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We are the BUILDING LOSS PEOPLE
OUR MEMBERS
• INTEGRAL CONSULTANTS
a division of Integral Enterprises Inc.
• DAVE LEMAY CONSULTING LTD.
• VALET CONTRACT SERVICES LTD. • LAMBERT CONSULTING
We Offer Peace Of Mind Through Knowledge And Expertise
PRESENTS
Property Insurance
&
the Players
PROPERTY INSURANCE
Insurance is a form of RISK MANAGEMENT primarily used to
HEDGE against the RISK of a contingent, UNCERTAIN loss.
Insurance is defined as the equitable transfer of the risk of a
loss, from one entity to another, in exchange for payment.
An insurer is a company selling the insurance; an insured, or
policyholder, is the person or entity buying the insurance
policy. The insurance rate is a factor used to determine the
amount to be charged for a certain amount of insurance
coverage, called the premium. RISK MANAGEMENT, the
practice of APPRAISING and controlling risk, has evolved as
a discrete field of study and practice.
The transaction involves the insured assuming a guaranteed and known
relatively small loss in the form of payment to the insurer in exchange for
the insurer's promise to compensate (INDEMNIFY) the insured in the case
of a financial (personal) loss. The insured receives a CONTRACT, called the
INSURANCE POLICY, which details the conditions and circumstances
under which the insured will be financially compensated.
Insurance involves POOLING funds from many insured entities (known as
exposures) to pay for the losses that some may incur. The insured entities
are therefore protected from risk for a fee, with the fee being dependent
upon the frequency and severity of the event occurring. In order to be
insurable, the risk insured against must meet certain characteristics in
order to be an INSURABLE RISK. Insurance is a commercial enterprise and
a major part of the financial services industry, but individual entities can
also SELF-INSURED through saving money for possible future losses.
Claims
Claims and loss handling is the materialized utility of insurance; it is the actual "product" paid
for. Claims may be filed by insured’s directly with the insurer or through BROKERS or AGENTS.
Insurance company claims departments employ a large number of CLAIMS ADJUSTERS
supported by a staff of RECORDS MANAGEMENT and DATA ENTRY CLERKS. Incoming claims
are classified based on severity and are assigned to adjusters whose settlement authority
varies with their knowledge and experience. The adjuster undertakes an investigation of
each claim, usually in close cooperation with the insured, determines if coverage is available
under the terms of the insurance contract, and if so, the reasonable monetary value of the
claim, and authorizes payment.
The policyholder may hire their own PUBLIC ADJUSTER to negotiate the settlement with
the insurance company on their behalf. For policies that are complicated, where
claims may be complex, the insured may take out a separate insurance policy add
on, called loss recovery insurance, which covers the cost of a public adjuster in the
case of a claim.
If a claims adjuster suspects underinsurance, the CONDITION of AVERAGE (co-
insurance) may come into play to limit the insurance company's exposure.
In managing the claims handling function, insurers seek to balance the elements of
customer satisfaction, administrative handling expenses, and claims overpayment
leakages. As part of this balancing act, FRAUDULENT INSURANCE PRACTICES are a
major business risk that must be managed and overcome. Disputes between insurers
and insured’s over the validity of claims or claims handling practices occasionally
escalate into litigation (see INSURANCE BAD FAITH).
HISTORY OF INSURANCE
In some sense we can say that insurance appears simultaneously with the
appearance of human society. We know of two types of economies in
human societies: money economies (with markets, money, financial
instruments and so on) and non-money or natural economies (using barter
and trade without a centralized and/or standardized set of monetary
instruments). The second type is a more ancient form than the first.
In such an economy and community, we can see insurance in the form of
people helping each other. For example, if a house burns down, the
members of the community help build a new one. Should the same thing
happen to one's neighbour, the other neighbours must help. Otherwise,
neighbours will not receive help in the future. This type of insurance has
survived to the present day in some countries where modern money
economy with its financial instruments is not widespread.
Turning to insurance in the modern sense (i.e., insurance in a modern money economy,
in which insurance is part of the financial sphere), early methods of transferring or
distributing risk were practiced by CHINESE and BABYLONIAN traders as long ago as the
3RD and 2ND MILLENNIA BC, respectively. Chinese merchants travelling treacherous river
rapids would redistribute their wares across many vessels to limit the loss due to any
single vessel's capsizing. The Babylonians developed a system which was recorded in
the famous CODE OF HAMMURABI, c. 1750 BC, and practiced by early MEDITERRANEAN
sailing MERCHANTS. If a merchant received a loan to fund his shipment, he would pay
the lender an additional sum in exchange for the lender's guarantee to cancel the loan
should the shipment be stolen or lost at sea.
A thousand years later, the inhabitants of RHODES invented the concept of the
GENERAL AVERAGE. Merchants whose goods were being shipped together would pay
a proportionally divided premium which would be used to reimburse any merchant
whose goods were deliberately jettisoned in order to lighten the ship and save it from
total loss.
