The insurance claims process doesn’t always run smoothly, despite the best intentions of wanting to fully satisfy claimants. Thinking through how to manage a difficult property claims scenario in advance can go a long way towards minimizing disruption and facilitating a smooth resolution when such a situation arises.
Let’s look at a hypothetical scenario. There is a reported loss involving several insured warehouses in Texas. The insured has retained a contractor who is acting as a public adjuster, and they are claiming that all of the roofs were damaged by hail and are in need of replacement. The contractor has provided a cost estimate to replace the roofs, but with completely different materials to those in place at the time of the loss. The estimated cost presented is initially twice as much as the estimate your consultant provided. The contractor refuses to provide a detailed scope. With each meeting, the contractor’s price keeps changing. The date of loss is from 2020. It’s now 2022.
The contractor in this example provides a bulk estimate, which changes with each meeting, and will not commit to scope or cost to complete repairs. What’s the best way to resolve a claims scenario like this?
Working Through a Tough Claim
Following are several steps an insured can consider to facilitate the smooth resolution of difficult property claims situations.
Notice of Loss
On receiving the Notice of Loss, make a coverage review based on the description of the loss as reported, including the following:
- What coverages are available?
- What are the limitations, deductibles, etc.
- What does the policy say about late notice?
- Review the underwriting file, risk control inspection reports, etc. Are there any indications of issues prior to loss date?
- Pull hail reports and note the potential dates of losses, hail size reported, etc.
- Search ISO and PILR (Property Insurance Loss Register) for prior reported or related losses
- Research state laws related to Property Appraiser (PA) involvement, if not fully known
Make a list of any potential vendors that might be needed to assist with the investigation such as an Information Assurance specialist, an Cause & Origin (C&O) expert, a structural engineer, meteorologist, a forensic accountant, and an outside coverage counsel.
Setting the Tone
During initial contact with the policyholder and/or the PA, it’s important to set the right tone. Manage expectations and ask for the insured’s explanation for late notice of claim. Request all current documentation, including expert reports, estimates, PA or contractor contracts, photos, etc.
Then, based on the outcome of the initial call, determine if an C&O expert is needed to accompany an initial inspection. Consider the need for written notification/correspondence after the call relating to reservation of rights (ROR), claim acknowledgement, etc.
An initial Request for Information (RFI) in the ROR should include the following:
- Any agreement/authorization/contract with the contractor
- Contractor’s detailed estimate with full scope
- Photographs of the damages being claimed
- Maintenance records for the roof and, if relevant, of HVAC roof units
- Roof repairs and roof inspection reports for the previous five years
- Weather reports