# Usage: curl -sSL https://seed.show/insurance.claims.us | bash -s <install-path>
# <install-path> is the directory where the file should land.

set -euo pipefail
[ -z "${1:-}" ] && {
  echo "install requires a path: curl -sSL https://seed.show/insurance.claims.us | bash -s <install-path>" >&2
  exit 1
}
TARGET="$1"
mkdir -p "$TARGET"
DEST="$TARGET/seed-fold.iyMjlO.folded.md"

cat > "$DEST" <<'PORTDOWN_A36B57A3'
<!--
This is a `.folded.md` archive — a directory packed into one markdown
file. The markers below are load-bearing; don't edit them directly.

To unpack (requires bash — if you have no shell, tell the user):
  1. curl -sSLf https://fold.dom.vin/skill | bash -s <INSTALL_DIR>
  2. <INSTALL_DIR>/fold/scripts/unfold <this-file>
     (or: unfold <this-file>  if fold/scripts is on your PATH)
-->

---
fold: true
marker: c31814
at: 2026-05-07T16:16:12Z
root: seed-pack.Q8Ljtm
---

<!--fold:c31814@file path="README.md" mode="644"-->
# insurance.claims.us

US insurance claims processing context for agents. What to know before handling any claim, coverage question, or claims-adjacent task.

## What level to work at — and what not to do

Claims decisions carry direct legal and financial consequences: a coverage denial creates a paper trail the insurer will defend in court; an improper payment waives defenses; a missed deadline is an independent bad faith exposure. Agents operating in this domain **orient, they do not adjudicate.** The job is to surface the right questions, map the facts to the right framework, and flag where jurisdiction-specific law or policy-specific language controls the outcome — not to issue a coverage determination, set a reserve, or advise on settlement authority.

This bundle is the orientation layer: the mental models claims professionals use, the obligations that govern every claim, and the mistakes agents make that produce bad outcomes. It is not a substitute for the actual policy, applicable state statutes, or current regulatory guidance. Fetch sources.md for authoritative NAIC standards, ISO forms, and state-specific bad faith law before advising on any live claim. State-specific timing requirements (acknowledgment deadlines, determination windows, payment deadlines) change by legislative session — always verify current statute before relying on a specific number.

## What claims processing is actually doing

Three things, simultaneously, and all three matter:

**Determining coverage** — Does the policy respond to this loss at all? This is a legal question grounded in contract language. The answer depends on the insuring agreement, the exclusions, the conditions, the endorsements, and the policy period. Coverage determination is binary: either the policy responds or it does not. Getting this wrong in either direction is a failure.

**Quantifying loss** — What is the covered loss worth? This is a factual and economic question: what happened, what was damaged or lost, what does repair or replacement cost, what does the applicable measure of damages (actual cash value vs. replacement cost, medical specials vs. pain and suffering) produce as a number. Quantification happens after coverage is established, not before.

**Resolving the claim fairly and efficiently** — Claims must close. An accurate coverage determination and a well-quantified loss still require a resolution: payment, denial, negotiated settlement, or litigation. "Fairly" is not sentiment — it is a legal standard enforced by bad faith law. "Efficiently" matters because delayed claims cost the insurer more (reserves sit longer, litigation risk rises) and harm claimants who need payment to repair property or cover medical bills.

All three objectives are in tension. Pressure to close claims fast can compromise coverage accuracy. Pressure to minimize payment can compromise fairness. The claims professional's job is to hold all three.

## The insurer-insured relationship and its obligations

**Duty to defend** — In liability lines (CGL, D&O, E&O, auto liability), the insurer's duty to defend is broader than the duty to indemnify. If the underlying complaint alleges facts that could potentially give rise to a covered claim, the insurer must provide a defense — even if the claim ultimately proves uncovered. The duty to defend is triggered by the allegations, not by the facts as they develop. An insurer that refuses to defend on the basis that it expects to win on coverage takes a significant risk: if coverage is later found, the insurer may owe the entire cost of defense plus consequential damages.

**Duty to indemnify** — The duty to indemnify is narrower: it attaches only when the facts establish a covered loss. An insurer can owe defense but not indemnity (if the defense is provided under a reservation of rights and coverage is later denied). The two duties run on separate tracks.

