Who's Handling Your Claim? The Professionals Involved in a Business Interruption Claim

Professionals in the Business Interruption Claims Field

Years ago after a fire hit a furniture factory in Virginia, an insured remarked, "Well, I know who the adjuster is and what he does, but I am not so sure about those other seven people that he brought with him. Who are they? Who do they work for and what are they doing here?" Here is a quick rundown of who may show up at your doorstep with the insurance adjuster.

Insurance Agent or Broker. Brokers are independent insurance professionals who assist in determining what coverage a client needs and then "shopping" that coverage in the marketplace. Brokers tend to be large international outfits providing a wide variety of services, sometimes including claims settlement assistance. Some brokers tend to be independent in the claim process; others advocate the policyholder's position.

Insurance agents are legal agents of certain insurance companies whose policies the agents sell. Similar to a real estate agent, they will often seem, even to themselves, to be acting as a neutral party or for the insured, but in fact are legally obliged to represent the insurer. In some states brokers are considered agents.

Claims Adjuster. Typically this is an insurance company employee, but sometimes it is an independent adjuster from an adjusting firm. Although they use the term "independent," the majority of their work comes from the insurance company. Essentially, they work on behalf of the insurer to investigate and settle claims.

Claims Manager/Examiner. This is a person at the insurance company to whom adjusters report.

Loss Accountants/Auditors. For large physical damage and especially for business interruption or fraud claims, adjusters usually will retain outside accountants to assist in evaluating claims. For the most part, these are normally smaller CPA firms that have no audit or other traditional accounting practices. Traditionally they represent only insurers.

Engineers. On large or complex claims, adjusters often will engage independent engineers to evaluate cause of damage, monitor the costs of reconstruction, or estimate time or cost to rebuild. Like loss accountants, they tend to work only for insurers and never for claimants. You should look to match this effort with your own engineering expertise.

Salvers. Usually brought in by the insurance company after a physical damage loss to salvage the destroyed property and sell it for the insurer holding a percentage of the sales as a fee. A good way to get a quick advance on a large claim is to have the salver make the check directly to the insured and adjust the final claim settlement by the check amount.

Subrogation Attorneys. Attorneys that specialize in the legal assignment of pursuing the "wrongdoer" that caused the loss. For instance, if your factory burns down as a result of faulty work performed by a contractor, the subrogation attorney will lead the effort to gather evidence and identify the legal course of action to take, if any, against the contractor. Never forget your company's legal rights to recover potentially uninsured items such as the deductible and other policy exclusions.

Cleanup Companies. To restore operations as quickly as possible, insurers will hire or recommend that you hire a cleanup specialist that will clean up the fire- or water-damaged area quickly and efficiently.

Other Specialists. Depending on the nature of your business and loss, the insurance company may hire any number of technical experts to help evaluate the cause and origin of the loss, the scope of loss, preexisting conditions, and other items that may impact the claim valuation. Insurance companies hire biologists, metallurgists, refinery experts, electricians, industry experts, and all sorts of professionals to ensure the payable loss is within the policy.

Assembling Your Claims Team

Now that you have met the adjuster's team, you will want to make sure that you have the needed expertise to address the questions and concerns that this group of experts will raise. Many companies are now developing their own professional loss team before an insured loss occurs. In the last few years, many U.S. insurers have amended their policies to follow the approach—followed for quite some time by U.K. forms—of paying for the policyholder to hire its own experts to help prepare the claim. Check the wording on this endorsement with your broker. In any event, here are the prospective members on your team.

Risk Manager. Employee responsible for managing the insurance program. Duties are typically within the treasury, CFO, or legal function. This role also can be one of defining all risk to a company, such as financial and economic risks. Some call this holistic or enterprise risk management.

Claim Accountants/Claims Consultant. Augments the capabilities of policyholders' in-house staff. These are generally Big 5 accounting firms with individuals that have claims experience. They work on an hourly or fixed-fee basis and only represent policyholders.

In-House Counsel. An attorney who is an employee of the company and oversees many of the legal transactions and lawsuits filed against the company or suits filed by third parties.

Outside Counsel. Outside law firms that will specialize in insurance coverage or litigation.

Coverage Attorneys. Attorneys that specialize in this area of law. Also called "wording specialists," as many attorneys now help clients with the exactness of policy wording before coverage is finalized.

Financial Management. Be sure to include your controller, treasurer, or CFO as a key resource within your company to be aware of the financial aspects of the claim. Many items will need to be reviewed with your financial management, such as cash flow of advanced payments, claim estimates, accounting and tax ramifications of reporting the loss, uninsured items, long term business recovery, and continued growth of the business.

Operational Management. For large companies, site or plant managers may be duly included in the claim process as they are the most knowledgeable about operations and how the business would have performed had it not been for the loss.

Marketing. To mitigate your loss, you may need to come up with some unique marketing concepts to maintain your customer base. This should be a well thought-out plan that does not have negative long-term impacts on your business. It is best to include the adjuster in your plans on these items before marching forward on these decisions.

Government Regulators. Occupational Safety & Health Administration (OSHA), the Food and Drug Administration (FDA), and others.

Engineers. On large or complex claims where rebuilding of a facility is needed, your company's plant manager or engineer may recommend a contractor to perform repairs or replace the facility. Be sure to also address the ever-critical question of the estimated rebuild time based on your insurance contract, which probably will insure you for replacement coverage to rebuild the facility to a condition of like kind and quality before the loss.

Insurance Agent or Broker. Some brokers and agents tend to be independent in the claim process; others advocate the policyholder's position.

If you need to hire outside experts, be sure to get references and find out if they have worked on other similar complex claims. Call their references and make sure you meet the actual people that will be doing the work and not the "salesperson."

Now that your team is formed, you should meet to determine what level of activity is expected from each group. You should also establish points of contact with the insurance adjuster so that information flow is controlled by one or two contacts on your team. In other words, the insurance adjuster should use the risk manager or broker as a direct contact, while the insurance companies' accountants can contact your claim accountants or controller directly. You should obtain an agenda or objectives from the adjuster and their expectations before any meeting so that your company is properly prepared with the proper expertise at the meeting. Minutes to meetings are often prepared for many large, complex losses that are expected to go on for several years. This is a helpful tool when new players come on board or agreements need to be revisited.

Common Goals

Believe it or not, the insurer has many goals in common with you. You both want to mitigate your loss, return normal operations as quickly as possible, and resolve the claim in a reasonable period of time. All this should be done while maintaining positive professional relationships with all who are involved. An insurance company's best salesperson is a happy customer.

Now that you have assembled your claims team and met with the insurance company and its representatives to agree on your common goals, you should look to develop a timetable to identify the key tasks in the claim process over the next few months. One of the first items you will work on is an initial loss estimate. This will be an analysis that is important both for your insurer and your management.

Understanding everyone's role in a business interruption claim is a good starting point to begin managing expectations of those involved and the people to whom you report within your company. Like any large business transaction, it is important to have a well thought-out plan with industry experts by your side. Knowing who is going to be involved is a good place to start your plan. Now you should be able to answer the question, "Who's handling your claim?"