When does the Insured need the help of an expert?

We have explained on more than one occasion how, in the Insurance world, the occurrence of a loss event is the moment of truth.

Policies are contracted in order to cover the assets and the liabilities of individuals and companies in the event of an accident occurring that brings about Material Damage and/or Consequential Losses.

In most cases, the covers under the Policy are clear, it is easy to ascertain the cause of the loss and also to agree the amounts of the indemnities that are payable on the basis of the Policy.  The Insurance Broker assists the Insured to recover the amount of the loss and damage sustained that is covered by the Policy.

However, there are loss events which given their size and complexity require both the Insured as well as their Insurance Broker to seek the support of a Loss Assessor to help them in that emergency situation that gave rise to the occurrence of a major claim.

On these occasions, particularly in the case of companies, it is in our opinion very useful if the Insured can count upon having some professionals by their side to help them:

  1. To minimise the Consequential Losses and take the correct measures to normalise the production of the risk.
  2. To prepare, document and defend the claim to be presented to their Insurance Company.

The intervention in these claims of a Loss Assessor acting on the part of the Insured who defends their interests and helps them recover the amount of the loss and damage sustained is of fundamental importance.

Likewise he can help them to obtain “payments on account” from the Insurance Company to cover the disbursements required in order to pay for the repair of the damage caused by the loss event.

It has been proven that the correct and professional intervention of a Loss Assessor speeds up the finalisation of the claims with the advantages that this can bring for both the Insured as well as the Insurer.

It has also been demonstrated that the presentation of a well-documented and verifiable claim facilitates the work of the Loss Adjuster acting for the Insurer and the reaching of an amicable agreement to close the claim.

This is the philosophy of Vantevo, independent consultants at the service of Insureds and their Brokers:  to assist the Insurer’s adjusters to close claims as soon as possible in a professional and amicable manner, in order to there by demonstrate the importance of Insurance for the company and that Policies do indeed perform their purpose, namely to protect the assets of the Insured, especially in the event of major claims that might jeopardise the continuity of the affected business.

Moreover, today with the “Preparation claims fees clause”, this consultancy service can be provided at no additional cost for the Insured, since it is the Insurance Companies who pay for this service.

 

What happens when a loss event occurs in the middle of another claim?

The above does not occur often, but it does sometimes.  Indeed, we have been involved in claims in which whilst the damaged machine was being transported to a workshop to be repaired, the lorry carrying it had an accident and overturned, thereby an increase of the loss being brought about in such cases.

On other occasions, due to an error on the part of a subcontractor who had been engaged in the repair of the damage, when it came to testing the machine, it failed and the repair and recommissioning of the same was delayed by several weeks.

In cases like these we have come across some Insurers who regard these incidents as being part of the same claim, since they understand that they occurred during the process of repairing the damage caused by the first loss event.  Whilst respecting this interpretation, the indemnity is paid by the Insurers and it is they who decide how the loss is to be adjusted.  It is the opinion of VANTEVO CLAIMS ADVISORS, that in both cases these are different loss events, since they occur at different times, on account of different causes and brought about by different persons.

In the case of the accident during the transportation, there will be somebody responsible for the same whose Insurer must be liable for the damage caused to the lorry’s cargo.  Therefore it is essential whenever a machine is to be transported so as to be repaired at an external workshop, that insurance is contracted that covers this carriage, since normally the covers of the carriers is inadequate.

In the other case, we have here an error on the part of an external subcontractor who must have a Professional Liability Policy, which should be liable for the loss and damage caused by the poor performance of the company subcontracted for the repair of the damaged machine or installation.

Unfortunately,  cases such as the above are not usually considered in the General Conditions and Schedules of the Policies, when it stands to reason that the Policies ought to specify whether they should be regarded as being new claims, as we at  VANTEVO CLAIMS ADVISORS believe, or as incidents of one and the same loss event.