**Good faith and fair dealing** — Every insurance contract carries an implied covenant of good faith and fair dealing. In practice this means: investigate promptly, communicate clearly, evaluate coverage fairly, make timely payment decisions, and pay what is owed without requiring the insured to sue to collect it. The standard is not perfection — it is reasonable conduct. An insurer that delays without cause, denies without investigation, or low-balls a settlement to force a vulnerable claimant to accept less can face bad faith liability that exceeds policy limits. Most states have enacted unfair claims settlement practices acts (UCSPA) with their own timing requirements, notice obligations, and statutory remedies — the NAIC Model Act (MDL-900) is the common baseline, but state adoptions vary significantly. Verify current state statute for jurisdiction-specific standards.

**Reservation of rights** — When an insurer investigates or defends a claim while maintaining that coverage may not apply, it must issue a reservation of rights letter to the insured. The letter puts the insured on notice that the insurer is not waiving its coverage defenses. Without a reservation of rights, an insurer that defends a claim and later tries to deny coverage may be estopped from doing so.

## What agents get wrong

**Coverage determination before investigation.** The instinct is to evaluate the policy first, then look at the facts. The correct approach is parallel: investigate the facts and evaluate coverage simultaneously, because coverage often depends on facts (was the loss sudden and accidental? was the property in the covered location? did the event occur within the policy period?). Coverage determinations made before the facts are developed are guesses, not conclusions.

**Reserving without adequate information.** Setting an initial reserve the day after FNOL based only on the claimant's description is standard practice — but treating that reserve as final is a mistake. Reserves must be updated as facts develop. Inadequate reserves understate the insurer's liability; overstated reserves inflate expense ratios and distort financial reporting. The reserve at any point should represent the best current estimate of the ultimate cost to resolve the claim, including defense costs where applicable.

**Ignoring subrogation potential.** Subrogation — the insurer's right to step into the insured's shoes and recover from the responsible third party after paying the loss — is often identified late or not at all. By the time the claim closes, evidence has been lost, statutes of limitation may have run, and third parties have been released. Subrogation analysis should begin at FNOL, not after payment. Common subrogation scenarios: products liability (defective product causes loss), construction defects, negligent third parties (car accident where the other driver is at fault), vendor or contractor failures.

**Missing policy exclusions.** The structure of a policy is: insuring agreement (broad) → exclusions (carved back) → exceptions to exclusions (restored). Agents who read the insuring agreement and stop, or who rely on the named exclusions from memory, will miss coverage gaps and coverage grants alike. Every coverage determination requires reading the full exclusion set for the applicable form, including any endorsements that add, delete, or modify exclusions. Common missed exclusions: pollution, mold, professional services carved out of CGL, intentional acts, contractual liability (unless the insured assumed liability in an insured contract).

**Confusing first-party and third-party claims.** First-party claims are the insured's own loss (property damage, business interruption, medical payments). Third-party claims are claims by someone else against the insured (a customer injured on the premises, a driver rear-ended by the insured's vehicle). The obligations, the measure of damages, and the claims process differ. First-party claims are governed by proof-of-loss requirements, cooperation clauses, and the policy's valuation methodology. Third-party claims involve liability investigation, comparative fault analysis, and negotiation with a claimant who is adverse to the insurer.

**AI-specific failure modes.** Agents handling claims context make a distinct set of errors beyond the above:

- **Treating statutory deadlines as stable.** State acknowledgment, determination, and payment deadlines are set by statute and change by legislative session. Never assert a specific deadline without verifying current state law — a number from training data may be outdated.
- **Conflating coverage lines.** An AI familiar with CGL policy structure may map a professional liability loss to the wrong framework. Every coverage analysis must start from the actual policy form and edition, not from a general description of the line.
- **Generating denial language without jurisdiction check.** Denial letter language that works in one state may waive defenses in another (some jurisdictions require all coverage defenses to be stated in the initial denial or they are waived). Do not draft denial language without knowing the jurisdiction's waiver rule.
- **Pattern-matching fraud indicators without SIU referral protocol.** Identifying fraud red flags is not the same as conducting a fraud investigation. The correct output is an SIU referral, not an independent fraud determination. Many states require insurers to submit SIU referrals through specific channels (NICB, state fraud bureau) — generating a list of indicators without specifying referral requirements creates compliance gaps.
- **Assuming policy language is standard.** ISO forms are widespread but not universal. Manuscript policies, captive programs, and surplus lines placements routinely use non-standard forms. Coverage analysis requires the actual policy, not the standard ISO form language.