The first insurance company in the UNITED STATES underwrote fire insurance and was
formed in Charles Town (modern-day CHARLESTON), SOUTH CAROLINA, in 1732.
BENJAMIN FRANKLIN helped to popularize and make standard the practice of
insurance, particularly against FIRE in the form of PERPETUAL INSURANCE. In 1752, he
founded the PHILADELPHIA CONTRIBUTIONSHIP for the INSURANCE OF HOUSES from
LOSS by FIRE. Franklin's company was the first to make contributions toward fire
prevention. Not only did his company warn against certain FIRE HAZARDS, it refused
to insure certain buildings where the risk of fire was too great, such as all wooden
houses. In the United States, REGULATION of the insurance industry is highly
Balkanized, with primary responsibility assumed by individual STATE insurance
departments. Whereas insurance markets have become centralized nationally and
internationally, state insurance commissioners operate individually, though at times in
concert through a NATIONAL INSURANCE COMMISSIONERS’ ORGANIZATION. In
recent years, some have called for a dual state and federal regulatory system
(commonly referred to as the OPTIONAL FEDERAL CHARTER (OFC)) for insurance
similar to that which oversees state banks and national banks.
PROPERTY INSURANCE
This TORNADO damage to a home would be
considered an “ACT of GOD" for insurance purposes
originally but with advanced policy wordings today it
would be covered as Property insurance provides
protection against risks to property, such as FIRE,
THEFT or WEATHER damage. This may include
specialized forms of insurance such as fire insurance,
FLOOD INSURANCE, EARTHQUAKE INSURANCE, HOME
INSURANCE, inland marine insurance or BOILER
INSURANCE. The term property insurance may be
used as a broad category of various subtypes of
insurance, as shown in the following slides:
Home insurance
Home insurance provides coverage for damage
or destruction of the policyholder's home. In some
geographical areas, the policy may exclude
certain types of risks, such as flood or earthquake
that require additional coverage. Maintenance-
related issues are typically the homeowner's
responsibility. The policy may include inventory, or
this can be bought as a separate policy,
especially for people who rent housing.
HURRICANE KATRINA caused over $80bn of storm and flood damage
- FLOOD INSURANCE protects against property loss due to flooding. Many
insurers in the U.S. or Canada do not provide flood insurance in some parts
of the country. In response to this, the federal and or a state/provincial
government created the NATIONAL FLOOD INSURANCE PROGRAM which
serves as the insurer of last resort.
- HOME INSURANCE, also commonly called homeowners insurance, is the
type of property insurance that covers private homes.
- LANDLORD INSURANCE covers residential and commercial properties which
are rented to others. Most homeowners' insurance covers only owner-
occupied homes.
THE PLAYERS
Claims adjusters investigate insurance claims by
interviewing the claimant and witnesses, consulting police
and hospital records, and inspecting property damage to
determine the extent of the company’s liability. Claims
adjusters have the knowledge to complete the preparation
of a property damage claim which, to an unrepresented
homeowner, may be unfamiliar territory. The documents
contain technical terms such as depreciation, replacement
costs, and actual cash value, that may be unknown to the
policyholder and a trained claims adjuster can ensure a
correct completion.
There are several classes of claims adjusters:
• staff adjusters (employed by an insurance company or self-insured entity),
• independent (independent contractors; not insurance company employees)
• public adjusters (employed by the policyholder).
• Claim Service Representatives (employed by the Insurance Company, or
Independent Adjusting Company).
In the two first instances, and the fourth, the adjuster operates on behalf of the insurer.
Adjusters may handle "property claims" involving damage to buildings and structures, or
"liability claims" involving personal injuries or third-person property damage from liability
situations, such as motor vehicle accidents, slip and falls, dog bites, or alleged negligent
behavior. Some adjusters handle both types of claims and are known as "Multi-Line"
adjusters. Also "All Lines Adjusters" may handle "any" type of claim already identified
and also include Professional Liability, Hospital Professional Liability, Excess Liability,
Physicians and Surgeons Liability, Aircraft Liability/Hull, Inland Marine, Ocean Marine,
Boiler and Machinery, as well as various types of Bond Losses.
Claims Service Representatives employed by both independent adjusting firms and
insurers usually operate from behind a desk and do not go out into the field by rather
provide the basic paper work, and dispatch a field adjuster or restoration contractor to
the claim and have them report back to them. They are commonly called a telephone
adjuster and are becoming more common than ever before since Call Centers are now
starting to become a common appearance. Their authority is usually very limited and
must report back to a claims examiner.
Public adjusters work exclusively for the policyholder. This means there should be no
inherent conflict of interest when it comes to advocating on the policyholders behalf to
the insurance company.
An independent adjuster could be working for multiple insurance companies or self-
insured entities.
An adjuster will frequently verify that coverage applies through an insurance policy,
investigate liability for the damages caused, and make compensation to the injured
person based on their emotional or physical property damages.
Many homeowners reach a fair settlement with the staff or independent adjuster they are
working with. In the event they are not, they can hire a public adjuster. Public adjusters
claim that many homeowners do not collect all the money to which they are entitled due
to a lack of familiarity with the claim process.
