Welcome to the Winter edition of Claim Solutions’ Newsletter.
We have now been tracking possible insurable incidents over 3 years and our full list appears at our Newsletter link on our web site. This resource is available to you. It includes events such as: -
Train collisions & derailments, bomb blasts, ram raids, gas leaks, chemical spills, crane collapses, earthquakes, power blackouts, explosions, evacuations, lightning strikes, mini tornadoes, malicious damage, product recalls, storm damage, flood and embezzlement.
What a time we have had!
Those events which occurred in the last quarter are listed on page 4 of this Newsletter highlighting the need for adequate insurance cover.
As always, we hope that all those who have sustained losses have a speedy recovery.
If we can assist you in relation to any claims please do not hesitate to contact us.
It’s never a great time to lose power but with the Olympic games beginning on 13 August another potential risk for the Athens games has arisen. On 12 July power failures affected Athens, halting trains, trolley buses and the underground metro. One theory for the blackout was a surge in the use of air conditioning during a recent heatwave. It lead to the Athens 2004 Organising Committee advising their risk management plans for power disruptions.
Perhaps it was just as well the International Olympic Committee (IOC) secured insurance cover of US$170 million for the Games of the XXVIII Olympiad in Athens (IOC, olympic.org). This is the first time insurance against cancellation of the games has been taken, and may not be the last. Two risks apparently covered are “Athens being hit by a huge earthquake to U.S. President George Bush dying during the Games pushing Olympics coverage off the world’s primetime TV schedules …”(Forbes.com).
This is on top of insurance the Athens Organising Committee is estimated to have obtained of £10 million to cover 15,000 athletes, 20,000 officials, 1.5 million spectators and 4 million Athenians involved in hosting the event (timesonline.co.uk).
Other reports of olympic related insurance cover include: -
“Some teams and sponsors offer their athletes big perks if they do well, but quietly buy insurance against the risk their stars exceed expectations, leaving them with a big bill.”
“major TV networks insuring themselves for up to [US] $350 million”
“Greek firms producing Athens 2004 memorabilia buying cover worth a million euros” (Forbes.com)
With all this insurance it gives new meaning to the price of gold!
Gamblers took a little more risk than anticipated when a fire broke out in the engine room of a gambling cruise ship called the SunCruz Casino just off the coast of Hollywood, Florida on 17 May 2004.
Eight rescue boats, two fire fighting tugs and a Coast Guard helicopter were sent to assist.
News footage showed people standing on the top deck, wearing life jackets. Thankfully no-one was injured.
The ship was towed back to port presumably nursing a claim for damaged property and lost gambling revenue.
Business Interruption cover is an integral component of an insurance portfolio but is often the least understood.
This is highlighted during hard insurance markets when the cover is reduced by shortening the indemnity period or increasing the deductible in an effort to cap spiralling insurance premiums. In some instances the cover is even abandoned!
When allowed to operate correctly a Business Interruption policy restores cash flow.
Consider the following claim.
On 1 July 2004, Mrs Sweet’s chocolate factory is razed by fire. Not only must she find a temporary factory but it will take at least 3 months before manufacturers in Switzerland can replace the equipment needed for Mrs Sweet to recommence making her melting moments.
This means no income until 1 October 2004!
Without any income, Mrs Sweet is unable to pay ongoing fixed costs such as wages to her experienced chefs, her key administrative staff, rates, taxes, etc.
Without any income, Mrs Sweet is also unable to pay additional costs to save the business e.g. costs to: -
- Hire temporary ovens.
- Air-freight the replacement ovens from Switzerland.
- Divert telephone, mail, facsimile, etc.
- Utilise mobile phones for additional communication.
- Work overtime to make up lost downtime.
- Print and mail notices to customers advising of temporary arrangements.
- Hire competitors spare capacity to make melting moments.
Shortly after the fire Mrs Sweet obtains copies of her insurance documentation. To her horror she discovers that in an effort to reduce her premium she cancelled the Business Interruption cover last year.
The Material Damage cover remains intact but what use is it? Mrs Sweet has no funds to implement any loss minimisation measures. By the time the damaged equipment and building is reinstated her chef will have resigned and may have taken a position with her competitor, her customers will have sourced their supplies of chocolate elsewhere and her market will have disappeared.
Perhaps it is extreme, but this case study demonstrates that adequate Business Interruption cover is an important adjunct to the property cover and should not be underestimated even in times of high premiums.
The insured, broker, claims preparer, insurer and loss adjuster are all parties to an insurance claim but the insured is the reason we all exist.
In the event of a loss the insured’s first call is usually to their insurance broker. Often the broker will notify two parties, first the insurer and then the claims preparer. The insurer normally instructs a loss adjuster.
The roles of the various parties differ from one claim to the next but we have found that the following roles facilitate an efficient claims settlement.
Works co-operatively with the claims preparer and loss adjuster. Provides full description of the property damage and detailed explanations of the impact of the loss on production, stocks, sales and customers. Provides documentation to the claims preparer in the format requested. Remains actively involved in all discussions and gains a thorough understanding of the insurance policy.
Oversees the functions being performed by the loss adjuster and claims preparer. Ensures the documentation flow between the insured, claims preparer, loss adjuster and broker proceeds in a timely manner. Remains actively involved in the claim. Co-ordinates meetings between the various parties if necessary.
The Claims Preparer
Obtains a clear understanding of the nature of the insured’s business, the extent of the property loss and the impact on production, stocks and sales. Reviews the insurance policy and provides the insured with a precise understanding of how the policy is likely to respond to the loss. Gathers the appropriate information, prepares the claim and presents this to the insured and then the loss adjuster and insurer. Remains actively involved in the claim process.
Reviews reports from the loss adjuster in a timely manner. Processes progress payments promptly. Attends claim meetings on key issues.
The Loss Adjuster
Gains an understanding of the business, extent of loss and insurance cover. Prepares an estimate of the likely loss for the insurer, reviews claims on a timely basis and recommends the insurer makes progress payments at the earliest opportunity.
When a loss occurs an adjuster is usually required to provide the Insurer with a reserve sufficient to reflect the Insurer’s potential liability under the policy.
It is important for these estimates to be as accurate as possible because: -
- They allow the Insurer to allocate funds for the payment of the claim.
- An understated estimate can lead to unnecessary justification as to why the claim exceeds the reserve.
- An overstated estimate can have an unrealistic impact on insurance renewals and premiums which may fall due during the course of a claim.
While it needs to be as accurate as possible it is important to remember that an estimate is just that and attention needs to be focused on the actual costs i.e. the claim.
About Claim Solutions…
Claim Solutions provides a specialist insurance claims service. Our firm is recognised as one of the leading practices in this field with both national and international companies featuring amongst our clients. Our aim is to provide an efficient, professional and complete claims service which responds to your needs in times of crisis.
The Articles which appear in this Newsletter are not intended to be a substitute for specific technical advice.