## What AI is changing

**FNOL automation.** AI systems now handle a significant share of first notice intake: voice-to-text FNOL transcription, structured data extraction from unstructured claimant descriptions, automatic policy lookup and coverage triage, and initial reserve suggestion based on loss type and jurisdiction. The gain is speed and consistency — AI doesn't have a Monday morning backlog. The risk is that automated FNOL processes miss the conversational signals (hedging, inconsistency, unusual urgency) that an experienced handler would catch.

**Damage estimation from photos and remote sensing.** Computer vision models estimate repair costs from photos submitted by insureds (auto damage, property damage) with accuracy that matches staff appraisers on straightforward losses. Aerial imagery and satellite data enable property damage assessment at scale after catastrophic events without field deployment. These tools accelerate payment on simple claims and free adjusters for complex ones. They underperform on unusual damage patterns, pre-existing damage separation, and losses where physical inspection is essential to cause-and-origin determination.

**Fraud detection.** Machine learning models score claims for fraud probability using network analysis (linked claimants, providers, attorneys), temporal patterns (claim timing relative to policy issuance or renewal), anomaly detection against historical loss distributions, and text analysis of recorded statements. AI fraud scoring is upstream of SIU investigation, not a substitute for it — the output is a referral priority, not a determination.

**Subrogation identification.** NLP models scan closed claims to identify subrogation opportunities missed during handling — third-party liability signals buried in investigation notes, medical records, or police reports. This is an area where AI recovers value that would otherwise be permanently lost.

**Adjuster assist.** Generative AI tools now draft reservation of rights letters, coverage analysis memos, and denial letters for adjuster review. The productivity gain is real. The risk is that AI-generated letters with jurisdiction-specific legal language require careful adjuster review — a plausible-sounding letter with the wrong waiver rule for the jurisdiction creates more exposure than a slow human draft.

**What stays human.** Complex coverage disputes where the coverage question requires legal judgment about ambiguous policy language. Large-loss claims where the reserve decision has material financial statement impact and the facts are genuinely contested. Litigation strategy: which cases to try, which to settle, when to appeal. Bad faith exposure management: any claim where the insurer's own conduct is at issue requires human judgment and attorney-client privilege. Claimant communications on catastrophic injury or death claims — the empathy and situational judgment these require are not AI tasks.

The pattern across all AI applications in claims: AI handles volume, speed, and pattern recognition at scale. Human judgment handles ambiguity, legal exposure, and decisions with asymmetric downside.
<!--fold:c31814@file path="sources.md" mode="644"-->
# sources

Fetch these at task time. Ordered by importance.

1. NAIC model unfair claims settlement practices act and state adoptions — the Model Act defines baseline claims handling obligations; most states have adopted versions of it with their own timing requirements, notice provisions, and penalties; the NAIC maintains the model and state-by-state regulatory map:
   https://content.naic.org/sites/default/files/inline-files/MDL-900.pdf

2. NAIC consumer guides to claims and complaint filing — plain-language overview of the claims process, consumer rights, and how to escalate a dispute through the state department of insurance:
   https://content.naic.org/consumer/claims

3. CPCU Society claims resources — the Chartered Property Casualty Underwriter designation body; publishes claims-specific education, technical bulletins, and the Claims Core Curriculum covering FNOL, coverage analysis, reserving, and litigation management:
   https://www.cpcusociety.org/learning-resources

4. ISO claims forms and coverage analysis — Insurance Services Office publishes the standard claim forms (ACORD and ISO) and coverage analysis tools used across the industry; ISO's Coverage Analysis Module maps policy form editions to coverage intent:
   https://www.verisk.com/insurance/products/iso-electronic-rating-content/

5. State bad faith statutes and unfair claims settlement practices — each state's insurance code contains its version of claims handling requirements; the National Conference of State Legislatures maintains an overview of state insurance statutes:
   https://www.ncsl.org/financial-services/insurance

6. NICB (National Insurance Crime Bureau) fraud indicators and referral process — NICB publishes red-flag indicators by claim type (auto, property, workers compensation, liability) and maintains the referral portal for suspected fraud; agents handling claims with fraud indicators are required by many states to submit SIU referrals:
   https://www.nicb.org/fraud-and-theft-resources/fraud-for-insurance-professionals

7. ACORD claims forms standards — ACORD maintains standard claim reporting forms by line of business (auto, general liability, property, workers comp); the forms define the minimum information collected at FNOL and used for reserves:
   https://www.acord.org/standards-architecture/acord-forms