The use of a public adjuster may mitigate this risk and could help put the policyholder on
a more equal footing with the insurance companies, which increasingly use experts to
support their side of a claim settlement. Public adjusters charge for their services, the
standard rate is 10% of the claim settlement.
For example, If you suffer a $250,000.00 fire loss, the public adjuster fee for assisting you
would be $25,000.00 This $25,000.00 is taken out of your claim settlement.
The objective of a claims adjuster should be to protect the insured against not only
financial loss, but also the cost of recovering it.
Specific duties include:
• Responding to claims in a timely manner
• Filing paperwork
• Communicating with policy holders
• Investigate liability
• Assess damages
• Research, detail and substantiate each aspect of the claim, including building
damage, contents, and extra living expense claims.
• Negotiate with product/service providers on time and cost of repairs for the purpose
of making an offer of settlement to the insured.
• Ensuring accurate procedures
• Protect the interest of the insurance company the adjuster represents, when dealing
with claimants.
• Computer Skills with a high degree of proficiency.
Many claims adjusters may work long hours. Claims adjusters frequently work nights and weekends
because they have to make appointments to see their clients, so the adjuster must be able to adapt their
schedules in order to accommodate their clients.
The more experienced claims adjusters are able to work from home. They will receive their
work load for that day through their private fax machine or their email accounts. The most
common claim adjusters receive their assignments when they arrive at the office first thing
in the morning. In the case of a severe natural disaster such as floods or tornadoes,
adjusters from another city or town are called in to support the local government. This
results in the adjuster being away from home for days at a time until all claims are
resolved.
Computer skills are essential, including keyboard skills. Most insurance companies store all
documentation digitally. Estimates, including auto and property losses, are prepared on
computers connected to a corporate network. Laptop computers, cell phones, and other
technology have made the process of claims adjusting easier and it consumes less time;
however, there are positions that require physical strength as well as stamina. Property
adjusters, for example, many times are required to operate a 50-pound ladder, able to
stand, walk, kneel, crawl, and other physical demands as they investigate property that
has been damaged.
A Loss Consultant is considered as part of Financial Services in most states and provinces
therefore do not charge and provincial, state of federal tax such as PST, GST or HST. Their
duties are to be instrumental in determining value for an insurer. They will provide report
and advice on the following services.
Underwriting Reports (before the loss occurs) in the form of a Reproduction Appraisal Report is
based upon the Calculator Method of Costing which will be determined by square foot valuating
of the finished floor areas, along with square foot adjustments, and additional feature adjustments.
The rates are based upon design group, building design, class of construction, quality of
construction, exterior finish, interior finish, mechanical, electrical, size, age, condition, climate, and
site logistics (size of building, weather conditions, area, terrain, type of construction, location, etc.).
It will give values for Building Replacement Cost, Occupancy Design Fixture Costs, Bylaw Costs,
Demolition and Debris Removal Costs, Guaranteed Replacement Surcharge Cost, and the
Depreciation Percentage. It will also give photo overviews of the building, footprints, etc.
This appraisal provides the following recommended individual policy limits for the building in order
to evaluate coverage limits for an insurance policy. These limits include the following:
• Replacement Cost (RCV)
• Occupancy Design Fixtures (ODF)
• Bylaw Coverage (BC)
• Demolition & Debris Removal (DDR) [includes recycling charges, site security costs, abatement
costs, emergency service costs, structural drying costs, etc.]
• Catastrophic Cost Value (CCV) [in the event of a natural or manmade disaster labour and
materials will normally increase]
• Depreciation Applicable (ACV)
Loss Reports (after the loss occurs) in the form of a Reproduction Appraisal Report as mentioned
above.
Damage Assessment Reports - Once a large loss has occurred, limits on the insurance policy
may not be sufficient and co-insurance may come into play. Therefore when a building, be it
agriculture, commercial, industrial, institutional, or residential is damaged to this magnitude,
conserving every penny spent on the loss is crucial. The most cost effective method of
determining value is a Damage Assessment Report and scopes of damage and estimates by
restoration firms are really redundant and are not cost effective.
Since every loss is not a total loss, the Assessment of Restoration should reflect costs for cutting
and patching to existing construction; dust protection; material handling & storage; protection
of existing finishes; shift work requirements; temporary shoring & bracing; equipment usage
curtailment; and work inside secure premises, where applicable. All of these conditions are
associated with retrofitting replacement material for partial losses.
This report will include:
• a description of the construction of the property
• a footprint of the building
• extent of damage
• scope of damage for repairs
• assessment of restoration, and
• a general time frame for reconstruction
This report provides an Extent of Damage, Scope of Damage and a Damage Assessment for both
Replacement Cost Values (RCV) and Actual Cash Value Values (ACV).
