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Reimbursing the Insured for the Deductible and Limits on the Claims Adjuster’s Actions

Publication date: January 13, 2020 | Last update: April 27, 2020
Targeted audience

Q. Can a claims adjuster mandated by an insurer ask a third party deemed liable for the damages incurred to send a cheque to the insured to reimburse him for his deductible? 

 
A. No. The adjuster cannot ask a third party to reimburse the insured for the deductible he paid, even if the money is sent directly to the insured. There are two reasons for this prohibition. First, this is a legal act: only a lawyer may send a formal notice on behalf of another person. If a claims adjuster does so, he exposes himself to charges of illegally practicing law. Second, it runs counter to section 28 of the Code of ethics of claims adjusters, which stipulates that a claims adjuster may not be the mandatary of both the insurer and the insured at the same time. However, when a third party is deemed liable for damages, two options are possible: 
 

1. The claims adjuster may send a form letter to his client, who can use it to claim reimbursement of the deductible from the third party. The adjuster must also explain the content of the letter to the client and ensure that he fully understands it. With respect to liable third parties, the claims adjuster’s role is limited to informing them of the amount of the insured’s deductible. 

2. If the insurer decides neither to claim the deductible from the insured nor to apply it because the insurer is planning to make a claim against the liable third party for all the damages, the claims adjuster can have the insured sign the claim, which provides for subrogation in favour of the insurer. 

EXPLANATIONS 

1. Providing a form letter that enables the insured to claim for reimbursement of his deductible. 
 
A claims adjuster may not be the mandatary of both the insurer and the insured at the same time1. For this reason, he may not act on behalf of the insured and ask a liable third party to reimburse the insured’s deductible—under such circumstances, he would be acting as the insured’s mandatary while already being the insurer’s mandatary. Moreover, with a few exceptions, only lawyers may send a formal notice on behalf of another person2
 
However, claims adjusters must fulfill their ethical obligation to provide information by explaining to insureds how to claim reimbursement of their deductible from the third party deemed liable for the damages incurred. In addition to offering the insured a form letter, the claims adjuster can give him the contact information of the third party, or the insurer of the third party deemed liable. Though the claims adjuster cannot write a formal notice, send it, or deal with the response, he may be cc’d on the exchange of correspondence in order to closely monitor the file. 
 
2. The insurer chooses not to claim the deductible from the insured.

In cases where the insurer decides not to apply the deductible since it plans to claim the entire cost of damages from the third party deemed liable, the adjuster may notify the insured and have him sign the claim. In doing so, the adjuster is still acting as the insurer’s mandatary; he is not acting on behalf of the insured and is therefore not in a conflict of interest resulting from holding a dual mandate3. In such cases, the insurer absorbs the cost of the deductible and assumes the risk of not being reimbursed. Should this occur, the insurer cannot claim the deductible from the insured.

 
1. Section 28, Code of ethics of claims adjusters. 
2. Section 138, Act respecting the Barreau du Québec. 
3. Section 28, Code of ethics of claims adjusters.