8. McKinsey Global Insurance Report and AI in claims research — McKinsey publishes annual insurance industry reports covering AI adoption in FNOL automation, damage estimation, fraud detection, and adjuster assist tools; useful for benchmarking where AI is deployed in production vs. where it remains experimental:
   https://www.mckinsey.com/industries/financial-services/our-insights/insurance
<!--fold:c31814@file path="workflow.md" mode="644"-->
# workflow

The claims lifecycle as a decision framework. Each stage has a goal, required inputs, decision criteria, jurisdiction-specific exposure, and red flags that trigger escalation or a lane change.

## The lifecycle

### Stage 1: FNOL — First Notice of Loss

**Goal:** Capture enough information to open a claim file, assign a handler, set an initial reserve, and determine whether the claim needs an immediate field response.

Required inputs at FNOL:
- Policyholder identity and policy number
- Date, time, and location of loss
- Description of what happened (claimant's version)
- Nature and approximate extent of damage or injury
- Whether third parties are involved (names, vehicles, injuries)
- Whether the police or fire department responded
- Whether photos or evidence exist and who controls them

Decision criteria:
- Does a policy exist and was it in force on the date of loss? If yes, open a claim file. If uncertain (policy not yet located, lapse possible), open under a reservation of rights — do not deny without investigation.
- Is this a first-party or third-party claim? This determines who the handler's client is and what obligations apply.
- Does severity, jurisdiction, or claim type require a same-day field response (major property loss, fatality, multi-vehicle accident)?

Jurisdiction-specific considerations: Many states impose strict FNOL acknowledgment deadlines — the common range is 10 to 15 days to acknowledge receipt of a claim in writing, but specific requirements vary by state and change by legislative session. Verify current statute before relying on any specific deadline. Missing the acknowledgment window is an independent bad faith exposure separate from the merits of the claim.

Red flags at FNOL that trigger SIU referral: loss reported long after the event, policy purchased very recently before the loss, prior claims history on the same risk or by the same claimant, claimant requests cash settlement immediately, loss occurs near a policy expiration or renewal date, description of loss is inconsistent with the coverage type in force, claimant cannot identify a specific date or mechanism of loss.

Hard dependency: An initial reserve must be set before FNOL closes, even if the information is limited. The reserve is an estimate, not a commitment — but an uninitiated reserve is a compliance gap.

---

### Stage 2: Coverage Verification

**Goal:** Confirm that the policy was in force, that the insuring agreement covers the type of loss alleged, and identify any exclusions, conditions, or endorsements that may limit or eliminate coverage.

Required inputs:
- Complete policy including declarations, insuring agreement, conditions, exclusions, and all endorsements
- Confirmed date of loss vs. policy period
- Description of loss mapped to the insuring agreement's coverage trigger

Decision criteria:
- Is there a valid insuring agreement that responds to this type of loss?
- Are any exclusions potentially applicable? Run the full exclusion set — not just the named peril exclusions from memory. The structure is: insuring agreement (broad) → exclusions (carved back) → exceptions to exclusions (restored). Read all three layers.
- Are there conditions the insured must satisfy (proof of loss, cooperation, timely notice) and have they been met?
- Are there endorsements that modify the base form? Endorsements control. The actual policy is the base form plus all endorsements — not the base form alone.
- Does the loss implicate multiple coverage parts or multiple policies (primary/excess, concurrent causation)?

Jurisdiction-specific considerations: Several states apply the efficient proximate cause doctrine — when a covered and excluded peril combine to produce a loss, coverage may attach if the covered peril was the dominant cause. California, Washington, and others have strong efficient proximate cause rules. Do not deny on an exclusion in these states without analyzing dominant cause. Some states also apply an anti-concurrent causation clause differently than the ISO form intends — verify state-specific coverage interpretation rules before relying on exclusion language.

Red flags: Exclusion applies but handler hasn't issued a reservation of rights. Coverage analysis is complete but insured hasn't been notified of the coverage position. Multiple policies potentially in play but only one has been verified. Policy is a non-standard or manuscript form but analysis relies on ISO standard language.

Hard dependency: Coverage verification runs parallel to investigation — not before, not after. Facts affect coverage; coverage affects what facts matter. The two tracks must inform each other throughout.