Forensic Reconstruction is a specialty area whereas the consultant reconstructs with like, kind,
quality, Scopes of Damage or Repair and an Assessment of Restoration of losses which may or may
not result in an actual or anticipated dispute or litigation. It takes years of experience in
collaborating with adjusters, claims examiners, lawyers, engineers and other industry experts that so
that their reports are suitable for use in a court of law, and it is to that standard and potential
outcome that they generally have to work as forensic or investigative auditors when it comes to
insurance claims. These reports for use in court cases presentation include: reason for the report,
qualifications, problem identification if known, photographic documentation if available, scope of
damage or repair, breakdown of costs, and identify individual costs such as bylaws and code
upgrade, stabilizing and securing the building, catastrophic or conditions of risk increase in costs,
and actual cash value.
File Audits - So you think you have done everything right. There was an assigned
approved insurance contractor to complete the restoration and the project was put
out to bid. But why did the costs escalate and the insured is not happy with the
results? There are a number of reasons why. Outside influences such as government
bodies can directly impact the how the restoration process is going to take place.
There really is no control over these situations and inevitably the construction costs are
directly impacted by decisions a government body can make concerning the
restoration process.
A Loss Consultant can provide a simple audit after the job is complete or a more
complicated ongoing file audit while the job is in progress until it is finished to ensure
that proper sufficient documentation is in the file.
Large Loss Coordination - Often overlooked, after a loss has occurred, is who
coordinates the site? This is usually a more critical decision than who does the
restoration work.
Without competent supervision, restoration contractors and the inevitable construction
problems that arise during a project can quickly cause the loss to get out of control. Most
restoration projects are site managed by the restoration contractor. Letting the
contractor have a "free rein" to make decisions may seem harmless, until you consider
the consequences.
When a restoration contractor is placed in a bid situation, this usually means stripping
away restoration details that could be considered frivolous but are still part of the quality
of construction that the insured had before the loss occurred. Saving money on the
project costs is now the contractor's priority.
Restoration project site management requires extensive and diverse restoration
experience. Assessing the conditions, scoping the damage, and estimating the cost of
the restoration correctly, the site manager should be able to have the project
completed in an efficient and timely manner, staying within budget.
Although a competent restoration contractor can handle the daily site management,
who do you think he's going to protect? The coordinator provides a site management
service to protect the integrity of the loss and the restoration cost. By the time a
contractor has made the decisions to make changes in the scope of the damage to
the property, getting it back on track can be very expensive. If you don't challenge
these decisions, you imply acceptance. Trying to get the contractor to correct the
deficiencies after they have completed a phase and covered things up is nearly
impossible. Preventing this is the role of the coordinator.
Outside influences such as government bodies can directly impact how the restoration
process is going to take place. If the insured is not confident that the contractor can
effectively manage this, then a large loss coordinator has the experience to negotiate
terms to a successful solution. We have many years of experience keeping a project on
course. We manager can speak their language, and effectively communicate
directions and concerns, to the contractor.
To know when to stop a project before costs and problems get out of control is often
the most cost effective decision to make and know when to make that call can save
money, legal costs and a restoration nightmare! Change orders in the rebuilding
process should be issued by the coordinator and not at the request of the contractor.
It should always be the adjuster’s or the insured's decision to make changes, not the
contractor's!
A Loss Consultant will scope the damage, assess the conditions of the risk, estimate the
cost of repair, provide a schedule of the work to be performed, provide all necessary
loss reports and revisions, qualify the contractor, attend all site meetings with engineers,
inspectors, etc., provide site supervision, quality control inspections, etc. and provide
weekly status reports, until the completion certificate is signed and the deficiencies are
corrected to the satisfaction of the insured.
An independent broker's obligation to his insured is to assist him if he is having any
difficulty or concerns expediting his claim, especially if he is not pleased with the
insurance repair contractor appointed by the insurers or the general handling or
settlement of his claim. If the broker and insurer is the same (commonly called a direct
writer), or the broker is a managing general agent, then the insured cannot be duly
represented fairly and an independent party such as a coordinator can step in to
resolve the situation.
Claims adjuster and the claims examiners do have very heavy workloads; therefore it
would not be unreasonable for a file to be ignored or to fall between the cracks. Even
turning these duties over to an approved restoration contractor can have negative results
if the restoration contractor does not recognize that the extent of the claim needs more
attention than just simply putting back what was originally there before the loss occurred.
Then there is a Remedial Management sector that is a Consultant who has his own project
manager on staff that will handle a difficult loss which usually one that fall outside the box
of a normal property loss whereas your average approved restoration contractor cannot
handle due to volume of work and time restraints. Here the consultant can move the claim
along at the speed it needs to go in order to produce solutions and resolution to the loss
because of its complexity. These types of losses are handled a little differently in the fact
that they are managing the claim for the insurer and will be working on their advanced
draws. The Consultant would probably handle one or two of them a year and each would
be in the range of five figures or more.
There are three major kinds of engineers that property claims really need to address a loss.
They are structural, building envelope, and geotechnical types. The other categories such
as mechanical electrical etc. are specialized and maybe required at the say so of the
primary engineer.