Common sense tells us that the experts ought to consult the Insurers as to the what approach to take in these types of cases, since what tends to happen is that all the loss and damage is covered under the Policy whilst at the same time they try to recover the increased loss and damage from the third parties that were responsible for the same.

Vagueness must be avoided when drafting Policies

For the experts, the Insurance Policy is crucial in order to be able to adjust a loss event.  Therefore, when the Policy is “made to measure”, that is to say, when it is tailored to the risk it is intended to cover, the process of the loss adjustment is usually straight forward.

The problems arise when this is not the situation, especially in covers for SMEs, when often the Policy fails to cover the Insured’s basic risks or even the Sums Insured are not updated and results in underinsurance.

However in many cases, both in Policies that are tailored to the risk they were intended to cover as well as those that are not, added complications arise such as vagueness and poorly drafted wordings, not to say ambiguities in many of the Policy clauses, particularly in those to do with the exclusions.

It may exclude corrosion and erosion, but neglects to indicate that this refers to that corrosion and erosion that originates in a slow and gradual manner but not to that which arises accidentally and unexpectedly.

The same thing happens when the loss event is caused by a defective item.  The Policy fails to clarify that the rest of the damage brought about to other parts of the machine or installation by this defective item could be afforded cover thereunder.

Again the same occurs with the Consequential Loss covers.  Normally, regarding the time Deductibles, they do not specify just how the days indicated therein must be considered:  Are they working days? Calendar days? The initial days after the occurrence?  Are they to be allocated pro rata?  This lack of definition causes, at least in Spain, many problems when it comes to adjusting a claim.

Neither do these LoP Policies normally specify what percentage of Gross Margin must be taken into account when calculating the indemnity:  Is it that of the year the loss event occurred? That of the previous year? And if the loss event affects two accounting years, which one should be applied?

Likewise the Policies do not define who must be responsible for the extra expenses, since they do not indicate that these should be assumed pro rata to the benefits that may accrue to each party from the same.

Lastly, nor do they usually specify how the costs of recommissioning the damaged piece of equipment or installation must be treated once it has been repaired.  Should this be done under the Material Damage cover or under the Consequential Loss cover?

In the opinion of VANTEVO CLAIMS ADVISORS, the drafting of the wording of the Policies is unsatisfactory and Insurers ought to improve the clarity and accuracy of the same, avoiding any vagueness and possible disputes that in many cases harm them.

The problem with the lack of clarity regarding the time Deductible in Loss of Profits or Consequential Loss Policies

Whenever the Loss of Profits or Consequential Loss policies issued by the London Market establish a Deductible or Excess  of, say 10 days, this is construed as being the first 10 days, and so there is no need to define just how those 10 days must be interpreted.

However, in Spain and other countries this is not the case, and the policies ought to specify just how the Deductible is to be considered:  Do we take the first 10 days?  Do we apply them pro-rata to the indemnity period?  Are they 10 calendar days or 10 working days?  Depending upon how it is interpreted, we will get a different indemnity figure.

It is quite shocking that the vast majority of Spanish Loss of Profits or Consequential Loss policies do not define the Deductible or Excess.  That is to say, they do not specify just how it must be applied and this prejudices the Insurers issuing them.

In effect the Spanish Law 50/80 on Insurance Contract, and consequently the courts, construe that such a lack of definition cannot prejudice the Insureds and therefore it must be applied in the way that is most beneficial for the latter.

Our experience as Loss Adjusters leads us to recommend that Insurers and Brokers should define how the time Deductible or Excess is to be applied.  Very often we have proven that such vagueness has led to the breakdown or deterioration in the relationships between Insureds and Insurers, and due to the lack of clarity concerning the time Deductible, it has taken longer to settle the claim and many have even ended up in the Courts.

It is the opinion of VANTEVO CLAIMS ADVISORS that, since the Insurance Policy is a standard form contract, entered into voluntarily and in good faith between the parties, such lack of precision ought to be avoided as it is a source of problems and conflicts when it comes to adjusting claims under Loss of Profits / Consequential Loss policies in Spain.

