TWELVE SUGGESTIONS TO INSURERS
(1) Investigate well! Investigate the facts to limit the damages claimed. Investigate the facts and the “soundness” of facts that show no liability.
(2) Early in the investigation, get the insured’s version into recorded form. (It is surprising that near trial an insured, wanting a settlement, changes history to shade his fault a little worse than he/she told you at first.) Get a receipt from the insured, in 30 days after you took the statement, that you sent the insured a copy of the statement. Keep the actual recording, and the receipt for the transcribed copy.
(3) Inform the insured of the excess possibility and that the insured can hire additional counsel at the insured’s expense. At the same time, ask the insured if the insured believes the plaintiff should get paid the amount demanded. Document the insured’s response.
(4) Before the claimant makes a demand, offer to the claimant something to settle the claims against the insured. (Establish the “psychological reasonable range.”)
(5) Respond promptly to all offers to negotiate or settle to the claimant. Keep the insured informed of all offers made.
(6) Put all communications to the claimant or the insured regarding settlement negotiations into writing. Remember those communications may be in evidence someday when someone is trying to show you were unreasonable.
(7) Give equal (or more) consideration to the right of the insured to have protection compared to the right of the insurer not to pay excessive amounts.
(8) Put into some written response something like:
“We certainly want to be fair, but we cannot with fairness to all the policyholders pay excessive amounts to settle claims. Excessive settlements result in all policy owners having to pay higher premiums in the future.”
(9) In a letter rejecting a settlement under settlement limits, give the reasons for denial. Make a paper record that the amount of the proposed settlement is unreasonable, and that considering the interest of the insured the offer still is an unreasonable settlement amount.
(10) Do not let a deadline by plaintiff for final cut-off for all negotiations expire without having offered the limit of authority that your file shows you have. The plaintiff may never engage in settlement negotiations again.
(11) As it gets close to trial, ask the insured if the insured has any ideas for a better defense. Document the response in writing to the insured. (Be ready to add the item the insured suggests as an aid to better defense if it is at all reasonable.)
(12) Always be open to conducting further negotiations or looking at the decision regarding amounts or responsibilities of settlement. The standard closing paragraph, in letters to either the claimant or the insured regarding settlement, always should be something like the following.
“If you think we have overlooked something or you have new information, please let us know, so we can negotiate further, or see if a different conclusion can properly be made.”