Engineers should be brought in when the structure appears to be unsafe to enter the
building, and again after the emergency service has been performed and the demolition
and debris removal completed before any reconstruction takes place. This is the biggest
mistake adjusters, and restorers make, by bringing in the engineer in the beginning and not
following up with another site visit by the engineer to see the site after the demo and
debris removal.
IF THE ONLY THING YOU REMEMBER OF THIS SLIDE SHOW IS
THIS ON THE NEXT PAGE IS
INSURE TO VALUE!!!!!!!
WE HAVE DONE OUR JOB!
There once was an adjuster who liked to man the outback
of his firm’s locations so they sent him to Northern Alberta.
He was stationed in their Peace River office, and today you
can find him wandering the streets of Peace River.
Moral of the story is shown on the next slide.
Be careful of what you wish for.
Older buildings, and many newer buildings, were built during times when building codes
were less strict than they are today. If you are rebuilding or restoring a building, you may
need to meet the newer and more demanding building codes. Even undamaged parts
of the structure may have to be rewired or plumbed to meet current codes. Building
codes may also require you to replace windows with safety glass or replace roofs with fire-
retardant materials. Building code changes can add tens of thousands of dollars to the
cost of restoring a damaged building.
Obsolescence of material and labour practices can invoke the Principle of Substitution on
a regular basis in today’s marketplace; therefore quality of like kind must be monitored
closely. Dangerous materials can also lurk in these buildings which can render the
undamaged portion of the building obsolete.
If you have a building that you think falls within these parameters, call one of us for a free
consultation today.
Al Brown al.integral@shaw.ca (250) 681 – 3161
Dan Lambert dan.lambert2013@yahoo.ca (604) 657 – 2545
Dave Lemay dlemay@live.com (778) 347 – 0417
Ron Wilkes integral@shaw.ca (604) 614 - 8350
The Associated Restoration & Replacement Network (ARRN) is a consortium of Property
Loss Consulting Firms who's members have in excess of a quarter of a century of
experience in this field and have access to all faucets of services for remediation of
property.
On behalf of all of us at the ARRN, thank you for taking time out of your busy
schedule and attending this presentation.

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Property Insurance & the Players

  • 1. We are the BUILDING LOSS PEOPLE OUR MEMBERS • INTEGRAL CONSULTANTS a division of Integral Enterprises Inc. • DAVE LEMAY CONSULTING LTD. • VALET CONTRACT SERVICES LTD. • LAMBERT CONSULTING We Offer Peace Of Mind Through Knowledge And Expertise
  • 3. PROPERTY INSURANCE Insurance is a form of RISK MANAGEMENT primarily used to HEDGE against the RISK of a contingent, UNCERTAIN loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; an insured, or policyholder, is the person or entity buying the insurance policy. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium. RISK MANAGEMENT, the practice of APPRAISING and controlling risk, has evolved as a discrete field of study and practice.
  • 4. The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (INDEMNIFY) the insured in the case of a financial (personal) loss. The insured receives a CONTRACT, called the INSURANCE POLICY, which details the conditions and circumstances under which the insured will be financially compensated. Insurance involves POOLING funds from many insured entities (known as exposures) to pay for the losses that some may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be insurable, the risk insured against must meet certain characteristics in order to be an INSURABLE RISK. Insurance is a commercial enterprise and a major part of the financial services industry, but individual entities can also SELF-INSURED through saving money for possible future losses.
  • 5. Claims Claims and loss handling is the materialized utility of insurance; it is the actual "product" paid for. Claims may be filed by insured’s directly with the insurer or through BROKERS or AGENTS. Insurance company claims departments employ a large number of CLAIMS ADJUSTERS supported by a staff of RECORDS MANAGEMENT and DATA ENTRY CLERKS. Incoming claims are classified based on severity and are assigned to adjusters whose settlement authority varies with their knowledge and experience. The adjuster undertakes an investigation of each claim, usually in close cooperation with the insured, determines if coverage is available under the terms of the insurance contract, and if so, the reasonable monetary value of the claim, and authorizes payment.
  • 6. The policyholder may hire their own PUBLIC ADJUSTER to negotiate the settlement with the insurance company on their behalf. For policies that are complicated, where claims may be complex, the insured may take out a separate insurance policy add on, called loss recovery insurance, which covers the cost of a public adjuster in the case of a claim. If a claims adjuster suspects underinsurance, the CONDITION of AVERAGE (co- insurance) may come into play to limit the insurance company's exposure. In managing the claims handling function, insurers seek to balance the elements of customer satisfaction, administrative handling expenses, and claims overpayment leakages. As part of this balancing act, FRAUDULENT INSURANCE PRACTICES are a major business risk that must be managed and overcome. Disputes between insurers and insured’s over the validity of claims or claims handling practices occasionally escalate into litigation (see INSURANCE BAD FAITH).
