MaximizingInsuranceProceeds for aLarge-ScaleFirst-PartyLoss
A HOW-TO GUIDE FORTHE HOSPITALITY
INDUSTRY
John E. Heintz, Dickstein Shapiro
Jacob Parsons, The Claro Group
Jared Zola, Dickstein Shapiro
Introduction
Hypothetical Loss Scenario
Initial Steps
Insured Obligations
Potential Coverage Issues
Common Mistakes to Avoid
Roadmap to Successful Claim Resolution
Questions
OVERVIEW
2
PRESENTERS BIOS
John E . He int z is Dickste in Shapiro ’s InsuranceCoverage Pract ice Leader.
He has represented hospi ta l i t y indust r y c l ientsin secur ing coverage for proper ty and businessinter rupt ion losses ar is ing out of the 9/11attacks , hur r icanes , and other catast roph icevents .
heintz j@d ic ks te inshapiro .com
Jacob Par sons is a Director in The ClaroGroup’s Washington, DC of f ice .
He specia l i zes in he lp ing commercia lpo l icyholde rs in hospi ta l i t y and var ious otherindust r ies to quant i fy, prepare and presentmajor proper ty damage, bus iness inter rupt ionand th i rd -par t y l iab i l i t y c la ims.
jparsons@ theclarogroup.com
Jared Zo la is the nor theast reg ional leader forDickste in Shapiro ’s Insurance Coverage Group.
He leads the group’s Proper ty & BusinessInter rupt ion Pract ice and successfu l l y resolveddozens of large -sca le f i r s t -par ty losses .
zo la j@d ic ks te inshapi ro .com
3
LARGE-SCALE LOSSES
4
Acme Hospitality is a full service Real Estatecompany that owns hotels in Florida,Louisiana and Texas.
On August 1, 2014, Hurricane Barth madelandfall along the Texas Gulf Coast causingwidespread damage throughout the region.
Acme has two properties that were impactedby Hurricane Barth in different ways…
HYPOTHETICAL LOSS SCENARIO
5
Seaside Hotel, Galveston
Acme closed this property in advance of Barth,pursuant to mandatory evacuation orders by CityManager.
Hotel suffered catastrophic structural damageand was deemed a total loss.
Acme plans to rebuild the hotel with a largerballroom and 15% more rooms.
Restoration is expected to take 12 -15 months.
HYPOTHETICAL LOSS SCENARIO
6
Inland Hotel, Houston
Sustained minimal property damage (missingshingles and loose gutters), but was without gridsupplied power for 10 days.
Hotel remained open and sold out for 3 daysimmediately following Barth, but was forced to closefor the next 7 days after fuel for the generatorbecame unavailable in the region.
The nearby MLS stadium suffered major roof damageand is expected to be closed for 6 months. Inlandtypically sells out for every Dynamo home game.
HYPOTHETICAL LOSS SCENARIO
7
WHAT STEPS SHOULDACME TAKE IMMEDIATELY
FOLLOWING THE LOSS?
Acme should assemble a cross-functionalteam compromised of internal and externalresources, to assist with the evaluation,analysis and preparation of its claim.
Team lead should be a senior member of theorganization who is committed tochampioning the claim to resolution.
STEP 1 – ASSEMBLE A CLAIMS TEAM
9
Supporting team resources may include thefollowing: Internal Risk & Insurance Construction & Development Operations Finance & Accounting In-House Counsel
External Broker Forensic Accountant Coverage Counsel Engineering/
Construction Consultants
STEP 1 – ASSEMBLE A CLAIMS TEAM
10
Coverage Seaside Hotel Inland Hotel
Property Damage ?
Business Interruption
Service Interruption
Civil Authority
Ingress/Egress
Extra Expense
Contingent BI/Dependent Prop.
Event Cancellation ?
STEP 2 – REVIEW POLICIES TODETERMINE IF LOSS IS COVERED
Potentially applicable coverages may include:
11
Limits & Sublimits Real Property
Personal Property
Equipment Breakdown
Loss of Business Income
Extra Expense
Named Storm or Wind
Flood
Earth Movement
Demolition
Debris Removal
STEP 2 – REVIEW POLICIES TODETERMINE IF LOSS IS COVERED
Employee payroll
Professional Fees
Errors & Omissions
Etc…
12
Deductibles & Waiting Periods
Fixed $ amount
% of TIV (separate for PD and BI or combined?)
% of TIV with a min or max
# of days or hours
Exclusions
Coverage bars
STEP 2 – REVIEW POLICIES TODETERMINE IF LOSS IS COVERED
13
Acme should provide notice of the loss to allpotentially affected carriers as prescribed intheir policy(ies).
Policies typically require notice to be:
Timely - “immediate”, “as soon as practicable” or “assoon as possible”; and
In writing
Some states require prejudice for insurer to avoidcoverage for late notice
STEP 3 – PROVIDE NOTICE
14
If broker is handling notice, Acme should askto be copied on the notice tender and all othercorrespondence relating to the claim
Follow up with broker and/or carrier(s) if notice hasnot been acknowledged within 48 hours.