---

### Stage 3: Investigation Trigger, Scope, and Fraud Detection

**Goal:** Determine what facts the coverage determination and loss quantification require, assign the right investigative resources, preserve evidence before it is lost, and identify fraud indicators early enough to route the claim correctly.

Required inputs:
- Coverage analysis output (what facts are legally material)
- Initial reserve (sets proportionality — a $3,000 auto claim doesn't warrant a $10,000 investigation)
- Any SIU red flags from FNOL
- Claimant's prior claims history and any network connections to prior claims

Decision criteria:
- What facts are genuinely in dispute or unknown that would change the coverage or quantum outcome?
- Is this a first-party or third-party claim? Third-party investigation involves adverse parties; first-party investigation involves the insured's own records.
- Does the claim require a field inspection, an independent medical examination (IME), an EUO (examination under oath), or a recorded statement?
- Does the SIU flag from FNOL require a parallel fraud investigation track to open now?

Investigation resources by claim type:
- Auto physical damage: staff or vendor appraiser, photos, repair estimate, total loss valuation
- Property: field adjuster or desk adjuster with contractor estimate, cause-and-origin determination for fire/water losses
- Bodily injury: medical records, treating physician contact, IME if causation or extent of injury is disputed
- Workers compensation: employer first report, medical provider contact, surveillance if disability extent is disputed
- Commercial: forensic accountant for business interruption, coverage counsel for complex coverage questions, reconstruction expert for cause-of-loss

**Fraud detection — indicators by claim type:**

Fraud is not a claim type, it is a pattern that appears across all lines. Detection requires systematic screening at FNOL and active attention throughout investigation. Fraud indicators are referral triggers, not determinations — the SIU investigates; the handler flags.

*Hard fraud* (staged or wholly fabricated claims):
- Staged auto accidents: rear-end collisions where the claimant's vehicle has multiple prior unrelated damage areas; passenger injuries that exceed the vehicle damage severity; claimants who all share an address or phone number; attorney or body shop referral immediately after the accident before the insurer is contacted
- Arson: fire of unknown origin on a property with recent financial distress signals (mortgage default, unpaid taxes, business closure, recent increase in coverage limits); accelerant patterns in cause-and-origin investigation; insured with recent access difficulty to the property
- Theft: recently purchased high-value items with no purchase documentation; theft reported after a claim denial on another line; stolen items that were photographed in the insured's social media after the claimed theft date

*Soft fraud* (legitimate loss, inflated claim):
- Medical billing that exceeds regional norms for the diagnosis and treatment type
- Wage loss claims without corroborating employer records
- Repair estimates from contractors with no verifiable business history
- "Discovered" prior damage attributed to the current loss
- Bodily injury demand that escalates significantly after the claimant retains an attorney with a history of high-demand claims on the same insurer

*Provider fraud* (medical, legal, or repair network):
- Medical provider billing for services not rendered (verify with claimant directly)
- Treatment patterns inconsistent with the diagnosed injury (unnecessary procedures, excessive visits)
- Body shop billing for parts not installed or labor not performed
- Attorney mill pattern: same attorney, same treatment provider, same diagnostic facility appearing together across multiple unrelated claims

*Workers compensation fraud indicators:*
- Injury reported Monday morning for an incident alleged to have occurred Friday afternoon with no witnesses
- Claimant's reported disability is inconsistent with activity observed on social media or surveillance
- Injury alleged to a body part with a prior compensable claim
- Treating physician with a disproportionate share of the insurer's WC claims and consistently higher disability ratings than peers

**SIU referral protocol:** Once two or more fraud indicators are documented, the claim requires an SIU referral — not just a notation. Many states require insurers to report suspected fraud to the state fraud bureau and/or NICB within a specified window after the referral decision. The handler's job after referral is to continue regular claims handling on the coverage and quantum tracks; investigation proceeds in parallel. Do not delay claims handling pending SIU investigation unless the SIU determines that investigation must precede payment.

Red flags at investigation: Investigation assigned but no deadline for completion. Evidence preservation opportunity has passed without action (e.g., damaged vehicle sold, property repaired, witnesses not contacted). Handler is accepting claimant's version without independent verification. Fraud indicators from FNOL were not carried forward to the investigation checklist.

Hard dependency: Subrogation potential must be evaluated at this stage — not after payment. Identify the responsible third party, preserve the damaged property, and put the third party on notice if applicable. A subrogation opportunity missed at investigation is often permanently lost.

