Setting Reserves & Discovery of the Insurance Claims File

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The insurer is required to evaluate a claim based upon its merits, and without regard to policy limits. Eastham v. Oregon Auto Ins. Co., 542 P. 2d 895 (Or. 1975). The adjuster must determine the value of the claim without a thought to limits of liability in the policy and then compare the evaluation with the limits available.

Reserves should be set realistically and are recorded in the claim file. Reserves are the adjuster’s estimate of the potential recovery the claimant would receive from a jury. Reserves should be reviewed regularly, and revised if necessary. Failure to do so can be a factor in holding the insurer responsible for an excess verdict. Kunkle v. United Security, 168 N.W. 2d 723 (S.D. 1969). (For further assistance in setting reserves see Chapter 13, “Evaluation and Settlement.”) New York uses a definition of insurance reserves that can be used everywhere.