  • 7. HISTORY OF INSURANCE In some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: money economies (with markets, money, financial instruments and so on) and non-money or natural economies (using barter and trade without a centralized and/or standardized set of monetary instruments). The second type is a more ancient form than the first. In such an economy and community, we can see insurance in the form of people helping each other. For example, if a house burns down, the members of the community help build a new one. Should the same thing happen to one's neighbour, the other neighbours must help. Otherwise, neighbours will not receive help in the future. This type of insurance has survived to the present day in some countries where modern money economy with its financial instruments is not widespread.
  • 8. Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance is part of the financial sphere), early methods of transferring or distributing risk were practiced by CHINESE and BABYLONIAN traders as long ago as the 3RD and 2ND MILLENNIA BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous CODE OF HAMMURABI, c. 1750 BC, and practiced by early MEDITERRANEAN sailing MERCHANTS. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen or lost at sea. A thousand years later, the inhabitants of RHODES invented the concept of the GENERAL AVERAGE. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were deliberately jettisoned in order to lighten the ship and save it from total loss.
  • 9. The first insurance company in the UNITED STATES underwrote fire insurance and was formed in Charles Town (modern-day CHARLESTON), SOUTH CAROLINA, in 1732. BENJAMIN FRANKLIN helped to popularize and make standard the practice of insurance, particularly against FIRE in the form of PERPETUAL INSURANCE. In 1752, he founded the PHILADELPHIA CONTRIBUTIONSHIP for the INSURANCE OF HOUSES from LOSS by FIRE. Franklin's company was the first to make contributions toward fire prevention. Not only did his company warn against certain FIRE HAZARDS, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses. In the United States, REGULATION of the insurance industry is highly Balkanized, with primary responsibility assumed by individual STATE insurance departments. Whereas insurance markets have become centralized nationally and internationally, state insurance commissioners operate individually, though at times in concert through a NATIONAL INSURANCE COMMISSIONERS’ ORGANIZATION. In recent years, some have called for a dual state and federal regulatory system (commonly referred to as the OPTIONAL FEDERAL CHARTER (OFC)) for insurance similar to that which oversees state banks and national banks.
  • 10. PROPERTY INSURANCE This TORNADO damage to a home would be considered an “ACT of GOD" for insurance purposes originally but with advanced policy wordings today it would be covered as Property insurance provides protection against risks to property, such as FIRE, THEFT or WEATHER damage. This may include specialized forms of insurance such as fire insurance, FLOOD INSURANCE, EARTHQUAKE INSURANCE, HOME INSURANCE, inland marine insurance or BOILER INSURANCE. The term property insurance may be used as a broad category of various subtypes of insurance, as shown in the following slides:
  • 11. Home insurance Home insurance provides coverage for damage or destruction of the policyholder's home. In some geographical areas, the policy may exclude certain types of risks, such as flood or earthquake that require additional coverage. Maintenance- related issues are typically the homeowner's responsibility. The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing.
  • 12. HURRICANE KATRINA caused over $80bn of storm and flood damage - FLOOD INSURANCE protects against property loss due to flooding. Many insurers in the U.S. or Canada do not provide flood insurance in some parts of the country. In response to this, the federal and or a state/provincial government created the NATIONAL FLOOD INSURANCE PROGRAM which serves as the insurer of last resort. - HOME INSURANCE, also commonly called homeowners insurance, is the type of property insurance that covers private homes. - LANDLORD INSURANCE covers residential and commercial properties which are rented to others. Most homeowners' insurance covers only owner- occupied homes.
  • 13. THE PLAYERS Claims adjusters investigate insurance claims by interviewing the claimant and witnesses, consulting police and hospital records, and inspecting property damage to determine the extent of the company’s liability. Claims adjusters have the knowledge to complete the preparation of a property damage claim which, to an unrepresented homeowner, may be unfamiliar territory. The documents contain technical terms such as depreciation, replacement costs, and actual cash value, that may be unknown to the policyholder and a trained claims adjuster can ensure a correct completion.
  • 14. There are several classes of claims adjusters: • staff adjusters (employed by an insurance company or self-insured entity), • independent (independent contractors; not insurance company employees) • public adjusters (employed by the policyholder). • Claim Service Representatives (employed by the Insurance Company, or Independent Adjusting Company). In the two first instances, and the fourth, the adjuster operates on behalf of the insurer. Adjusters may handle "property claims" involving damage to buildings and structures, or "liability claims" involving personal injuries or third-person property damage from liability situations, such as motor vehicle accidents, slip and falls, dog bites, or alleged negligent behavior. Some adjusters handle both types of claims and are known as "Multi-Line" adjusters. Also "All Lines Adjusters" may handle "any" type of claim already identified and also include Professional Liability, Hospital Professional Liability, Excess Liability, Physicians and Surgeons Liability, Aircraft Liability/Hull, Inland Marine, Ocean Marine, Boiler and Machinery, as well as various types of Bond Losses.
