Most of us pay our insurance and hope never to make a major claim.
While most Resident Management Companies (RMCs) and their Property Managing Agents (PMAs) diligently arrange appropriate insurance for the blocks they manage, very few expect to experience a major loss. So when an incident such as a large fire does occur, it can have devastating effects on the residents and can be an extremely challenging and potentially stressful time for the RMC.
Immediate attention needs to be given to contacting the emergency services, ensuring the safety of the residents and their visitors, shutting down utility services and then instructing an appropriate contractor to carry out any emergency works in order to make the building safe and secure. However, once you have dealt with the immediate crisis, do not overlook that all important phone call to the insurers.
Avoid delays
The circumstances of the loss should be immediately notified to your insurers or their appointed representatives. RMC’s should make sure they are familiar with the claims procedure in advance and be aware of who to make first contact with. This may be the insurers, an appointed claims management company or the broker. Most blocks of flats policies contain a claims notification condition stipulating that immediate notification of a claim is required. The breach of such a condition could lead to the insurers restricting or -in some cases – withdrawing policy coverage.
Your insurers will appoint a loss adjuster and may also appoint additional experts such as forensic investigators, building surveyors and engineers, all of which will assist the insurer in forming an opinion on policy coverage, the cause of the loss, the repair and reinstatement options available and the potential for making a recovery against a responsible third party.
Managing the repairs
Managing the reinstatement works following a major loss can be a complex and time consuming process. Most RMCs will find that they neither have the in-house expertise or the resources to deal with such a monumental task. It is recommended that a consultant or surveyor is appointed to fulfil the project management role and to keep detailed accounts of costs. Most blocks of flats policies will include cover for ‘professional fees’ up to a pre-determined indemnity limit, although a condition of the insurance policy may be the prior agreement of the insurer to the appointment of an expert. This is a good reason always to check yourpolicy in advance and make sure you understand the terms and conditions.
Supporting documentation – get it right!
The onus is on you to fully document and evidence your claim. The quality of claim presentation and supporting documentation is critical to a successful settlement. Providing inaccurate or incorrect supporting documents can damage your credibility, lead to uncomfortable questioning and potentially damage the value of the settlement. So it is vital that you have adequate procedures in place to ensure the accurate collation of costs and a suitable format for presenting the details to the loss adjuster.
Build a relationship with the loss adjuster
While no one would suggest that you invite the loss adjuster out to dinner, or even go as far as to provide him or her with more information than they have requested, it is important to establish and maintain a good working relationship. The loss adjuster acts on behalf of insurers but if you can persuade them of the merits of your case, in most cases they will convince the Insurer.
Keep the lines of communication with the loss adjuster open throughout the life of the claim and agree a process for providing claims information and the identification of potential policy cover issues.
Ensure you hold the loss adjuster to account – leave no room for vagaries, assumptions or ambiguity. If you don’t understand something that the adjuster has asked for, ask them to explain.
Gather support
Keep the broker informed of developments and secure their support. A good broker will be able to give advice on any number of issues, including policy cover, the appointment of experts, the presentation of documentation and the overall claims process. They will also be able to provide support with negotiations with insurers and the loss adjuster should you run into difficulties during the life of the claim.
In the event of a major loss it is always worth giving consideration to the appointment of a professional claims consultant, who will act as the RMC’s in-house resource, preparing and presenting the claim to the loss adjuster under the relevant heads of policy cover. The appointment of a claims consultant can reduce the overall lifecycle of the claim and maximise the policy cover, while freeing-up much needed resource within the RMC. Be aware however that a commercial policy will not cover the cost of using a claims consultant as standard – this is generally an additional cover negotiated by the broker at the client’s request.
Avoid the pitfalls…
- Do not sit on paperwork and cause unnecessary delays with the claim.
- Avoid causing delays with the repair/reinstatement process, which could give insurers grounds for reducing a loss of rent claim.
- Most Residential Property Owner’s policies extend to cover Alternative Accommodation for the residents. Ensure that the alternative accommodation is appropriate and relative to the size of accommodation that has been damaged. Insurers will look to exclude additional costs if they are considered to be excessive.
- Professional fees are generally covered with the insurer’s prior consent. Costs for claims preparation, including the administration and presentation of claims information however are normally excluded so avoid racking up large costs in this area.
- Necessary emergency works and immediate mitigation measures to stop ongoing damage will be picked up by the policy. Additional costs for avoiding a future loss however, such as commissioning additional security on a building that has become unoccupied because of the loss, in most cases will not be covered.
Do you have a claims procedure?
An insurance policy will contain a basic claims notification procedure, which will set out what information the insurers expect to receive in the event of a claim. It is unlikely however this procedure will provide much guidance in the event of a major loss.
You should ensure that you have a robust and up-to-date claims procedure to follow in the event of both smaller claims and the less frequent larger losses. This should detail the first point of contact as well as including contact details for your broker and/or insurer.
Your broker should be able to assist with drafting a claims procedure that provides emergency contact details for the loss adjuster if the loss occurs outside of office hours and gives advice on immediate action to take following a loss.
Major Loss Check List
When managing a major loss give consideration to the following points.
- Establish a project management team, co-opting external experts as required, to manage the claim process and determine/implement the claims strategy.
- Organise the systematic collection of information as it becomes available (rather than fishing through historic files at the end of the claim!).
- Fully engage insurers and their representatives. Seek the loss adjuster’s agreement on key decisions such as reinstatement methods, mitigation expenses, time lines etc.; at the time those decisions are taken, ensuring that they are faced with the same realities and uncertainties as you (this denies them access to hindsight!).
- Prepare best/worst case cost estimates as soon as feasible. Ballpark figures with plenty of contingencies are better than nothing.
- Review the potential for recovery from third parties and assess the impact of a recovery action on existing contractual relationships.
- Ensure that critical dates and time limits for the notification and/or presentation of claims are identified and complied with.
- Ensure that all documentation is passed to loss adjusters is accurate.
- Communicate any problems e.g. with suppliers, timetables, work schedules etc to the loss adjuster immediately they become apparent – so you include them in the problem solving process.
Source: JLT Specialty and Echelon Claims Consultants Limited.