---

### Stage 4: Liability and Coverage Determination

**Goal:** Reach a documented, defensible conclusion on whether coverage applies and, for liability claims, on the degree of fault attributable to each party.

Required inputs:
- Completed investigation file
- Coverage analysis (including all endorsements, exclusions, conditions)
- Applicable state law on causation, comparative fault, and coverage interpretation

Decision criteria:
- Does coverage apply? If yes: full coverage, partial coverage (some exclusions apply), or coverage subject to conditions not yet met?
- For liability claims: what percentage of fault attaches to each party? Is there comparative fault that reduces the claimant's recovery? Pure comparative fault (fault reduces recovery proportionally), modified comparative fault (recovery barred above a threshold — typically 50% or 51% depending on state), or contributory negligence (any claimant fault bars recovery — still the rule in Alabama, Maryland, North Carolina, Virginia, and DC)? Verify the applicable state's fault standard; it is not uniform.
- If coverage is denied, has a denial letter been prepared that states the specific policy provisions at issue, the facts supporting the denial, and the claimant's right to contest the decision?
- If coverage is accepted under a reservation of rights, has a ROR letter been issued that identifies the specific coverage questions still open?

Jurisdiction-specific considerations: Claim denial timing requirements vary by state — a common range is 30 to 45 days from receipt of proof of loss, but specific deadlines and what triggers the clock differ by state and are subject to legislative change. Exceeding these deadlines without documented cause is an independent bad faith exposure independent of whether the denial was substantively correct. Some states require that all coverage defenses be raised in the initial denial letter or they are waived — draft denial letters in these jurisdictions require particular care.

Red flags: Coverage denial issued without a complete investigation. Denial letter cites only one exclusion when multiple defenses exist (waiver risk — courts in some jurisdictions hold that an insurer waives coverage defenses not raised in the initial denial letter). Liability determination made without documented fault analysis. AI-drafted denial letter used without jurisdiction-specific review of waiver rules.

Hard dependency: The denial or acceptance letter must cite specific policy language — not general summaries. The letter is the insurer's legal position; vague letters invite estoppel arguments.

---

### Stage 5: Reserving

**Goal:** Set the reserve to the best current estimate of the ultimate cost to resolve the claim, including defense costs where applicable, updated as facts develop.

Required inputs:
- Coverage determination (what is covered sets the ceiling)
- Liability determination (fault percentage adjusts third-party reserves)
- Quantum information: repair estimates, medical specials, wage loss documentation, expert opinions
- Prior claims data for similar losses (jurisdiction, injury type, venue, opposing counsel)

Reserve components:
- **Indemnity reserve:** estimated payment to the claimant or for the covered loss
- **Defense reserve:** estimated legal fees and litigation costs if the claim is in suit or suit is expected
- **ALAE (allocated loss adjustment expense):** outside vendor costs directly attributable to the claim — IME, appraisals, investigators
- **ULAE (unallocated loss adjustment expense):** overhead; typically handled at the portfolio level, not the individual claim

Reserve adequacy standards:
- Initial reserve: best estimate given FNOL information — acknowledged to be incomplete
- 90-day reserve: must reflect investigation results; a reserve unchanged from FNOL after 90 days is a red flag in any reserve audit
- Pre-trial reserve: must reflect plaintiff's settlement demand, litigation risk, and venue-specific jury verdict history
- Post-verdict reserve: must reflect the actual verdict plus post-judgment interest and appeal risk

Jurisdiction-specific considerations: Statutory bad faith frameworks in some states treat reserve adequacy as direct evidence of bad faith. An insurer that sets an artificially low reserve to hit expense targets and then pays a higher amount at settlement creates a documentary record of knowing underpayment. Specific statutory frameworks vary — Florida §624.155 is one example of a first-party bad faith statute with explicit provisions, but many states have analogous frameworks. Verify the applicable state's bad faith statute before relying on any specific reserve adequacy standard.

Red flags: Reserve has not moved since FNOL despite multiple investigation milestones. Reserve is set below plaintiff's documented medical specials with no documented rationale. Defense reserve is zero on a claim in active litigation. Reserve was adjusted downward near a quarter-end without a documented factual basis.

---

### Stage 6: Negotiation and Settlement

**Goal:** Resolve the claim at a value that reflects the covered loss, applicable fault allocation, and the cost/risk of litigation — without underpaying in bad faith or overpaying without factual basis.

