When Using Colossus Independent Judgment Is a Must
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Placing the value on bodily injury claims is inherently speculative.
To remove some of the guess work from ascertaining a proper value for general damages, some insurance companies utilize a comprehensive software program called Colossus. The Colossus software attempts to recreate, electronically, the “round-tabling” that often occurs with specific claims. One court has described the “round-tabling” process as a process in which the insurer’s most skilled and experienced casualty claims professionals come together to evaluate hypothetical injury claims by examining settlements in similar claims, jury verdicts, and the like. See In re Farmers Ins. Exchange Claims Representatives’ Overtime Pay Litigation, 336 F.Supp.2d 1077, 1102 (D. Or. 2004).
When an insurer decides to use the claim valuing software, it is customized according to the insurer’s settlement philosophies and claims practice history. This process may involve bringing together a super round-table to come up with predicted values for hypothetical case scenarios, which are then incorporated into the software matrix. When this is done, the Colossus software allows for electronic “round-tabling” at each adjuster’s desk for each submitted claim without having to wait for a claim committee meeting. In that fashion, use of the Colossus software helps insurers to evaluate claims consistently and to smooth out variations in claim payouts.
Because some settlement amount ranges of value recommended by Colossus may be different than what a specific adjuster would offer on a specific claim, there has been a plethora of litigation over the utilization of the software where plaintiffs assert bad faith claims against the insurance company based on their use of it.
Although Colossus is a useful estimating tool, it is incapable of considering external factors such as re-injuries to preexisting conditions or complications arising as a result of preexisting conditions; the reputation and caliber of counsel; possible aggravated liability; and a multitude of other external factors.
Some courts have noted that Colossus does not and cannot replace the claims professional’s judgment and experience.
Claim Values and Bad Faith
Two cases demonstrate judicial focus on the adjuster’s independence in deciding claim values in the context of bad faith litigation.
In Kosierowski v. Allstate Ins. Co., 51 F.Supp.2d 583 (E.D. Pa. 1999), Allstate used Colossus on the claim presentation. The first evaluation produced a value range of $11,624 to $13,824 although the adjuster in the case independently evaluated the case as being worth $50,000 to $60,000. On that same day, Allstate offered $50,000. Two days later a Colossus evaluation was run with the addition of different variables which produced a settlement range of $50,760 to $61,060. Shortly thereafter Allstate gave the adjuster $100,000 in settlement authority but he did not utilize that authority and instead made an offer of $80,000.
The claimant insured accepted the $80,000 offer but would not release his bad faith claim. The insured argued that Allstate committed bad faith because it calculated the value of claims based upon irrelevant variables used in Colossus.
The court found that even assuming all of plaintiff’s arguments about the impropriety of the program, the adjuster did not rely on the program exclusively in making his own initial settlement offer of $50,000, which was well above the first value range. The adjuster consistently used his own judgment in determining the value of the case. Therefore, the use of Colossus was not relevant to the bad faith claim.
In a second case, Milhone v. Allstate Ins. Co, 289 F.Supp.2d 1089 (D. Ariz. 2003), the adjuster also used Colossus to set a value range in the plaintiff’s case. The adjuster’s initial offer was less than the range Colossus recommended, but the adjuster then made an offer within the range and made a final offer above the range. Plaintiff asserted that the adjuster had to apply the Colossus value mandatorily and that the Colossus formula did not take into account how an injury might specifically affect a particular individual.
Just like the court did in Kosierowski, the court in Milhone, stated that assuming the plaintiff’s allegations were true, plaintiff nevertheless failed to show how the program – by not taking into account some items – would constitute bad faith as a whole. The facts demonstrated that Colossus was not mandatorily used by the adjuster “in this case.” The court concluded that adjusters could overcome any alleged bad faith in utilizing the system where a manual adjustment to the range was offered.
Read original articleTags: Allstate Ins, bodily injury claims, Colossus, The Colossus
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