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Limiting UncertaintyLimiting Uncertaintyin the Large Loss Claimin the Large Loss Claim
Building upon case studyBuilding upon case study
- Ms. Sally Somebody -- Ms. Sally Somebody -
The Truth and Trauma of aThe Truth and Trauma of a
Hurricane ClaimHurricane Claim
Author / Trainer: Mark Phillips Provider #0005021Author / Trainer: Mark Phillips Provider #0005021
Copyrighted 2011: no permission to reprint without authorizationCopyrighted 2011: no permission to reprint without authorization
DUTIES OF THE INSURED DUTIES OF THE INSURED IN EVENT OFIN EVENT OF
LOSSLOSS
General Conditions – Claims Activated General Conditions – Claims Activated ObligationsObligations
Your Duties in Event of Loss:Your Duties in Event of Loss: ““As often as we (the carrier) reasonably require”As often as we (the carrier) reasonably require” Item c:Item c:1)1) Show us the damaged property; Show us the damaged property;
2)2) Provide us with the records and documents we request and permit us to make copies; andProvide us with the records and documents we request and permit us to make copies; and
3)3) Submit to examinations under oath while not in the presence of any other named insureds and sign the same.Submit to examinations under oath while not in the presence of any other named insureds and sign the same.
Item dItem d: : Send to us, within sixty (60) days after our request, your signed, sworn proof of loss (a legal Send to us, within sixty (60) days after our request, your signed, sworn proof of loss (a legal document typically unknown to most insureds) which sets forth, to the best of your knowledge and belief:document typically unknown to most insureds) which sets forth, to the best of your knowledge and belief:
1)1) The time and cause of loss;The time and cause of loss;
2)2) Your interest and that of all others in the Covered Property involved, and all liens on the Covered Property;Your interest and that of all others in the Covered Property involved, and all liens on the Covered Property;
3)3) Other insurance which may cover the loss;Other insurance which may cover the loss;
4)4) Changes in title or occupancy of the Covered Property during the term of the policy;Changes in title or occupancy of the Covered Property during the term of the policy;
5)5) Specifications of damaged buildings and detailed repair estimates;Specifications of damaged buildings and detailed repair estimates;
6)6) The inventory of damaged and undamaged personal property described in policyThe inventory of damaged and undamaged personal property described in policy
Uncertainty IngredientsUncertainty Ingredients
Will Magnify Agent's PerformanceWill Magnify Agent's Performance
Agent's adequate analysis of insured?
Insured's honest and reasonable
state of mind?
Does the insured have a clue of what the adjusting process will bring?
LOCATION LOCATION LOCATION LOCATION LOCATIONLOCATION
WHERE WAS THIS POLICY PRODUCED?WHERE WAS THIS POLICY PRODUCED? Role of your Agent / BrokerRole of your Agent / Broker Role of your UnderwriterRole of your Underwriter Role of your Executive Review – accuracy, updates, Role of your Executive Review – accuracy, updates,
valuesvalues
WHO PRODUCED THIS MANUSCRIPT?WHO PRODUCED THIS MANUSCRIPT? Does it square with your notes and coverage needs?Does it square with your notes and coverage needs? Who is documenting Best Practices of this risk Who is documenting Best Practices of this risk
placement?placement? Do you have backup communications (emails, boards Do you have backup communications (emails, boards
notes, phone calls) made to agent / broker to validate notes, phone calls) made to agent / broker to validate policy designs?policy designs?
- CASE STUDY - - CASE STUDY - MS. SALLY SOMEBODYMS. SALLY SOMEBODY
POLICY DESIGNS AND DOCUMENTATED HISTORIESPOLICY DESIGNS AND DOCUMENTATED HISTORIES
HOW DOES THIS PATHWAY OF PREPARATION PLAY OUT IN HOW DOES THIS PATHWAY OF PREPARATION PLAY OUT IN THE CLAIMS EVENT?THE CLAIMS EVENT?
WHAT DUTIES AND FIDUCIARY ISSUES APPLY?WHAT DUTIES AND FIDUCIARY ISSUES APPLY?
WHERE AND WITH WHOM ARE MAINTENANCE AND REPAIRS WHERE AND WITH WHOM ARE MAINTENANCE AND REPAIRS RECORDED AND RETRIEVABLE?RECORDED AND RETRIEVABLE?
HOW IS THE INSURED PREPARED TO DO BATTLE WITH HOW IS THE INSURED PREPARED TO DO BATTLE WITH EXPERIENCED OR INEXEPIENCED ADJUSTERS?EXPERIENCED OR INEXEPIENCED ADJUSTERS?
DESIGN x DETAILS = SUCCESSDESIGN x DETAILS = SUCCESS
DIGITAL DOCUMENTATION OF BUILDING CONDITIONS DIGITAL DOCUMENTATION OF BUILDING CONDITIONS PRE-HURRICANE SEASON – CRITICAL FOR CLAIMS.PRE-HURRICANE SEASON – CRITICAL FOR CLAIMS.
MATCHING BUILDING VALUES AND LOCATIONS.MATCHING BUILDING VALUES AND LOCATIONS.
COINSURANCE PERCENTAGE AND PENALTIES.COINSURANCE PERCENTAGE AND PENALTIES.
DIGITAL STORAGE OFF-SITE OF NEEDED RECORDS – WITH DIGITAL STORAGE OFF-SITE OF NEEDED RECORDS – WITH AGENTS, CONTRACTORS, LEGAL TEAM.AGENTS, CONTRACTORS, LEGAL TEAM.
