Sometimes Loss Happens: A Guide to Navigating the Commercial Claims Process

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. The other party is the insurance adjuster, who is responsible for investigating a loss, recommending reserves, measuring a loss and settling a loss.  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.

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

  • 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 he may use such as an engineer, construction consultant or accountant.
  • Understand Your Coverage. Review your coverage in conjunction with your account manager and the insurance broker/property claim consultant. If you have questions or concerns, the time to reconcile them is prior to a loss.
  • Secure Important Documents. Financial records, personal tenant 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.
  • Identify Key Points of Contact. A serious loss often involves many individuals within the insured 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.
  • Anticipate Your Loss. 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 and Post the Loss

The following steps are vital in ensuring your claim is resolved as quickly and burden-free as possible:

  • Report the claim. Report your loss to your insurer and insurance broker immediately.
  • Restore fire protection. Replace damaged sprinkler heads, arrange fire watches, and recharge extinguishers. Bottom line – get these systems back in service immediately.
  • Prevent further damage. The policy requires that an insured protect and preserve property from further damage. This is an obligation under the insurance policy that an insured must adhere to.
  • Salvage. 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. these as well.
  • 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?
  • Keep Track of Claim Costs. 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. Describe in detail what work has taken place, who was involved, 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).
  • Make Permanent Repairs. The adjuster will want to be involved in this process. He may engage a construction consultant to help develop a scope of work and then ask you to invite two or three contractors to bid that scope of work. All bids submitted should be itemized and presented on a time and material basis. Ultimately, the objective is to develop a consensus and reach an agreed price for the reconstruction work.

Your ultimate objective is to resume normal 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.

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