Required inputs:
- Reserve (the benchmark — settlement authority typically granted up to the reserve)
- Claimant's demand with supporting documentation
- Venue and jurisdiction analysis (what does a jury in this county award for this type of injury?)
- Litigation risk assessment (how strong is the coverage defense if the claim goes to suit?)

Decision criteria:
- Is the claimant's demand documented? Medical records, wage loss verification, repair estimates, expert reports — demand unsupported by documentation is a starting point, not a number.
- Does the demand exceed the policy limit? If yes, the insurer has an obligation to attempt settlement within limits if liability is reasonably clear. Failure to settle within limits when the opportunity exists exposes the insurer to excess judgment liability.
- Is there a statutory offer requirement? Some states have offer-of-judgment or proposal-for-settlement statutes that shift attorney's fees to the insurer if a settlement offer is unreasonably rejected and the claimant obtains a better result at trial. The specific statutes and triggering conditions vary — verify before making any offer near the limit.

Jurisdiction-specific considerations: For liability claims near or above the policy limit, coverage counsel should be involved before any settlement communications. An insurer handling a limit-demand claim without experienced oversight faces direct bad faith exposure if the claim goes to verdict above limits.

Red flags: Settlement authority granted without a documented reserve review. Claimant with legal counsel being negotiated without handler authority to reach policy limits. Low-ball offer made without factual basis for the lower number — creates a paper trail supporting a bad faith claim. Settlement authority based on an AI-generated valuation without adjuster review of the underlying assumptions.

---

### Stage 7: Payment

**Goal:** Issue payment promptly, to the right parties, in the right amounts, with the right releases.

Required inputs:
- Settlement agreement or judgment
- Proper payee identification (insured, lienholder, attorney, medical provider — priority matters)
- Release language confirming scope of the release (full and final vs. partial, lines of coverage covered)

Decision criteria:
- Who has a lien on the payment? First-party property claims: mortgagee must be named on the check. Workers comp: subrogation lien from the comp carrier if the tortfeasor's insurer is paying the injured worker. Medical: Medicare/Medicaid conditional payment obligations must be resolved before settlement; failure to protect Medicare's interest exposes the insurer and the claimant to double damages under the Medicare Secondary Payer Act.
- Is the release enforceable in this jurisdiction? Minors require court approval. Wrongful death settlements in many states require probate court approval.
- Does the payment trigger state reporting obligations (large loss reporting, IBNR adjustments, tax reporting)?

Jurisdiction-specific considerations: Most states impose a statutory deadline for payment after settlement agreement — common ranges are 5 to 30 days, but specific deadlines vary by state and line of business. Missing the payment deadline after settlement is agreed is bad faith per se in some jurisdictions. Verify current state statute.

Red flags: Payment issued without a signed release (first-party or third-party). Release language is broader than the settled claim (releasing future claims or related claims the claimant didn't know about). Medicare conditional payment not resolved before settlement check issued.

Hard dependency: Medicare Secondary Payer compliance must be confirmed before any settlement payment on a bodily injury claim involving a Medicare beneficiary. This is federal law, not state — it applies in every jurisdiction without exception.

---

### Stage 8: Subrogation and Salvage

**Goal:** Recover amounts paid from responsible third parties (subrogation) and realize value from damaged property retained by the insurer (salvage).

Required inputs:
- Final indemnity payment
- Investigation file identifying third-party fault
- Statute of limitations for the applicable subrogation claim (state tort SOL applies — typically 2 to 4 years, but shorter for some governmental defendants and some states; verify current statute)
- Whether the insured has been made whole (in jurisdictions with a made-whole doctrine, the insurer's subrogation right does not attach until the insured has been fully compensated for all losses, including uninsured losses)

Decision criteria:
- Is there an identified third party against whom the insurer can recover?
- Has the insured executed a subrogation agreement or is subrogation reserved in the settlement release?
- Is the potential recovery worth the cost of pursuit? Small subrogation claims (typically under $5,000) often go through industry arbitration programs (Arbitration Forums AISA for auto, CAMP for property) rather than litigation.
- Is salvage available (total loss vehicles, recovered theft property, damaged goods)?

Jurisdiction-specific considerations: Several states follow the made-whole doctrine strictly — the insurer cannot pursue subrogation if the insured's uninsured losses exceed what the insurer paid. Document whether the insured has been made whole before pursuing subrogation. Anti-subrogation rule in most states bars the insurer from subrogating against its own insured or against a co-insured. Both the made-whole doctrine and the anti-subrogation rule vary in their application by state — verify before pursuing recovery.