MARSHALL & SWIFT REPLACEMENT COST VALUATIONS.MARSHALL & SWIFT REPLACEMENT COST VALUATIONS.
WHAT DEDUCTIBLE PLAN DID YOU BUY?WHAT DEDUCTIBLE PLAN DID YOU BUY?
COINSURANCE PENALTY EXPLAINED
F. Additional Conditions The following conditions apply in
addition to the Common Policy Conditions and the Commercial Property Conditions.
1. CoinsuranceIf a Coinsurance percentage is shown in the Declarations, the following condition applies.a. We will not pay the full amount of any loss if the value of Covered Property at the time of loss times the Coinsurance percentage shown for it in the Declarations is greater than the Limit of Insurance for the property. Instead, we will determine the most we will pay using the following steps:
Multiply the value of Covered Property at the time of loss by the Coinsurance percentage;
Divide the Limit of Insurance of the property by the figure determined in Step (1);
Multiply the total amount of loss, before the application of any deductible, by the figure determined in Step (2); and
Subtract the deductible from the figure determined in Step (3).
Calculus or Algebraic formulas do not apply – ONLY correct policy design and building valuations.
Copyright, Insurance Services Office, Inc.
AND THIS IS HOW THE FINE PRINT COULD WORK OUT
Example No. 1 (Underinsurance):When: Value of Property is $ 250,000
Coinsurance is 80% Purchased Limit is $ 100,000 The Deductible is 250 The amount of loss is $ 40,000
Step (1): $250,000 x 80% = $200,000 (this is the minimum amount of insurance limit required by contract to meet your Coinsurance requirements)
Step (2): $100,000 / $200,000 = .50
Step (3): $ 40,000 x .50 = $ 20,000Step (4):
$ 20,000 - $250 = $ 19,750 We will pay no more than $ 19,750. The
remaining $ 20,250 is not covered.
Example No. 2 (Adequate Insurance):When: Value of Property is $ 250,000
Coinsurance is 80% Purchased Limit is $ 200,000 The Deductible is 250 The amount of loss is $ 40,000
The minimum amount of insurance to meet your Coinsurance requirement is $200,000 ($250,000 x 80%). Therefore, the Limit of Insurance in this Example is adequate and no penalty applies. We will pay no more than $ 39,750 ($40,000 amount of loss minus the deductible of $250).
Copyright, Insurance Services Office, Inc.
The Coconut Twist
• Insured was not prepared – and perished• Insured’s documents not ready for claims• Insured’s directors & officers not in control• Inadequate building records and histories• Fiduciary exposure is expanded• Insured had no idea of what resources and
strategies the carrier would bring to the loss investigation – but they had warning!
The Coconut Twist FamilyThe Coconut Twist Family Directors & OfficersDirectors & Officers
Maintenance Records?Maintenance Records?
Financial Records?Financial Records?
What Assets Used for Claim? What Assets Used for Claim?
Who and What were they?Who and What were they?
Inadequate experience for this Inadequate experience for this event and its demands – you event and its demands – you bet!bet!
Insurance Agent is tainted.Insurance Agent is tainted.
With each “issue” there may With each “issue” there may be corresponding liability be corresponding liability exposures that increase exposures that increase with each error or with each error or omission.omission.
With each “attempt” to react With each “attempt” to react to the large loss claim – a to the large loss claim – a fiduciary event no one was fiduciary event no one was prepared for - a successful prepared for - a successful claims settlement derails.claims settlement derails.
Uncertainty swells!Uncertainty swells!
Liabilities expand and peak.Liabilities expand and peak.
Duties of the Insured:Three Big Killers
1. Examination Under Oath (EUO)
1. Proof of Loss
1. Appraisal
Who among association management is prepared or skilled for these potential
demands of the claim process and investigation?
A Snapshot of How They PrepareA Snapshot of How They Prepare
P I L RP I L R““Property Insurance Loss Register”Property Insurance Loss Register”
What is it?What is it?
How is it used?How is it used?
How does the carrier use this against your How does the carrier use this against your claim?claim?
Plan for RecoveryPlan for Recovery
This Policy May be Your Biggest Asset.This Policy May be Your Biggest Asset. A large loss claim event may be the A large loss claim event may be the
biggest corporate viability challenge you biggest corporate viability challenge you have faced.have faced.
Know the strategies and tools of the Know the strategies and tools of the carrier’s claims adjusting process – know carrier’s claims adjusting process – know how they come to play.how they come to play.
Equip your professional advisors ahead of Equip your professional advisors ahead of time – no reactive magic has been found.time – no reactive magic has been found.
Court’s Response – Your failure to plan Court’s Response – Your failure to plan does not make for their emergency!does not make for their emergency!
The other half of the The other half of the sunshinesunshine
The The Coconut Twist Coconut Twist hard times and hard times and disappointments do not have to be yours.disappointments do not have to be yours.
Ms. SallyMs. Sally does not have to repeated. does not have to repeated. But, without a plan and inducement to But, without a plan and inducement to
change your behavior and preparation. . . change your behavior and preparation. . . You will repeat history!!You will repeat history!! And this is just another version of insanity.And this is just another version of insanity.
Preparation and ConsultingPreparation and Consulting
Independent Claims Guidance Independent Claims Guidance
with the with the
professional services of:professional services of:
Mark PhillipsMark PhillipsTampa Bay, FloridaTampa Bay, Florida
Email: Email: [email protected]
Phone: 813.532.5023Phone: 813.532.5023
