Commercial property and business interruption insurance is a relationship business, but after a loss, details settle claims. Immediately after a loss, significant attention, leadership, and data analysis are required to fully document a claim. Policyholders have the responsibility to present their loss to their insurer(s) in order to be reimbursed based on the policy coverage.
Often times the policyholder is unfamiliar with the process and relies upon the insurer’s experts to determine the amount of the loss. This creates a conflict as the insurer’s expert’s role is to audit and review claims as presented. When a complex loss occurs, it is the responsibility of the Risk Manager or Policyholder to lead the development and presentation of property and time element losses caused by the event. Keep in mind that a complex loss will be evaluated eventually for insurance purposes or for a general audit, therefore it is essential to quickly establish a claim validation and presentation process to capture and document all loss- related costs.
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6 Keys Steps for Risk Managers
1. Ensure all damages are documented adequately.
Photograph and video footage of the loss are key to memorializing the damages. At some point, these documents will help you settle potential disagreements on items such as scope and pricing. Remind your teams to include pictures of any identifying information such as serial numbers of damaged equipment.
2. Connect with your insurance broker to understand the coverage that’s available including deductibles and sublimits.
Lean on your insurance brokers, partners and policy experts. Connect with your brokers or legal counsel to discuss the damages reports you are receiving and how your policy may or may not respond to each issue. Your brokers are happy to join operational calls to discuss the policy aspects. Make them a part of your team, they are working today too!
3. Enact your recovery plan — strategically.
After the damage has been memorialized, it is important to focus on decisions that get your business up and running as quickly as possible. Sometimes there is confusion on whether or not to act to mitigate the loss prior to the first adjuster site inspection. While, you don’t need to ask permission from your adjuster before you act, it does help to keep him or her in the loop as you move to mitigate your loss. More often than not, any decision made to mitigate a loss as a prudent business person is considered favorably by the insurance community. Be decisive.
4. Make plans (now) to survey the damage with your adjuster.
If it looks like you have a large loss, contact your assigned adjuster ASAP to set a date to view the damage. It is likely your adjuster is becoming booked. Make every effort to be there in person. Often risk managers rely on facility staff for this inspection. Being there sets the tone and working relationship for the entire adjustment process. In a disaster like Harvey, adjusters will be spread thin and likely do not have unlimited time to spend at your loss. Be prepared to walk the adjuster through the loss and focus them on your business operations. Explain your recovery efforts and your timeline to document the loss.
5. Prepare preliminary loss estimates / order of magnitudes.
As your adjuster begins to review the parameters of your loss, he or she will look to recommend a loss reserve to the insurer(s) for accounting purposes. Prepare a short summary identifying all areas of your loss with associated estimated costs. For example, if there is building damage, obtain estimates for repair to demonstrate the ultimate costs. If claim items are too early to quantify, such as business interruption, include the item as “to be determined” or “TBD.” This will help the adjuster consider the worst case scenario including potential future claim items as he or she sets the reserve.
6. Live, eat, breathe “cash-flow” and how quickly you can substantiate partial payments.
Remember that the claim doesn’t have to be paid only at the end of the process. The adjuster is able to release funds as items are agreed to and supported. As you are able to prove damages through the adjustment process ask for partial payments. This will help you to maintain cash flow for your business during the recovery.