Steve Ambort, Senior Manager of Deloitte & Touche, offered valuable advice on how to avoid the common pitfalls.
- It takes a team approach to be successful in preparing the proof of loss. The team will need a leader, someone to coordinate input from accounting, legal, construction, building engineering and the hired experts.
- Read your policy and “tailor your claim to your policy.” In other words, make sure you know where you're coverage problems are and think of ways to overcome them.
- Put your "beans in the right pot." For example, make sure your “bean counters” in accounting capture all extra expenditures as a result of the interruption of your business. Don't let people charge items to it for which you will not be able to collect.
- “Lead, don't follow.” It takes time to prepare and negotiate a business interruption claim settlement.
- Communicate. Above all, make sure senior management has a realistic expectation of the outcome. Don't book an account receivable from the insurance company until you are certain you have a valid claim.
In the Q&A session that followed the risk manager (and controller) of a retail chain asked for advice about a problem in negotiating his physical damage claim. They sustained a total loss of their business personal property in a lease store located in the underground-shopping plaza of the World Trade Center. Their policy, apparently a standard commercial form, is worded to pay actual cash value -- not replacement cost -- in the event the store is not repaired or rebuilt. Should he accept ACV, which is defined as replacement cost minus depreciation?
We were pleased to respond that with the following advice:
Don't be in a hurry to settle. Significant office and commercial store space eventually will be rebuilt on Ground Zero.
Keep the meter running. The end of the period of indemnity is triggered to the moment physical restoration is achieved — and there is no link between the policy period and the period of indemnity. If the insurance company is so eager to settle, get them to pay you replacement cost value on the loss of business personal property. Get them to compensate you for your economic loss due to the early termination of your lease, something called Leasehold Interest Coverage.
Naturally, we were pleased to hear the panelist call for the engagement of business interruption claim experts — whose fees are often paid by the insurance policy. For an outline of how we approach the preparation and negotiation of business interruption claims, select business interruption claims from our Services menu.
