by Natalie DuBose
When disaster strikes, following these five practices will make it easier for businesses to get up and running again and for insureds to maximize their insurance recovery with the least amount of stress:
1. Take Emergency Measures. Hire emergency services personnel and take actions to secure property immediately. This may involve hiring a debris clean-up crew, engaging security to guard against theft, boarding up and tarping roofs and windows to minimize further damage, or engaging HazMat response teams. Have a go-to list of emergency response personnel who can be called upon to assist immediately.
2. Organize Internal and External Responses Teams. The insured’s team typically involves both internal and external professionals, organized into a “claims team” and a “business continuation team.” The business continuation team consists of key employees, as well as suppliers, shippers, and others, who can keep the business running as smoothly as possible following a disaster. Whether this involves developing alternative shipping routes, negotiating extensions on delivery, telephoning customers, or managing press communications, create a plan and a team in advance so that everyone knows their role and can act immediately. Consider setting up a group email or intranet for instant team communication. Identify employees in different geographic areas which may be able to provide cover for a downed regional operation.
The “claims team” involves key internal personnel and retained experts who will interact directly with the insurer’s team or provide substantive support for the claim. Internally, in addition to claims personnel, this will likely include accounting employees who can keep track of repairs costs and advise on anticipated lost revenue. Identify a company point-person to communicate with the insurer to make sure the company is presenting a unified position.
3. Consider Retaining Experts. After a carrier sends a loss adjuster out to view damage and prepare an estimate, they will then set reserves on the claim. Many businesses are unaware that once reserves are set, they can be very difficult to change if the damage is more extensive or the repair more complex than originally thought. Thus, consider retaining experts early to assist in maximizing the estimate from the beginning. For example, a claims-management company or independent appraiser can aid in preparing an estimate of loss and appraisal, taking into account the various coverages available. Additionally, engineering/reconstruction experts may also be key in navigating the claim. They can identify not only the extent and cost of property repairs, but also pinpoint the cause of loss (or dispute the carrier’s cause-of-loss determination).
4. Engage Coverage Counsel Early. If your claim is complex or you think coverage may be an issue, its best to contact coverage counsel early and get them up-to-speed on your claim. They can suggest experts and help quarterback your internal and external teams. Most importantly, they can review your policy and advise everyone working on the team on ways to maximize different coverages (for example, property loss, business interruption, extra expense, code upgrades, etc.) and avoid potential coverage pitfalls. Coverage implications under the policy and any potential exclusions must be understood by everyone on the claims team, from accountants to engineers. Coverage counsel can work silently behind the scenes, or if negotiations with the insurer fail, they can act quickly in initiating litigation or arbitration on the insured’s behalf.
5. Record Loss Carefully and Prepare Claim. Immediately following the loss, you should take an inventory of all damaged property, along with copious photographs. Be sure to retain all invoices from emergency repairs and claims experts, as those costs are often covered. Claims counsel, along with retained experts, can help identify other records needed to support the claim. After the insured completes its investigation of the scope of loss, it will, often with the assistance of counsel, submit a Proof of Loss to the carrier. The Proof of Loss will include all estimates, inventories, photographs, receipts, invoices, and other support documents to substantiate the claim. Be aware that the Proof of Loss must be filed by a specific date. If an extension is necessary, be sure to get one in writing from the carrier.
Navigating coverage issues following a catastrophe can be tricky, but having the right procedures and people in place will go a long way towards maximizing the company’s payment on the claim and getting the business up and running smoothly as quickly as possible.
Natalie DuBose is an associate at Haynes and Boone, LLP, and serves on the board of the DBA Trial and Insurance Practice Section. She can be reached at firstname.lastname@example.org.