  • 15. Claims Service Representatives employed by both independent adjusting firms and insurers usually operate from behind a desk and do not go out into the field by rather provide the basic paper work, and dispatch a field adjuster or restoration contractor to the claim and have them report back to them. They are commonly called a telephone adjuster and are becoming more common than ever before since Call Centers are now starting to become a common appearance. Their authority is usually very limited and must report back to a claims examiner. Public adjusters work exclusively for the policyholder. This means there should be no inherent conflict of interest when it comes to advocating on the policyholders behalf to the insurance company. An independent adjuster could be working for multiple insurance companies or self- insured entities. An adjuster will frequently verify that coverage applies through an insurance policy, investigate liability for the damages caused, and make compensation to the injured person based on their emotional or physical property damages.
  • 16. Many homeowners reach a fair settlement with the staff or independent adjuster they are working with. In the event they are not, they can hire a public adjuster. Public adjusters claim that many homeowners do not collect all the money to which they are entitled due to a lack of familiarity with the claim process. The use of a public adjuster may mitigate this risk and could help put the policyholder on a more equal footing with the insurance companies, which increasingly use experts to support their side of a claim settlement. Public adjusters charge for their services, the standard rate is 10% of the claim settlement. For example, If you suffer a $250,000.00 fire loss, the public adjuster fee for assisting you would be $25,000.00 This $25,000.00 is taken out of your claim settlement. The objective of a claims adjuster should be to protect the insured against not only financial loss, but also the cost of recovering it.
  • 17. Specific duties include: • Responding to claims in a timely manner • Filing paperwork • Communicating with policy holders • Investigate liability • Assess damages • Research, detail and substantiate each aspect of the claim, including building damage, contents, and extra living expense claims. • Negotiate with product/service providers on time and cost of repairs for the purpose of making an offer of settlement to the insured. • Ensuring accurate procedures • Protect the interest of the insurance company the adjuster represents, when dealing with claimants. • Computer Skills with a high degree of proficiency. Many claims adjusters may work long hours. Claims adjusters frequently work nights and weekends because they have to make appointments to see their clients, so the adjuster must be able to adapt their schedules in order to accommodate their clients.
  • 18. The more experienced claims adjusters are able to work from home. They will receive their work load for that day through their private fax machine or their email accounts. The most common claim adjusters receive their assignments when they arrive at the office first thing in the morning. In the case of a severe natural disaster such as floods or tornadoes, adjusters from another city or town are called in to support the local government. This results in the adjuster being away from home for days at a time until all claims are resolved. Computer skills are essential, including keyboard skills. Most insurance companies store all documentation digitally. Estimates, including auto and property losses, are prepared on computers connected to a corporate network. Laptop computers, cell phones, and other technology have made the process of claims adjusting easier and it consumes less time; however, there are positions that require physical strength as well as stamina. Property adjusters, for example, many times are required to operate a 50-pound ladder, able to stand, walk, kneel, crawl, and other physical demands as they investigate property that has been damaged. A Loss Consultant is considered as part of Financial Services in most states and provinces therefore do not charge and provincial, state of federal tax such as PST, GST or HST. Their duties are to be instrumental in determining value for an insurer. They will provide report and advice on the following services.
  • 19. Underwriting Reports (before the loss occurs) in the form of a Reproduction Appraisal Report is based upon the Calculator Method of Costing which will be determined by square foot valuating of the finished floor areas, along with square foot adjustments, and additional feature adjustments. The rates are based upon design group, building design, class of construction, quality of construction, exterior finish, interior finish, mechanical, electrical, size, age, condition, climate, and site logistics (size of building, weather conditions, area, terrain, type of construction, location, etc.). It will give values for Building Replacement Cost, Occupancy Design Fixture Costs, Bylaw Costs, Demolition and Debris Removal Costs, Guaranteed Replacement Surcharge Cost, and the Depreciation Percentage. It will also give photo overviews of the building, footprints, etc. This appraisal provides the following recommended individual policy limits for the building in order to evaluate coverage limits for an insurance policy. These limits include the following: • Replacement Cost (RCV) • Occupancy Design Fixtures (ODF) • Bylaw Coverage (BC) • Demolition & Debris Removal (DDR) [includes recycling charges, site security costs, abatement costs, emergency service costs, structural drying costs, etc.] • Catastrophic Cost Value (CCV) [in the event of a natural or manmade disaster labour and materials will normally increase] • Depreciation Applicable (ACV)
  • 20. Loss Reports (after the loss occurs) in the form of a Reproduction Appraisal Report as mentioned above. Damage Assessment Reports - Once a large loss has occurred, limits on the insurance policy may not be sufficient and co-insurance may come into play. Therefore when a building, be it agriculture, commercial, industrial, institutional, or residential is damaged to this magnitude, conserving every penny spent on the loss is crucial. The most cost effective method of determining value is a Damage Assessment Report and scopes of damage and estimates by restoration firms are really redundant and are not cost effective. Since every loss is not a total loss, the Assessment of Restoration should reflect costs for cutting and patching to existing construction; dust protection; material handling & storage; protection of existing finishes; shift work requirements; temporary shoring & bracing; equipment usage curtailment; and work inside secure premises, where applicable. All of these conditions are associated with retrofitting replacement material for partial losses.