Calendar deadline for filing proof of loss
STEP 3 – PROVIDE NOTICE
15
Take all reasonable steps to protect theproperty from further damage
Furnish list of all lost, damaged or destroyedproperty
Permit adjuster to inspect the damagedproperty and take samples for inspection,testing and analysis
Produce for inspection and copying, all of yourbooks of account, business records, bills andinvoices
WHAT ARE ACME’S DUTIES BEYONDPROVIDING NOTICE?
16
Submit to examinations under oath
Abide by contractual limitation periods
File a signed, sworn, Proof of Loss within timeperiod, as extended
Cooperate with the investigation andadjustment of loss
WHAT ARE ACME’S DUTIES BEYONDPROVIDING NOTICE?
17
Seaside Hotel Discrepancy between scheduled property value and actual
restoration cost Distinguishing replacement cost from the incremental cost
of betterments Impact of betterments on the period of restoration, extended
period of restoration and related business interruptionlosses Coverage for extra expenses (i.e. training new staff) Business interruption make-up at other locations Impact of event on local economy Impact of hotel performance prior to loss or claim Ramp-up to “reopening”
WHAT ARE SOME COVERAGE ISSUESTHAT ACME POTENTIALLY FACES IN THELOSS ADJUSTMENT PROCESS?
18
Inland HotelLoss potentially subject to high deductible for
Wind or Named Storm
Burden to demonstrate that service interruptionand stadium damage were caused by an insuredperil
Extraordinary “gains” over first 3 days may offseta portion of the losses experienced over thefollowing 7 days
Lengthy and uncertain period of restoration
WHAT ARE SOME COVERAGE ISSUESTHAT ACME POTENTIALLY FACES IN THELOSS ADJUSTMENT PROCESS?
19
Underinsured
Late notice
Disjointed commutations with adjuster
Premature estimates of loss
Unrealistic expectations -- confuse the actualloss with the covered loss
Passively allow the Adjuster’s team toquantify the loss
Missed deadlines
WHAT ARE SOME COMMONMISTAKES THAT ACME SHOULDSTRIVE TO AVOID?
20
ROADMAP TO SUCCESSFUL CLAIMRESOLUTION
Timely and Strategic Communication
Team lead should control all communication withthe carriers
Keep the carriers apprised of your plans and seekinput or buy-in on major decisions
Be cognizant that every email, memo, analysiscould be viewed by the carriers in a litigationcontext
21
ROADMAP TO SUCCESSFUL CLAIMRESOLUTION
Be Proactive About Managing the ClaimProcess
Do not rely on the insurance company’s adjuster tolook out for your best interests
Establish early on that you are carefully and fullypreparing a fair, credible claim for all losses towhich you may be entitled under relevant policies
Implement critical path milestones to keep thingsmoving forward
22
ROADMAP TO SUCCESSFUL CLAIMRESOLUTION
Fully and fairly respond to carrier requests
Deal with carriers in good faith and respond to allreasonable requests in a timely manner
Propose alternatives (i.e. sampling approach) ifrequests are overly burdensome
Push back if demands are irrelevant to your claim
Consider using a web-based file share site tocommunicate and organize claim and claim supportdocumentation
23
ROADMAP TO SUCCESSFUL CLAIMRESOLUTION
Prepare and periodically submit claimsummaries and support packages
Prepare a preliminary estimate of loss as soon aspracticable so that carrier can consider thisinformation when they set a claim reserve
Periodically update claim estimate; distinguishincurred costs and realized losses from estimatedfuture costs/losses
Submit claims in well-organized and supportedpackages
24
ROADMAP TO SUCCESSFUL CLAIMRESOLUTION
Demand payment for undisputed elements ofclaim
Identify and document hard costs - low hanging fruit
Interim payments should be requested once sufficientclaim dollars documented excess of applicabledeductibles
Document loss as you go
Obtain written confirmation of significant decisionsfrom carrier
25
ROADMAP TO SUCCESSFUL CLAIMRESOLUTION
Be prepared for settlement negotiations
Develop internal analysis of claim value and establisha target settlement range
Set internal expectations on strengths andweaknesses of claim
Anticipate challenges and be prepared to offersolutions
Consider all relevant factors, not just coverage, legal,technical, but also relationships, market factors,renewal, etc.
26
ROADMAP TO SUCCESSFUL CLAIMRESOLUTION
Conduct Negotiations on Principal-to-Principal BasisWith True “Decision Makers” present from all Parties Cuts through the usual “filtering” done by both sides’
advocates
Important that claim is mature enough before such meetingtakes place
Be Flexible In any complex claim, there are inevitably new, unexpected
issues that arise or your perspective on things changes asmore information about claim is developed
Be prepared to walk away and come back to table at later time
27
QUESTIONS
28
Top Related