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There Is No Such Thing As A Pro Forma Signature On A Document – If You Sign It You Own It

Don’t let doing something for the sake of doing something come back to bite you

I have written a number of articles on the importance of avoiding processes that have no added value to an operation. For example, I spoke of how making a “check” in the process is no assurance that things are being done right in the posting In Claims Don’t Let The Process “Thing” Get In The Way Of Doing The “Right” Thing.  Making sure that a process is adding value is essential in claims to avoid the “we have to just say we did it” way of doing things. The putting a note in the file that adds nothing to the file just because it is part of the process does nothing to increase value to the claim process and should be scrutinized. In “What’s The Point” Claims Process And How To Avoid Them I raised the issues that to be truly successful in claims it is important to focus on what’s truly important.

Mortgage foreclosures all in doubt because of a process for the sake of process

Doing things for the sake of doing things can have significant adverse consequences for an organization. It is important to realize that one day you may have to answer for every action you take on a claim file. The concept of how doing a pro forma task can come back to bite you is being highlighted as a yet another fallout of the mortgage crisis. Thousands of foreclosures are in doubt because a mortgage bank executive did not verify the documents used to justify home seizures. Tens of thousands of foreclosures are being halted because of a process in place where an individual just signed hundreds of documents without ensuring the information contained on the documents were correct.

In one of those cases an executive at JP Morgan Chase & Co. testified that her review was more or less signing the documents unless it was questionable and someone else told her there was a problem. She was among 8 others who signed over 18,000 documents a month (see JPMorgan Based Foreclosures on Faulty Documents, Lawyers Claim, Bloomberg 9/27/2010). At another bank, Wells Fargo, it was reported in the New York Times that an executive only verified the dates on up to 150 foreclosure documents signed daily (see Bank Exec Checked Only Date on Foreclosure Docs, NYT 10/3/2010).  The complete fallout from these events is still being sorted out, however it will certainly expose the banks, their attorneys and title companies to possible liability.

Claims organizations are often subjected to a variety of sign offs and controls that are instituted to prevent fraud and protect company assets. Given the volume in a typical claims organization, signatures for the sake of signatures are a possibility. Regardless, as seen in the mortgage situation, such a process can have significant implications.

Suggestion to avoid the process trap

Clearly, doing something for the sake of doing something can really have negative consequences for the organization. How many signatures do you put on documents in a given day? Do you really know why your signature is needed? Are you taking the appropriate steps to verify what you are signing? If you do not have an answer to these questions then you should be asking one more – what will happen if something goes wrong with the document that I just signed?

I believe strongly in supporting process and controls that are adding value. For example, it is clearly a good idea to have a second set of eyes prior to settling claims over a certain dollar amount to ensure company assets are being spent wisely. As a claim handler you would not want a settlement of a million dollars to go out the door without a manager’s approval and as a manager you would never want that check sent unless you were fully aware of the circumstances of the loss and the reasons for the settlement. It is this type of clear common sense that needs to be used on all processes where you are being asked to sign something.

Prior to signing a document make sure to ask yourself the following:

  • Why am I being asked to sign this and for what purpose?
  • Is my signature needed to control something, or am I just putting it down because there is a signature line?
  • Do I understand what went into preparing the documents that are asking for my signature?
  • What are the consequences if the document turns out to be faulty?
  • Do I tend to sign everything put in front of me without review?

It cannot be an excuse that “it’s just a process and it has always been done that way”.  If you had to testify about signing the documents would saying you just “signed everything unless someone told you it was a problem” sound like a reasonable response? Don’t read me wrong, controls and signatures are required for good reasons on many documents. Nonetheless, if you are the one asked to sign – make sure there is a good reason for your signature and know what your signing before you put your name down. If not, stop and ask the questions and revisit the whole process.

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Posted in Best Practices, Compliance, SPOT on Issues, SPOT on Ops.

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One Response

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  1. Philip J. Loree Jr. says

    Marc,

    This is an excellent article that features sound, practical advice not only for insurance and reinsurance claims handlers, but anyone who conducts business.

    As a commercial litigator I agree that any business person who is considering signing a document should first consider whether he or she will be able to testify truthfully that, prior to signing the document, he or she reviewed it; reached a reasonable conclusion concerning its meaning, content and import; and endorsed it on that basis. In most instances you’ll never have to give that testimony, but if you do, you probably won’t embarrass yourself or your company.

    Phil



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