It is strange how after so many bad experiences, most of the Spanish Policies still continue to fail to specify just how the time Deductible or Excess must be considered.  It is VANTEVO’s suggestion that instead of stating “10 days” they should state “10 working days and applied pro rata”.  We are sure that this would avoid many problems when adjusting this type of loss in our country.

The Usefulness of an Incident Action Protocol in the event of a loss

Incident Action Protocol

A major loss event occurring in an industrial risk generates an emergency situation that requires emergency solutions.  With this type of company, the Consequential Losses arising out of the interruption of the business can be substantial and it is vital not to lose any time and be clear about what must be done after the incident has occurred.

That is the objective of implementing an Incident Action Protocol:

  1. Recover normal productivity within the shortest time possible.
  2. Adequately prepare and document the claim to be presented to Insurers.
  3. Recover as soon as possible the settlement for the loss and damage covered by the insurance policy.

The elaboration and design of an Incident Action Protocol requires the examination of the company’s risks along with their emergency and contingency plans.  Thought must be given in the same to:

  • Who is going to settle the losses: A list should be drawn up of three firms specialising in industrial risks operating locally that can assist the Insured to undertake measures in order to minimise the Consequential Losses.
  • Who is going to repair the damage: A series of firms specialising in the risk should be approved and establish with them what are their rates and work conditions.
  • Who is going to control the repairs and document the cost of the same along with the Consequential Losses brought about by the loss event: VANTEVO suggest that this should be done by the Insured’s Maintenance Department using their own management system.  That would allow a control to be kept of the quality of the repairs and, without any doubt, would expedite the same.
  • An account should be opened in which all the costs associated with the loss event are entered, with some accounting codes for a quick and easy identification and classification of the amounts.

Our experience is that, at the time of the loss event, which is the moment of truth as far as the insurance is concerned, there should be no room for any improvisations or any time wasted, but instead that agreed in the Incident Action Protocol drawn up earlier must be enacted.

We at VANTEVO CLAIMS ADVISORS would be delighted to assist the Policyholders and Brokers to implement an Incident Action Protocol to help them to resume normal productivity as soon as possible and receive from Insurers the settlement for all the losses to which they are entitled on the basis of the insurance Policy that they have contracted.

Why should Insureds contract a risk survey?

As the saying goes “better safe than sorry”, yet all too frequently we have encountered, on the occasion of visits motivated by claims, companies whose layouts and risk prevention and safety measures left much to be desired.

In a tough insurance market such as the current one, it is important to invest in prevention and safety so as to facilitate the acceptance of the risks by the Insurance Companies.  Many of the measures that can be undertaken, such as improving cleanliness, sealing of electric cable ducts, thermal imaging of the electric switchboards, charging forklift batteries in an adequate place (either open air or well ventilated) … are cheap to do and require little investment.

In addition, it has been proven that most of the loss events that occur in industrial risks are caused by human factors, i.e., due to the negligence of their own workers or workmen from external companies engaged in maintenance or repair work.  Therefore, it is vital to ensure that the operations and maintenance manuals are complied with and likewise the protocols for the “hot work permits”, and that both your own as well as the subcontractor staff know and follow the prevention and safety manuals established for each risk.

There is no point whatsoever in having excellent prevention and safety rules, if then their rigorous compliance is not enforced or controlled.  Being strict on this point would substantially reduce the claims record of companies, and is a matter in which their boards of directors and works committees ought to be seriously involved.

The fact that some experts inspect the risks and issue reports recommending improvements in prevention and safety issues and point out any deficiencies and gaps found, we believe would reduce the accident rate of companies and facilitate the cover of their risks by Insurers.

At VANTEVO CLAIMS ADVISORS, we have experts in risk surveys and are in a position to assist Policyholders and Brokers to reduce their claims record and lower the cost of their insurance policies.