Originally published in The Residence May/June 2012
Multi-family properties in the Greater San Antonio area face numerous potential damages from various perils on a daily basis. The risk of fires is a well known exposure; however, as many can attest, San Antonio has experienced damage from hail storms, floods and even damage from Hurricanes as they move inland from the coast.
Taking the time to better prepare your organization for property loss is of critical importance in the apartment industry. Regardless of the type of peril that has occurred at a property, many issues arise such as resident safety, options for recovery, relocation of residents, liability issues, insurance coverage and possible loss of rental income. Whoever is in charge of the recovery must gather the experience of a lawyer, a public relations representative, a construction expert, an insurance expert and be a liaison among fire officials, residents and recovery service companies. Depending on your organization, this individual may be the property owner, a risk manager, a management executive or the supervisor of the property.
A few ideas about contingency planning and risk management preparation can lessen the burden on the person in charge and expedite the recovery process for all involved. The following information describes key issues involved in the property claims process and typical coverage available. The following discusses the responsibilities of the insured and the insurance company and lists options available for those in the apartment industry, as well as steps you can take that will facilitate a quick and equitable recovery from your insurance carrier.
PROPER INSURANCE COVERAGE
If your property is located within a flood plain or coastal area where common carriers will exclude coverage for certain perils, you may have additional policies for coverage of flood and windstorm damage. These policies are typically underwritten by states or the federal government (through the National Flood Insurance Program) and many have predetermined limits of coverage. These limits often do not cover the value of the entire property, and, in the event of catastrophic loss, financial loss can occur. Also, many policies are simply renewed each year without consideration for rehabilitation or upgrades made to the property. In this case, the valuations may be incorrect even though you may have a valid policy. The best rules of thumb is to contact your insurance agent if you feel that proper coverage is not in place and request an evaluation of your coverage in writing to best protect your interests.
WHAT DO I DO NOW?
Following any property loss, the primary focus should be on making certain that all people are safe and accounted for. Once the area has been secured and any injured people attended to, the insured should secure the property so that no one will be injured by entering the area. The next steps should involve protecting the property from further damage. Decisions made at this point can greatly affect your claim outcome, so proceed slowly and evaluate your best interests carefully prior to proceeding. This can be a challenge because our instincts suggest we act quickly to restore things to normal; however, it is important to think clearly. For instance, should the insured spend money protecting a property that is clearly a total loss? In many cases the insurance carrier may deny paying the expense because it was unnecessary to protect totally destroyed items.
As any manager who has suffered a loss knows, numerous fire restoration or service companies will approach you and offer their services following a loss. Their marketing approach is understandably reactive in nature, but be cautious in your selection and take the time to investigate the firm if you do not know the company. Think twice before signing anything. We highly recommend securing written estimates before signing agreements and suggest staying away from “direct billing” agreements which allow companies to bill the insurance company directly.
If your organization has a contingency plan in place, information on who to call and when to call them should be readily available. The plan should outline responsibilities for each stage of the recovery and should rely on certain areas of expertise to better respond to your organization’s needs. If a plan is not in place, attempt to assign your personnel with tasks that fit their levels of expertise and areas of responsibilities.
It is important to note that it is the insured’s responsibility to measure and document their damage and present a formal demand for payment to the insurance carrier. While most businesses outsource their tax work or hire professionals to assist with acquisitions and other important financial matters, it is not uncommon for the insured to allow the insurance carrier to tell them what a loss is worth. While it may be easier for the insured this way, we do not recommend you approach your claim in this manner. It places the insurance company in too much control of your claim and your business matters. Also, numerous options are available to the insured following a loss, and the insurance carrier is under no obligation to inform you of paths that may be of more short- or long-term benefit to your organization. You may not want to rebuild the damaged property, or, you may want to rebuild using a different design or type of structure. These options can be accomplished in the claim process but a strategy should be in place prior to acting upon them.
An insurance company also has certain responsibilities when a claim is presented. Within these responsibilities, it is understandable that the company may attempt to minimize their financial obligation in the loss while avoiding conflict with the insured. It is also understandable that the experience level of a seasoned insurance company adjuster can place the insured at a disadvantage in the process should a dispute arise. By carefully assessing the situation and being aware of the relationships within the process, you can protect your interests in the claim.
Both the insurance company and you, the insured, seek to avoid any drawn-out legal battle regarding the recovery. In such a case, no one is a winner, and many battles are lost as an insurance company’s resources can outlast even the most secure investor. If the insured takes a firm position and brings in the resources to assist in the assessment and valuation of damages while understanding that the insurance company adjuster is there to audit what is presented, the claim can be resolved equitably.
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