An interesting brochure published by Marsh McLennan, Preparing For And Handling A Property Loss–Managing The Property Insurance Claim Process, caught my attention. I would suggest that commercial policyholders, public adjusters, and restoration contractors read this publication to gain a perspective on property insurance claims from the world’s largest insurance broker.

This is how Marsh McLennan (Marsh) describes itself on its website:      

Marsh McLennan is the world’s leading professional services firm in the areas of risk, strategy and people. Our more than 85,000 colleagues advise clients in 130 countries. With annual revenue of over $20 billion, we help corporate and public sector leaders navigate an increasingly dynamic environment through four market-leading businesses – Marsh, Guy Carpenter, Mercer and Oliver Wyman.

I agree with the concept in Marsh’s introduction, which indicates that the loss decision process should start long before the loss ever occurs:

A major property loss is rare, but most insureds do have losses. Since handling a loss is not your normal business function, it can cause many questions and problems. Remember that the first hours after a loss are crucial. During that time, management will have to make decisions that can dramatically affect operations. Some of these decisions can and should be made before the loss.

The most important decisions a commercial property policyholder should make before a loss occurs are who the insurance advisor will be and the scope of property insurance coverages purchased. Given the slowness and relatively small partial payments which are the modern trend of property claims adjustment, many commercial policyholders should also consider having lines of credit to pay for losses rather than wait for their slow paying insurers.        

Marsh describes the role of the property adjuster as follows:

After a loss is reported, an adjuster will be appointed as your principal contact with the insurance company. Remember: the adjusters represent the insurer…. Adjusters will do what they can to assist you but it is not their obligation to prepare your claim.

Primary adjuster duties are to investigate, negotiate, and settle your loss. They will need to speak to the risk manager and others, inspect the damage, and gather facts about the value of the loss. With sufficient information, a coverage determination will be made. Assuming this is favorable, the adjuster will proceed toward settlement.

Adjusters can call on a wealth of background knowledge from previous losses to help you plan your actions. They also use the services of accountants, engineers, salvors, and other experts as consultants.

As discussed in Insurance Surrogates and Insurers Delegating Those Duties Do Not Want Surrogates To Be held Accountable For Failing To Provide Honest and Good Faith Treatment In Washington, and Church Mutual Found To Be Systematically Underpaying Claims By a Federal Judge and Engle Martin Grossly Underestimated The Loss, the modern trend is for the field adjuster to have smaller dollar authority and to delegate much of the adjustment work previously done by general adjusters to “surrogate” specialists. All these people then report to a claims manager with authority to approve payment and that person rarely comes to the loss.    

The brochure makes a very important point regarding commercial losses:

A serious loss necessitates a series of important decisions on such matters as salvage, expediting repairs, or resuming operations.

Top-level management must make some of these decisions; others will be made at the plant, production, planning, or sales levels. To function effectively during the emergency, be sure to designate who will be responsible for coordinating and communicating with the adjuster.

Your list of key contacts should include the insurance company claim office, your designated Marsh property claim consultant, and/or other appropriate members of the Marsh property team. Home and cellular phone numbers are a must.

Commercial policyholders have a myriad of policy benefits available to them if they know their policy and especially how to use extra expense benefits. Commercial policyholders should read Business Interruption and Extra Expense Insurance are the Most Important Commercial Coverages–and Often the Most Overlooked at Point of Sale and Adjustment, where I state:

The point of this post is two-fold. First, businesses need more and better time element coverage. Second, adjustments of these losses need to be much more prompt.

My suggestion to those commercial policyholders suffering a significant loss with downtime is to immediately ask for payment of income coverages and how extra expense dollars can be used to mitigate the loss and prepare for the ongoing operations after the restoration is complete.

Boggs argues in his book that the business income coverages are the most important coverages available to commercial policyholders, more so than other property coverages. I am not so certain about that. Yet, I agree that they are just as important because commercial enterprises rely upon revenue to exist. Money is blood to a business.

Marsh correctly notes that insurance companies make payments for undisputed amounts of the loss:

Despite all efforts to communicate, compromise, and settle the loss, you and the insurance company may come to an impasse regarding your claim’s value. When only part of the claim is in dispute, the insurer should make payment of the undisputed amount. These funds will allow you to begin reconstruction, minimizing the dispute’s financial impact.

Some insurers and their defense counsel wrongfully argue that the insurer has no obligation to pay until there is an agreement on all the amounts.   

This brochure is not a comprehensive treatise about first-party property loss claims handling, but it has many points worthy of consideration. The most important is a reminder that great coverage is something that needs to be purchased before the loss ever occurs. “Cheap insurance” is a lot more expensive when the disaster strikes.

Thought For The Day    

Success depends upon previous preparation, and without such preparation there is sure to be failure.