Red flags: Subrogation potential identified at payment stage rather than at FNOL. Third party has been released by the claimant without protecting the insurer's subrogation rights — if the release was granted with the insurer's knowledge and consent, subrogation is waived. Statute of limitations is less than 6 months out with no action taken.

---

## Hard dependencies summary

| Later step | Must wait for |
|---|---|
| Coverage determination | Investigation results (parallel, not sequential — but final determination needs complete facts) |
| Liability determination | Coverage verification (no fault analysis on an uncovered claim) |
| Reserve update | Investigation milestone completion — reserve must move when material facts change |
| Settlement authority | Current reserve review and documented rationale |
| Payment | Signed release (third-party) or proof-of-loss acceptance (first-party) + lien resolution + Medicare Secondary Payer clearance |
| Subrogation pursuit | Payment complete + SOL analysis + made-whole determination |

## Escalation triggers

A claim moves to coverage counsel, SIU, or senior supervision when:
- Any claim with a coverage question where denial is being considered
- Any third-party claim where the demand equals or exceeds the policy limit
- Any claim with a bad faith allegation, a state insurance department complaint, or a regulatory inquiry
- Any claim with two or more documented fraud indicators (SIU referral, not just notation)
- Any bodily injury claim involving a fatality, catastrophic injury, or minor
- Any claim involving a governmental entity or sovereign immunity question
- Any claim in active litigation with a verdict risk above the reserve
- Workers compensation claims involving permanent total disability or death benefits
- Any claim where AI-generated output (valuation, denial letter, coverage memo) will be used without adjuster review
<!--fold:c31814@end-->
PORTDOWN_A36B57A3

# ── post ──
MARKER=$(awk '/^---$/ { f++; if (f==2) exit; next } f==1 && /^marker:[[:space:]]/ { sub(/^marker:[[:space:]]+/, ""); print; exit }' "$DEST")
[ -z "$MARKER" ] && { echo "seed: archive has no marker — corrupt" >&2; exit 1; }
awk -v m="$MARKER" -v outdir="$TARGET" '
  BEGIN {
    # Match <!--fold:<m>@file path="X"--> with an optional mode attr after
    # the path (fold emits  mode="644"  on executables).
    file_re = "^<!--fold:" m "@file path=\"([^\"]+)\"( mode=\"[0-9]+\")?-->$"
    end_re  = "^<!--fold:" m "@end-->$"
  }
  $0 ~ end_re { if (current) close(current); exit }
  $0 ~ file_re {
    if (current) close(current)
    line = $0
    sub(/^<!--fold:[^@]+@file path="/, "", line); sub(/".*$/, "", line)
    current = outdir "/" line
    dir = current; sub(/\/[^\/]*$/, "", dir)
    if (dir != current) system("mkdir -p \"" dir "\"")
    printf "" > current
    next
  }
  current { print >> current }
' "$DEST"
SEED_EXTRACTED=$(find "$TARGET" -type f -not -path "$DEST" 2>/dev/null | wc -l)
if [ "$SEED_EXTRACTED" = "0" ]; then
  echo "seed: archive contained no files — refusing to delete the source" >&2
  echo "  archive preserved at: $DEST" >&2
  exit 1
fi
rm -f "$DEST"

echo "" >&2
echo "✓ seed unpacked → $TARGET ($SEED_EXTRACTED files)" >&2
find "$TARGET" -type f | sort | while IFS= read -r _sf; do
  echo "  ${_sf#${TARGET}/}" >&2
done
echo "" >&2
if [ -f "$TARGET/SKILL.md" ]; then
  echo "This seed contains a skill (SKILL.md). Install it in your agent's skills directory." >&2
  echo "" >&2
fi
echo "Install the seed skill if not already installed:" >&2
echo "  https://seed.show/skill" >&2
echo "" >&2
echo "Publisher prompt:" >&2
sed 's/^/  /' >&2 <<'__SEED_PROMPT_END_AC1F2B__'
US insurance claims processing for agents: FNOL through subrogation lifecycle, coverage determination logic, reserving principles, fraud detection by claim type, bad faith obligations, and what AI is changing in claims — orient and flag, never adjudicate
__SEED_PROMPT_END_AC1F2B__
exit 0