Every insurer's marketing materials will tell you that it's dedicated to paying claims promptly and efficiently, with the highest level of service, that making good on its promise to pay is its top priority.
But when you actually have a claim, especially a big one, you'll find out:
-- You have to play by the company's rules. The insurance contract stipulates the conditions under which the insurer will pay claims. If you violate its rules, your claim may be denied, delayed or reduced.
-- Documentation is essential. You have to prove what you lost.
-- Time is of the essence. Prompt reporting is necessary.
-- Even when you do play by the rules and report the claim promptly, the insurer may drag its heels. You often have to apply a little pressure from time to time.
For all these reasons, the broker should get involved in the claims process early. When you and your broker work together, the odds of a prompt, fair settlement are much improved.
BEFORE THE CLAIM
As the insured, you need an accurate inventory of all your physical assets and up-to-date appraisals of machinery and equipment. Videotaping is a good way to document the inventory. Records should be stored in a separate location and/or in a secure Web-based backup service.
It doesn't do much good to have a great inventory that goes up in flames along with everything else. Keep vital records separate so they're retrievable; back up all irreplaceable items off premises.
Additionally, for business-interruption recoveries, you'll need unimpeachable records of how much income your organization collects over any given time period so you can document how much you've lost. It's also wise to have backup copies of your policies in a safe, separate place.
WHEN YOU HAVE A LOSS
When you have a loss, report it immediately to your broker if the broker offers claim support, or to your insurer if the broker doesn't get involved in claims. Even if you don't have all the proper forms, as soon as you know everyone is safe and getting proper medical treatment, if needed, pick up the phone and call right away. This puts the insurer on notice and starts its wheels turning.
If possible, take photos of the loss. Of course, you can't do this in the case of embezzlement or computer crimes, but most losses, like fires and employee accidents, can be captured in pictures. Take photos before you touch anything. Photos not only help you document the claim, but also give you information that help you avoid future losses--particularly in slip-and-falls and workers' comp accidents.
By investigating the accident, you can find out what went wrong and act to correct the underlying condition. Preventing future losses is as important as collecting fully on the ones you can't avoid.
You'll want to take steps to prevent further damage and prevent bystanders or looters from wandering into a damaged building. But don't make any repairs until the insurer has been notified; tampering with the site, though well intentioned, could jeopardize your claim.
Let's say you have a fire. You inform the broker and/or the insurer, take photos if possible, and then arrange to have a contractor board up the place or make temporary repairs promptly.
Let's look at claims strategies for different types of losses.
Property losses are somewhat straightforward because no third party is involved. There's a covered event--a fire, chemical explosion, water or wind damage, or earthquake. Assuming you have the right policy, the coverage is unambiguous as are the limits. But the devil is in the details--the property that was lost.
Make sure that you count every item of property when submitting the claims. Besides the big stuff, add up all the small items you may have lost: supplies, paper, pads, pencils, pens, computer disks and so on. If you have an inventory that covers every single item, you have a big advantage. If you don't, you'll have to have someone--consider hiring a public adjuster--to comb through the rubble and resubmit claims as more items are discovered. That will slow down payment, but it will be worth the wait.
Policies require reporting property claims within a certain time, which can be anywhere from 30 to 120 days. If you wait too long, you may not be able to collect.
While damage to the building itself is evident, don't neglect extra expenses. Depending on the extent of the damage, your organization may also have to pay architect's fees and permit fees to government agencies. You may need to rent a dumpster and hire a cleanup and/or demolition crew. These are all real costs.
Additionally, if your building was old, it may have been grandfathered for certain building codes. But if you have to rebuild, you may be required to install a sprinkler system, for instance, and take other steps to bring the building up to code. A broker can offer a second set of eyes to help assure that you don't overlook anything.
Claims that involved bodily injuries, whether the injured party is an employee, a visitor, pedestrian or car-crash victim car, are challenging. Many factors come into play--causality, negligence, and the potential for faked or exaggerated injuries.
