Even with proper risk management best practice, it’s impossible for fashion and apparel businesses to completely avoid all types of insurance claims from happening. When you have a loss, there are a number of parties involved who will play a role in your claim. The first party involved is the insured, which includes any individuals charged with overseeing the reporting, reconstruction response and documentation/presentation of a claim against a commercial insurance policy. The other party is the insurance adjuster, who is responsible for investigating a loss, recommending reserves, measuring a loss and settling a loss. They will inspect the damage, attempt to quantify the value of the loss, evaluate the coverage for the loss and, assuming they find coverage, measure the loss and settle it. Ideally, the adjustment process will be a positive, courteous, professional experience, but there are times where a difference of opinion may arise in terms of coverage and/or the value of the loss.
Remember, a claim is like any other business dealing — it is, at its heart, a negotiation. Your ability to convincingly argue your position and support it with solid, factual-based evidence can often sway the outcome in your favor.
Finally, your insurance broker will help you report the loss, coordinate its overall management, serve as your conduit to the adjuster, assist you in developing your claim, present it and negotiate a settlement. In the event a coverage dispute arises, we will serve as your advocate in an effort to resolve the dispute favorably.
Before the Loss Occurs
First, build an adjustment team. Generally, it is helpful to identify the parties involved in advance of the loss. This means identifying an adjuster in advance of a loss and any other consultants they utilize. We recommend that a pre-loss meeting be held involving these individuals, the insured and your broker so that all may have the opportunity to discuss exposures, account nuances, inspection coordination and communication and information flow.
Next, secure important documents. Financial records, personal employee/client information, inventory records, appraisals, building drawings, etc. can all be critical to the adjustment process. Please make sure they are properly secured in a fire-proofed location or, better yet, stored off-site.
A serious loss often involves many individuals within the organization. It can be helpful to identify who the key players are in advance in sales, operations, accounting and finance, warehousing, management and risk management so that the entire team can interact efficiently and effectively with the adjuster and your insurance broker.
Finally, think about the types of losses your properties can sustain, the business units at risk, how those units will respond in the face of an event and how they can quickly and efficiently resume operation.
During & Post-Loss
The following steps are vital in ensuring your claim is resolved as quickly and burden-free as possible. First, report the claim to your insurer and insurance broker immediately.
Then, if necessary, restore fire protection. Replace damaged sprinkler heads, arrange fire watches and recharge extinguishers. Bottom line: get these systems back in service immediately. Make sure you prevent further damage. This is an obligation under the insurance policy that an insured must adhere to. If you need to, contact professional vendors to assist you, and, when in doubt, abide by this general rule: act as if you had no insurance.
Next, inspect all potentially damaged property and separate the damaged property from undamaged property. Take note of what you believe can be repaired/cleaned/dried and what should be replaced, and separate these accordingly. Begin developing a full inventory of the property, describing each item and recording the manufacturer, costs to repair or clean (based upon quotes), the original purchase price and the cost to replace (again based upon quotes and/or invoices). If there are lead times, make note of these as well. Motors and machinery should be thoroughly dried to protect from rust and before testing.
Do not discard anything! Let the adjuster inspect all property and make sure to photograph it. The insurer has salvage rights to damaged property that an insured must protect. Work out a clear understanding of how the adjuster plans on dealing with damaged property that cannot be replaced – will he arrange for a salvor to take it away, or will the insured be charged with disposing of it?
Create a general ledger account called the “loss account” (or something similar), and direct all costs associated with the loss to this account. Use work orders, job accounts and other accounting procedures to capture your costs. All expenditures should be directed to the loss account and should correlate to the loss account.
Keep a daily log of efforts where you describe in detail what work has taken place, who was involved and what the objective was. Keep track of your labor; hourly personnel should be coded to correlate to the loss account. Describe what work they’re doing, how many hours they worked, what they are paid (straight wage, overtime and variable payroll costs).
Your ultimate objective is to resume normal business operations as quickly as possible. The claim can consist of a variety of expenses all designed to assist in expediting an insured’s resumption of operations — for example, freight costs, equipment rental costs, temporary storage costs, etc. Please remember to keep the adjuster fully informed of your plans and attempt to get the adjuster’s agreement prior to incurring these expenses.
Frank DeLucia serves as senior vice president of Hub International Northeast, a full-service global insurance brokerage. He can be reached by phone at (212) 338-2395 or at email@example.com. For more information on Hub, please visit hubinternational.com.