Welcome
Welcome to
the Claim Solutions' Newsletter for Winter 2003.
Losses over the past quarter have included fires in retail outlets,
factories, restaurants and hospitals. Explosions, gas leaks and
even a tornado also occurred. A list is included on page 4. As
always, we hope all those who sustained a loss experience a speedy
recovery.
This newsletter contains articles on the tornado in Bendigo, sabotage,
conflicts, indemnity periods, underinsurance and communication.
We hope you enjoy them. If you have missed one of our newsletters
don't worry. An archive of our current and past newsletters can
be found on our website.
If we can assist you in relation to any claims please do not hesitate
to contact us. Your enquiries are always welcome.
Tornado's
Trail of Devastation
A tornado
is a violent rotating column of air extending from a thunderstorm
to the ground. The most violent can produce wind speeds up to
400kph, moving forward at average speeds of about 50kph.
They are a natural phenomenon we usually associate with the United
States. They occur in Australia but are often unnoticed as they
strike in unpopulated areas. Bendigo residents can tell us otherwise.
At approximately 6pm on 18 May 2003 a freak tornado accompanied
by winds of up to 150kph hit the area. It ripped roofs complete
with trusses from houses, tore huge gum trees from the ground
with roots intact, threw street lights and debris across roads
and knocked down power lines cutting electricity to Bendigo, Castlemaine
and Maldon.
The tornado left a 7 kilometre trail of devastation through the
suburbs of Bendigo. Approximately 100 homes were damaged and 10
destroyed. The famous Joss House listed by the National Trust
also sustained damage. While the damage was largely residential
it could just as easily have been industrial.
It has been
a long time since Bendigo has seen such an event. Other tornadoes
were reported in the area in 1899, 1905, 1906 and 1911.
This event highlights the need for adequate insurance. Not only
can such disasters be unpredictable, their ferocity can be frightening.
Odd
Spot - Sabotage Is Alive and Well
Yes, the Claim
Solutions archive includes sabotage. A developing orchid nursery
in the Northern Territory was beginning to thrive when its water
supply was contaminated. Not only did almost the entire retail
stock die much
of the germination stock was badly damaged. A significant loss
of profit followed.
A similar situation affected a farmer who bred quails destined
for exclusive Melbourne restaurants. His feed stock was contaminated
causing many of the delicacies to fall off their perch and the
breeding pairs to become feeble.Industrial sabotage is alive and
well!
Claims,
Conflict and Independence
The claims
industry is not immune from Conflicts of Interest, and independence
is amongst the key criteria which needs to be considered when
appointing a consultant to prepare a claim. 
For example a conflict of interest may arise if the consultant
accepts engagements from both the Insurer and Insured. An Insured
needs to be satisfied that the presentation of their claim is
free from any working relationship the consultant may have with
the Insurer.
A conflict may also arise if the consultant is also the Insured's
auditor. Both the insured and insurer need to be content that
the claim presentation is free from any need to retain a larger
audit role. One event can often lead to a series of claims affecting
many parties e.g. one fire may affect a tenant, landlord, customer
and supplier. The consultant must be aware of the relationships
and avoid situations which may cloud their judgement. The recent
Pan Pharmaceuticals product recall is a prime example. It would
be difficult to prepare the claim for Pan as well as its affected
customers.
The
Indemnity Period
Some time
ago we were involved in several claims for a series of retailers
where a fire ripped through an arcade in the centre of a Victorian
country town. The concentration of risk proved to be a problem.
Nearby vacancies were immediately swamped by distraught tenants
endeavouring to re-establish their businesses. It was a case of
first in best dressed and many tenants could not find an alternative
location to trade. They had no option but to wait until the arcade
was rebuilt, a lengthy process. In many instances their indemnity
period was too short.
This claims
experience highlights the need for an adequate indemnity period.
Insured's need a longer rather than a shorter indemnity period
if: -
These
are just some of the factors which need to be considered. Remember,
it usually takes longer for sales to return to normal than expected.
Some see claims....
Underinsurance
- Mid Term Review
We were recently
appointed to prepare a Business Interruption claim for a medium
sized family owned business.
A new broker placed the risk in March 2003 after winning the account
the previous month. There was insufficient time to fully review
the Declared Value on Gross Profit and the existing value was
used after allowing a nominal increase for positive business trends.
A full review of the Business Interruption risk including the
Declared Value on Gross Profit was planned in the months preceding
the next renewal i.e. early 2004.
One of our first tasks after our appointment to prepare the claim
was to test the adequacy of cover. The Declared Value on Gross
Profit was found to be inadequate.
A large number
of Business Interruption insurance claims are underinsured.
This can be due to a lack of understanding of policy terms, inadequate
allowance for business trends, failure to project figures far
enough into the future and it can also be due to timing.
If pressures preclude a full review of the Gross Profit cover
when the risk is placed it is best for it to be conducted as soon
as possible after renewal.
If the initial value declared on Gross Profit is found to be inadequate
it can be increased and an additional premium paid.
If it is overstated it can be reduced and a credit requested.
Underinsurance is a major issue. Let's do all we can to try and
avoid it!
The
Art of Communication
An
insurance claim involves a team of people including the Insured,
the Insurance Broker, the Claim Preparer, the Insurer(s) and their
loss adjuster.
Our mutual goal is to present and settle the claim. Based on our
claims experience this is best achieved with open communication
between all parties.
There
are often three levels of communication.
A.
Meetings
The circumstances surrounding the claim, information gathering,
identification and resolution of claim issues is best communicated
face to face. With larger claims it is often of benefit to schedule
a regular fortnightly or monthly meeting date to ensure all parties
are comfortable with the progress. Agendas and minutes help to
maintain focus and update those parties who cannot attend.
B.
Correspondence
Critical issues need to be confirmed in writing. E-mail is an
efficient and convenient media to ensure all parties are aware
of the issues. It is important this does not become a substitute
for face to face contact. The written word can often be misinterpreted
causing unnecessary dispute. Once misinterpretation occurs it
is best resolved in person. An attempt to clarify the position
with further e-mails often leads to a barrage of misguided communications.
C. Formal Reports
Our claim reports are made available to all parties. The loss
adjuster uses these to verify the claim and report to the Insurer.
The loss adjuster's report is usually only available to their
principal. Perhaps it should also be made available to the Insured
to outline and explain the issues as they arise.
Others
see solutions ....
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. We are
available to assist in relation to any of the above incidents
or similar losses.
For
a copy of our Company Profile please
contact Joe or Susan.
