January/February 2006
What should you do if your business suffers a major property loss?
That is a critical question to ask at any time—after all, the threat of a property loss is everpresent—but it is especially important these days in light of the many natural disasters that have devastated scores of businesses. The answer to that question can make a huge difference in the speed of your company’s recovery, the outcome of its insurance claim, and—ultimately—its future viability.
So what steps should you take immediately following a property loss?
1. Report the claim to your insurance agent and carrier.
2. Take safe and appropriate action to minimize the loss and protect undamaged property from loss.
3. Consult with contractors for an initial estimate on the scope of the property damage and the cost of repairs.
4. Take photographs of all damaged property.
5. Appoint one person in your firm to work with the claims adjuster and set up clear lines of communication.
6. Assign one special accounting code for all expenses related to the loss and then categorize the expenses by type, such as cleanup, excess operating costs, buildings and structure, and machinery.
7. Provide good descriptions of all work performed as well as services and materials purchased.
8. Gather supporting documentation for all items claimed and keep two copies—one for your claim file and the other for the claims adjuster (remember to include records for in-house labor if you use any).
Beyond these basic steps, there are specific points to know regarding the types of property that could experience a loss.
If you have suffered damage to real property, such as your building, you first want to ensure that the area is safe for personnel to enter. Next, you should perform emergency work to prevent further damage, such as boarding up holes in roofs and covering broken window openings.
Afterward, you must assess the degree of damage to each component. That exercise may require the assistance of contractors and other vendors.
Also, make sure you work closely with the insurance adjuster. Anyone who has suffered a property loss will tell you that agreement and commitment on the extent of testing and assessment needed will prevent surprises and greatly assist in the resolution of the claim.
Loss or damage to inventory or stock may require special attention. You must segregate stock based on the degree of damage, as in undamaged inventory or stock, material that is reusable or marketable after minimal cleanup, and damaged material without value that must be discarded.
Though the handling of a loss to contents is similar to buildings, there are some categories that require special attention:
Valuable Records: Paper documents can frequently be cleaned or dried. For a loss to be covered under valuable records insurance, you must establish that there is a need for the document—in other words, that the document has value.
Data Media and Electronic/Electrical Equipment: Do not use it if there is any evidence of contamination as such usage may destroy the data and/or the equipment. Prompt service by an electronics vendor can prevent minor damage from becoming a major loss.
Remember: If you have replacement cost coverage, valuation is based on the cost to repair or replace the damaged property with like kind and quality. If you want to upgrade, you can do so but the increase in cost will not be paid by the insurer.
What else should you do when you experience a property loss?
Documentation and Presentation: Provide a brief narrative of what happened—including any eyewitnesses and police reports—and the impact the loss had on your business operations. Provide a spreadsheet listing, by number, the items damaged and the cost to repair or replace them (this list makes it easier to discuss individual items). Include identification of equipment manufacturers, serial numbers, and any other pertinent information. Provide photos or videotape taken during or after the loss. Document all costs associated with using your own labor force to make repairs. Provide original building plans and a copy of the contractor’s report on the scope of damage and the cost of repairs. For equipment, make sure estimates from outside vendors are itemized for labor and materials.
Claim Audit and Settlement: After you submit your claim, the adjuster will audit it for accuracy. There may be differences of opinion, but the better your claim presentation, the easier it will be to settle the claim.
The final settlement represents many hours of preparation, negotiation, and compromise. In the end, the more you put into it, the more likely you are to be satisfied with the result.
—Monica McNally, senior vice president of RecycleGuard/Willis of New Hampshire Inc. (Portsmouth, N.H.)
The information contained in this document has been prepared and/or assembled by Willis RecycleGuard for informational purposes only and is not intended to provide legal advice. Readers should not rely on this document or act upon any of the information contained in this document without first consulting competent legal counsel.