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The Property Claims Investigation
By Barry Zalma, Esq. CFE - August 9, 2021

Insurers are large organizations with varying levels of authority for the payment of claims. The adjuster is the representative at the loss scene. He or she must report, in writing, to superiors with the authority to pay the indemnity required unless the claim falls within the authority provided to the adjuster who will only then write a short closing report.

Writing a clear, concise, understandable and comprehensive report is an essential part of the adjuster’s job.

The captioned report should be written immediately after the adjuster’s first meeting with the insured on every file, no matter how small. The length and detail of the report should only be limited by the extent of the loss. The captioned report is written to explain to the adjuster’s supervisor all the adjuster knows about the loss so that decisions required of them by the insurer and the law can be made.

The captioned report should be detailed under, at least, the following captions:


This should provide information about:

  • the company(ies) insuring the risk;
  • the policy number(s);
  • the term of the insurance;
  • the policy limits;
  • special limits of liability applicable to the loss;
  • the coverages available;
  • the deductibles;
  • the form numbers applicable;
  • if there is other insurance with other insurers, details concerning the other insurance should be listed; and
  • any unusual conditions, limitations, exclusions or warranties.


If the insured is an individual the adjuster must determine his or her:

  • name;
  • age;
  • date and place of birth;
  • Social Security Number;
  • state driver’s license number;
  • citizenship;
  • marital status;
  • names and ages of the spouse and children, if any;
  • occupation;
  • reputation;
  • previous loss history;
  • whether the insured had ever had insurance canceled, nonrenewed, or refused; and
  • the insured’s financial status, earnings and/or net worth.

The information detailed above may sound like exceedingly personal information that will be difficult to obtain. It is not. Ask the insured and the information will be provided. It is the adjuster’s job to obtain all relevant information. Further investigation cannot be conducted without this information.

If the insured is a corporation, the adjuster must report:

  • the names of the officers;
  • where the corporation is incorporated;
  • its standing with the Secretary of State or other appropriate state agency;
  • the identity of the majority shareholder(s); and
  • its financial condition, net worth, and dividends or other profits paid to the shareholders.
  • If the insured is a partnership the adjuster must report:
  • the identities of the partners;
  • the type of partnership (general or limited);
  • if a limited partnership, the name of the general partner; or
  • if a general partnership the names of all partners and the person acting as managing partner.
  • a description of all properties owned by the partnership, its net worth, and the financial condition of the partnership; If the insured is an estate, the adjuster must report:
  • the identity of the administrator or executor (the adjuster must obtain copies of the official papers appointing a person as the administrator or executor of the insured’s estate);
  • the assets of the estate; and
  • the identities of those who will share in the assets of the estate when it is divided.


The adjuster must answer the following questions about the loss:

  • What happened?
  • When did it happen?
  • Where did it happen?
  • Where was the insured when it happened?
  • What was the insured doing when it happened?
  • Who were the witnesses?
  • Did the loss involve incendiary origin, mysterious disappearance, alleged theft, or evidence of third party involvement?

The adjuster should also cover in the report the use of statements taken by the adjuster from witnesses with summaries of the information obtained.

Potential Fraud

The report must explain facts that lead to the suspicion of fraud.

It should state whether reports have been made of a potential fraud to the local police, the Fraud Division or Bureau of Fraudulent claims if the adjuster’s state has one, or other official agency for the reporting of crimes.

A report of a suspected fraudulent claim is mandated by the Model Insurance Fraud Act of the Coalition Against Insurance Fraud, and various state statutes regarding the reporting of crimes.

Fraud Unit or Bureau Statutes have been enacted in almost every state. The adjuster should be familiar with the statutes and regulations in the jurisdiction where the adjuster works and where the claim occurred.

The adjuster must also report whether a report has been filed with the Property Insurance Loss Register (PILR) — a type of “Index Bureau” that has been merged into the ISO All Claims Database. The adjuster reports property losses where subscribing companies can obtain a report on other losses reported by the insured as reported by other insurers, the National Insurance Crime Bureau (NICB), the INDEX System or the ISO All Claims Database that includes a data base of property losses. It is not complete, but it can provide useful information.

Experts the Adjuster Has Retained

The adjuster must report to management any experts that have been retained, for example, if a professional photographer or video operator has been used, or if private investigators, fire cause and origin experts, or expert engineers were retained to advise the adjuster on the cause and origin of the loss.

Meetings with Officials from Authorized Government Agencies

The adjuster must report his or her meeting with police or fire investigators and what they observed. The adjuster discusses demands made, or to be made on investigating officers for their files.

As an example, California Insurance Code section 1875 et. seq. requires that an arson investigator for a police agency provide everything in a police agency file to the adjuster if the documents are determined by the agency not to cause damage to its ability to prosecute a criminal who may be responsible for the loss.

Many states have adopted variations on this section.

The California Insurance Code Sections are modelled, to some degree, on provisions recommended by the National Association of Insurance Commissioners (NAIC). The adjuster should consider the statutes of his or her particular state when dealing with this aspect of the investigation and report.

Many states have adopted the NAIC Model Immunity Act which provides an immunity for insurers who, without malice, report information concerning suspected, anticipated or completed fraudulent insurance acts to law enforcement officials.


