Articles & Releases

 Insurance Claims - Demystified
By: Glen MacRae
Claims Manager

 
Even the most seasoned businessperson thinks twice about claiming on their insurance policy. Sometimes they are worried about how a claim might affect their premiums. Or, they might prefer to eat a loss just to save their insurance for when they “really need it”. Occasionally, they feel embarrassed by the circumstances of the loss and don’t want to talk about it. But most of the time, they are worried about the process involved resolving a loss and what they should and should not do.
 
You and your insurance company share similar interests. Until you can talk with one of their claims representatives, you may do what anyone would do if they had no insurance. Suppose for example you have a Builders Risk policy covering a 4-storey building under construction. During a high wind, protective tarps are blown loose and water seriously damages the interior finished spaces including some electrical installations. The first step is to protect the property from further loss. The second is to dry up the water and take any reasonable precautions to prevent the damage. The third step is to get prices to repair any permanent damage. Last, contact your insurance broker to discuss how the incident should be handled. The costs incurred to that point can be passed along to the insurance company to be adjusted and paid.
 
The scope of emergency repairs needs to be monitored closely to prevent them from expanding into something more permanent.  The cost of final repairs needs to be subject to competitive pricing by repair contractors, including the trades already working on the project.  They are entitled to quote market rates and prices.
 
Barring very large property losses such as a major fire, the vast majority of property losses are resolved satisfactorily in less than 3 months. It doesn’t take long for an insurance company to review a claim. Once accepted for payment it only takes 24 hrs. for an insurance company to issue a cheque and have it in the mail. So, in most instances any delays in settling a loss can be traced to the desk of the insured themselves. In other words, the faster you present a claim, the faster it gets paid!
 
Liability claims aren’t much different. When a passer-by trips over some construction debris and breaks an ankle what would you do? You wouldn’t say – “gee that is all my fault – send me a bill.” Be empathetic of course; but never admit responsibility for their injury. Sure, make certain the person receives medical attention. Keep a copy of the first aid attendant’s report. Take down particulars of name, phone number and address. Take photos of the scene and get the names and contact particulars of witnesses. And, because builders are expert in building and bodily injury adjusters are expert in negotiating with injured parties (or their lawyers), you do not want to undertake that work yourself, instead, you turn the matter over to them.
 
Liability claims are handled differently from property losses because they are driven by the demands of someone other than you. Using the example above, the injured third party has the right to make virtually anyone they choose, jump through certain hoops. Once a lawsuit has started, it can never be “controlled” in the same sense a water damage claim can be controlled. Instead, it has to be managed. Your insurance companies have experts who are accustomed to handling litigation claims.
 
Not all commercial law firms understand insurance related litigation. It is a specialized field. Firms that concentrate in this area are familiar with the law and need not spend time “bringing themselves up to speed”. That is why your Insurance Company will appoint a specific law firm to defend you. They will choose one that they know; one whose lawyers have agreed to follow the Insurance Company’s litigation management standards. That firm works for you, the policyholder. The insurance company pays their bills. If they feel that your lawyer is getting off track or is straying from a litigation management plan, a private conversation between the claims handler and the lawyer usually sets matters straight. That is how they control the costs and in many cases the overall outcome of the claim.
 
For an insurance company that specializes in Construction Liability claims, certain patterns begin to emerge in the lawsuits that appear. There are concrete steps that can be taken to control defense costs and to move the litigation to a timely conclusion. Thirty-six months to resolve most mild to moderate bodily injury and property damage claims is about the norm. Claims involving infants (people under 21 years of age) and complex property liability claims like "leaky condo" litigation will stretch the timeline for resolution.
 
The impact of claims on insurance renewals varies between insurance companies. Often, if they can pay a claim and still make money there is good justification for an as-is renewal. That is why it is probably not a good idea to hop from one insurance company to another. Long-term relationships do pay dividends.
 

Businesses as well as people are known by the company they keep. Insurance brokers and insurance companies are no different.  The vast majority of insured claims flow without a hitch. But, on the rare occasion where things get rough, or coverage becomes an issue, your insurance broker can usually help you through the process.  Insurance Companies take pride in paying claims – it is what their corporate branding is all about. Your insurance broker knows who they are. So, if things look bleak after you suffer a loss just keep in mind that for both your broker and your insurance company, paying claims is just good business.