Property & Casualty: Claims Scenarios

Training for Adjusters, Examiners, and Claims Professionals

Claims handling is where the promise of insurance meets reality. How you handle these scenarios determines whether a customer recovers quickly—or whether the company faces bad faith litigation. Here are critical scenarios every claims professional should master.

Scenario 1: The Staged Slip and Fall

The Situation: A claimant walks into a retail store, and within minutes, "slips" on a small puddle near the entrance. They have a witness (a friend), immediate photos of the wet floor, and a lawyer calling within 24 hours demanding medical records. The store manager says the floor was dry minutes before.

The Red Flags:

• The "witness" arrives separately but knows the claimant personally

• The claimant retained counsel before seeking medical treatment

• Photos show the puddle, but no surrounding context (time stamp, source of water)

The Adjuster's Response:

• Take recorded statements immediately—from the claimant and the witness separately. Inconsistencies emerge when stories aren't rehearsed .

• Request surveillance footage before it's overwritten. If the store has cameras, check whether the claimant walked past the puddle without issue before "falling."

• Consider an Examination Under Oath (EUO) if the policy permits. Fraudulent claimants often refuse or provide vague answers .

The Takeaway: Staged slips are among the fastest-growing fraud schemes . Separate witnesses, preserve evidence, and trust your training.

Scenario 2: The Questionable Fire Loss

The Situation: A policyholder with a $500,000 dwelling policy reports a total loss fire at 2:00 AM. The insured is behind on mortgage payments, recently increased coverage limits, and removed several personal items the week before. The fire marshal's report is inconclusive but notes "accelerant" in one area.

The Dilemma: Pay the claim and risk rewarding fraud. Deny the claim and risk bad faith litigation if wrong.

The Adjuster's Response:

• Request all financial records—mortgage statements, credit card bills, bank records. Motive often appears in financial distress .

• Conduct a thorough Examination Under Oath (EUO). Ask about the removal of personal property. Inconsistencies here are telling.

• Retain a certified fire investigator (meeting NFPA 1033 standards) to review the origin and cause .

• Issue a Reservation of Rights letter immediately to preserve the insurer's defenses while investigating .

The Takeaway: "Prompt investigation" does not mean "immediate payment." You have a duty to investigate thoroughly. Document every step to demonstrate good faith .

Scenario 3: The Phantom Vehicle

The Situation: An insured calls to report an auto accident. They claim an unknown driver forced them off the road, causing $8,000 in damage. The insured has a $500 collision deductible but carries Uninsured Motorist (UM) coverage with a $500 deductible. They want to file under UM to avoid paying the deductible.

The Red Flags:

• The accident occurred late at night with no independent witnesses

• The insured waited three days to report

• Damage patterns don't match the story (e.g., they claim a side-swipe, but damage is centered on the front bumper)

The Adjuster's Response:

• Inspect the vehicle personally. Photograph damage from multiple angles. Compare damage patterns to the described impact.

• Check for "material misrepresentation" in the application. If the insured knowingly provided false information about the accident, coverage may be void .

• If the claim proceeds, consider whether the "phantom vehicle" actually existed. Without corroboration, UM claims require strict proof.

The Takeaway: Never assume a claim is legitimate just because it's "small." Fraud occurs at all dollar amounts.

Scenario 4: The Claims-Made Policy Trap

The Situation: A healthcare provider had a claims-made policy with Dr. Smith Insurance for years. They switched carriers mid-year to a new occurrence policy. Six months later, a patient files a lawsuit for an incident that occurred during the claims-made policy period but was never reported. The old policy has expired, and the new occurrence policy only covers incidents after its effective date.

The Gap: The insured never purchased Extended Reporting Period (ERP) coverage (also called "tail coverage") when leaving the claims-made policy.

The Adjuster's Response:

• Explain to the insured that claims-made policies require the claim to be made during the policy period or during the ERP .

• If the insured declined ERP, the claim likely falls outside coverage.

• Document the explanation thoroughly. This is a painful but necessary conversation.

The Takeaway: Claims-made policies are among the most misunderstood in the industry . Always discuss ERP options with insureds when they switch carriers.

Scenario 5: The Good Faith Trap

The Situation: A first-party property claim for wind damage. The policyholder provides an estimate from their public adjuster for $75,000. Your independent adjuster estimates $45,000. You offer $45,000. The policyholder rejects it, hires an attorney, and sues for bad faith—alleging you failed to properly investigate.

The Adjuster's Response:

• Review your investigation file. Did you inspect the property yourself? Did you photograph all damage? Did you provide a detailed explanation of the estimate?

• Consider whether a neutral appraisal is warranted. Many policies include appraisal clauses to resolve valuation disputes .

• If litigation proceeds, your good faith defense rests on documentation. Show the court every step you took, every photo you captured, and every communication you sent.

The Takeaway: Bad faith claims often succeed not because the insurer was wrong on value, but because they failed to communicate or investigate properly