A complete and detailed description of the property involved is required. If it is a structure claim the adjuster should report:

  • the type of structure;
  • its age and condition;
  • the use to which the insured put it;
  • the total square footage;
  • the materials from which it was constructed, e.g., frame and stucco;
  • any special characteristics, like an atrium, an indoor pool, or spa; and
  • any unusual hazards the adjuster noted, like a roof peeling off from old age, a perimeter fence about to fall, vicious dogs, or a dangerous activity being conducted by an insured are reported, such as:
  • reloading bullets in a garage;
  • operating a sausage factory in a dwelling;
  • an upholstery shop, with all necessary equipment, operated as a commercial enterprise from the insured’s dwelling;
  • the presence of wild animals kept as “pets”; or
  • the presence of explosives, gasoline, or other hazardous substances.

The adjuster must also report the replacement value of the entire structure; the actual cash value of the entire structure; and the actual cash value of all the contents or business personal property before the loss. This will give information about the risk to the adjuster’s supervisor, and the underwriter, that might cause an underwriting action to take place.

The adjuster should, if replacement cost coverage is available to the insured report on the adjuster’s estimate of the replacement value of the structure and contents of the property and that he or she has reached an agreement with the insured as to the replacement cost value and the actual cash value.


Under this caption the adjuster explains the extent and nature of the damage, the types of items damaged, and the adjuster’s estimate of the loss, and the suggested reserve. The adjuster should also cover data necessary to support information dealt with above, like the preparation of estimates, meetings held or to be held, what has been discussed with the insured, what the adjuster will do from the date of the report forward, and what the adjuster has instructed others to do.

Title and Encumbrances

Under this caption the adjuster will give details as to all persons with record title, all mortgage interests, all liens against the property, and all persons with an insurable interest in the property. An “insurable interest” is any interest, the loss of which will cause financial or other harm to the insured.

Insurable interest can also be defined as:

Every interest in property, or any relation thereto, or liability in respect thereof, of such a nature that a contemplated peril might directly damnify the insured. [California Insurance Code § 281.]

Also recognize that “insurable interest” is defined as including “any lawful and substantial economic interest in the safety or preservation of property from loss, destruction or pecuniary damage.”

According to the New York Court of Appeals, “the rights under a fire insurance policy are fixed both as to amount and standing to recover at the time of the fire loss.” See Whitestone Sav. & Loan Assoc. v. Allstate Ins. Co., 28 N.Y. 2d 332, 334, 321 N.Y.S. 2d 862, 270 N.E. 2d 694 (1971).

It likewise recognized that section 3401 “requires an insurable interest at the time of the loss in cases involving property or casualty insurance.” See Herman v. Provident Mut. Life Ins. Co., 886 F. 2d 529, 534 (2d Cir. 1989). Counihan v. Allstate Insurance Co., 25 F. 3d 109 (2nd Cir. 05/26/1994).

People with unrecorded interests, such as parents who have contributed to the purchase of the property or lenders who have a deed of trust but have failed to record it should be noted.

When the insureds have no interest in the property, they have no right to policy benefits. Losses are often reported by people with an interest in the property but who are not insureds. The adjuster must, therefore, carefully show how he or she has established the interest of the insured and all others in the property and that people who are not named as insureds who have no right to the benefits of the policy but are making claim.

There is no requirement that there be an insurable interest in a specific automobile, since an insurer is liable for personal protection benefits to its insured, regardless of whether or not the vehicle named in the policy is involved in the accident.

A person obviously has an insurable interest in his own health and well-being. This is the insurable interest, which entitles persons to personal protection benefits regardless of whether a covered vehicle is involved.

For example, a house in escrow, before the title is transferred, suffers a loss by fire. The named insured is the record owner but the buyer is in possession. By agreement and common law, the risk of loss is on the buyer. The named insured in this example incurred no loss. The buyer in possession is not named as an insured on the seller’s policy so he has no claim.

Policy Violations

The adjuster, under this caption, explains all possible policy violations. The violations may include any of the following:

  • delayed notice;
  • unoccupancy or vacancy;
  • change in ownership;
  • other undisclosed insurance;
  • misrepresentations on the application;
  • warranty violations;
  • a falsely sworn proof of loss;
  • a misrepresentation to the adjuster about the extent of loss;
  • a misrepresentation to the adjuster about the cause of the loss;
  • concealment of material facts;
  • the loss is not within the policy term; or
  • failure by the insured to protect the property from further loss.

The report should also include all material changes in the risk of loss faced by the property.

Subrogation and Salvage

Subrogation is an equitable remedy allowing an insurer that pays a claim to take over the rights of the insured and recover from the person or entity who caused the damage to the insured. It is incumbent, therefore, on the adjuster to determine by the thorough investigation who, other than the insured, was responsible for the loss.

This caption requires the adjuster to comment as to why subrogation is or is not involved. A right to recover under the equitable or contractual remedy of subrogation may arise because of the wrongful act of another or a contractual relation that exists between the insured and the person charged with the responsibility for the insured’s property. The adjuster must, to fulfill this requirement, understand the law of torts and the law of contracts.

Salvage requires comments on the nature of the salvage and its sound value. The adjuster should report any arrangements that have been made for the disposal of the salvage including the name and address of the salvor.


Under this caption the adjuster comments on the desirability of the risk and whether or not the adjuster feels coverage should be continued. The adjuster must report detailed facts to support the recommendation. The adjuster also uses this caption to recommend additional investigation, experts, or counsel needed to complete the investigation.

The captioned report should be written immediately after the adjuster’s first meeting with the insured on every file, no matter how small. The length and detail of the report should only be limited by the extent of the loss. The captioned report is written to explain to the adjuster’s supervisor all the adjuster knows about the loss so that decisions required of them by the insurer and the law can be made.


See the full video at and at

Barry Zalma, attorney at law and CFE, is a consultant and fraud expert who is available for expert testimony.  Zalma@Zalma.comand



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