Educate your employees. Instruct them to never admit guilt or take responsibility. Often, your employee or organization may not have caused the accident, but someone stepped forward and took the blame. You can even lose coverage because insurance will not cover intentional acts.
More typically, admitting guilt will jeopardize your defense position by removing any doubt in people's minds. If an employee said your organization was at fault, your insurer may feel compelled to make a generous settlement. The injured party's lawyer may decide to take you to court to win a big judgment.
After getting the injured party medical attention, get as much detail on the third party as possible: name, address, occupation, cause of accident, location of accident, and the names and phone numbers of the witnesses. What was done after the accident? Did anyone call an ambulance, and if so, who?
Sometimes people will suffer a spill, get up and pronounce themselves fine. But notify your broker or insurer as soon as possible, even if you think there won't be a claim. You never know. The next day, the individual may discover a broken bone ... or decide to cash in on the "injury."
Because workers' comp is no-fault, establishing liability doesn't play into it, but virtually all else of the above applies. With worker injuries, prompt reporting to the insurer and getting the worker prompt medical assistance from a healthcare provider who's familiar with treating workplace injuries are critical. Prompt treatment can keep a minor cut, for instance, from becoming infected and the worker may miss little or no time.Similarly, minor back injuries should be treated.
Ironically, your best, most motivated workers can cause real problems. They're the ones who want to suck it up and keep on going despite an injury. They may ignore the signals their bodies are sending them because they want to keep earning money. They have to be educated that it's in their interest to report minor injuries and get treatment.
On the other hand, some workers exaggerate or fake injuries. This is particularly endemic with seasonal and temporary workers. They know their job is ending and they miraculously manage to get "injured" just before they're laid off. If you suspect the worker is faking, gather all the evidence you can that will help your insurer deny or reduce an unwarranted claim.
Group travel accident claims offer many challenges. Unlike other employee benefits, travel accident insurance is usually sold by a property/casualty broker, and the risk manager rather than a benefits manager is often the buyer. Settling a travel accident claim is more like settling a property/casualty claim than a routine health insurance claim, even though the payment normally goes to the employee or employee's beneficiary, not the company.
The policy typically covers injury or death that occurs when an employee is traveling on company business, so you must first establish that the accident indeed occurred in the course of business. An itinerary can be invaluable. You, the employer, should provide a letter stating that the employee was injured while on company business.
It's good to get your broker involved because today's travel accident policies have many bells and whistles. For instance, let's say your employee is hurt or killed in an auto accident in China. Was she wearing a seatbelt and can you prove it? Many policies provide an extra benefit, of say, $50,000 more, if a seatbelt was used.
If it's a death claim, several factors come into play. Most policies pay a multiple of salary, so you first have to find out the employee's salary and then make sure the insurer pays the right amount. You'll need a death certificate. If the death occurred overseas, obtain a newspaper article or police report and send it to the insurer. Many insurers have offices in foreign countries and can obtain these reports, but it's still a good idea to get them before the insurer does.
If the employee has kids in college, the policy may pay their tuition until graduation, so you need to know the family situation. If the beneficiary incurs expenses going to an investment advisor, the policy may cover the advisor's fee up to a certain limit.
Additionally, most policies pay the cost of returning the body for burial or repatriating a sick individual to the United States for treatment. (In one famous case, the policy paid to have a seriously ill employee flown back from Antarctica in the winter--an enormously expensive proposition.) A broker who's familiar with all the provisions of the policy is in the best position to review the claim, go over the benefits, and make sure that the employee or beneficiary gets every penny owed under the policy.
Whether it's property, liability, comp, crime or travel-accident, claims come in all types and sizes. With complex claims, the insurer's investigation may take months, and you can hardly expect a full payment the next day. Nevertheless, some insurers do sometimes sit on legitimate claims--what a surprise--and it helps speed things if you or your broker nudges them regularly about the status of the claim. The squeaky wheel does get the grease.
HARRY ENNEVOR is president of E.G. Bowman Co. Inc., a commercial insurance brokerage in Manhattan. MARJORIE YOUNG is vice president. The firm provides insurance, loss-control and risk management services nationally.
April 15, 2008
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