  • 21. This report will include: • a description of the construction of the property • a footprint of the building • extent of damage • scope of damage for repairs • assessment of restoration, and • a general time frame for reconstruction This report provides an Extent of Damage, Scope of Damage and a Damage Assessment for both Replacement Cost Values (RCV) and Actual Cash Value Values (ACV). Forensic Reconstruction is a specialty area whereas the consultant reconstructs with like, kind, quality, Scopes of Damage or Repair and an Assessment of Restoration of losses which may or may not result in an actual or anticipated dispute or litigation. It takes years of experience in collaborating with adjusters, claims examiners, lawyers, engineers and other industry experts that so that their reports are suitable for use in a court of law, and it is to that standard and potential outcome that they generally have to work as forensic or investigative auditors when it comes to insurance claims. These reports for use in court cases presentation include: reason for the report, qualifications, problem identification if known, photographic documentation if available, scope of damage or repair, breakdown of costs, and identify individual costs such as bylaws and code upgrade, stabilizing and securing the building, catastrophic or conditions of risk increase in costs, and actual cash value.
  • 22. File Audits - So you think you have done everything right. There was an assigned approved insurance contractor to complete the restoration and the project was put out to bid. But why did the costs escalate and the insured is not happy with the results? There are a number of reasons why. Outside influences such as government bodies can directly impact the how the restoration process is going to take place. There really is no control over these situations and inevitably the construction costs are directly impacted by decisions a government body can make concerning the restoration process. A Loss Consultant can provide a simple audit after the job is complete or a more complicated ongoing file audit while the job is in progress until it is finished to ensure that proper sufficient documentation is in the file. Large Loss Coordination - Often overlooked, after a loss has occurred, is who coordinates the site? This is usually a more critical decision than who does the restoration work.
  • 23. Without competent supervision, restoration contractors and the inevitable construction problems that arise during a project can quickly cause the loss to get out of control. Most restoration projects are site managed by the restoration contractor. Letting the contractor have a "free rein" to make decisions may seem harmless, until you consider the consequences. When a restoration contractor is placed in a bid situation, this usually means stripping away restoration details that could be considered frivolous but are still part of the quality of construction that the insured had before the loss occurred. Saving money on the project costs is now the contractor's priority. Restoration project site management requires extensive and diverse restoration experience. Assessing the conditions, scoping the damage, and estimating the cost of the restoration correctly, the site manager should be able to have the project completed in an efficient and timely manner, staying within budget.
  • 24. Although a competent restoration contractor can handle the daily site management, who do you think he's going to protect? The coordinator provides a site management service to protect the integrity of the loss and the restoration cost. By the time a contractor has made the decisions to make changes in the scope of the damage to the property, getting it back on track can be very expensive. If you don't challenge these decisions, you imply acceptance. Trying to get the contractor to correct the deficiencies after they have completed a phase and covered things up is nearly impossible. Preventing this is the role of the coordinator. Outside influences such as government bodies can directly impact how the restoration process is going to take place. If the insured is not confident that the contractor can effectively manage this, then a large loss coordinator has the experience to negotiate terms to a successful solution. We have many years of experience keeping a project on course. We manager can speak their language, and effectively communicate directions and concerns, to the contractor.
  • 25. To know when to stop a project before costs and problems get out of control is often the most cost effective decision to make and know when to make that call can save money, legal costs and a restoration nightmare! Change orders in the rebuilding process should be issued by the coordinator and not at the request of the contractor. It should always be the adjuster’s or the insured's decision to make changes, not the contractor's! A Loss Consultant will scope the damage, assess the conditions of the risk, estimate the cost of repair, provide a schedule of the work to be performed, provide all necessary loss reports and revisions, qualify the contractor, attend all site meetings with engineers, inspectors, etc., provide site supervision, quality control inspections, etc. and provide weekly status reports, until the completion certificate is signed and the deficiencies are corrected to the satisfaction of the insured. An independent broker's obligation to his insured is to assist him if he is having any difficulty or concerns expediting his claim, especially if he is not pleased with the insurance repair contractor appointed by the insurers or the general handling or settlement of his claim. If the broker and insurer is the same (commonly called a direct writer), or the broker is a managing general agent, then the insured cannot be duly represented fairly and an independent party such as a coordinator can step in to resolve the situation.
  • 26. Claims adjuster and the claims examiners do have very heavy workloads; therefore it would not be unreasonable for a file to be ignored or to fall between the cracks. Even turning these duties over to an approved restoration contractor can have negative results if the restoration contractor does not recognize that the extent of the claim needs more attention than just simply putting back what was originally there before the loss occurred. Then there is a Remedial Management sector that is a Consultant who has his own project manager on staff that will handle a difficult loss which usually one that fall outside the box of a normal property loss whereas your average approved restoration contractor cannot handle due to volume of work and time restraints. Here the consultant can move the claim along at the speed it needs to go in order to produce solutions and resolution to the loss because of its complexity. These types of losses are handled a little differently in the fact that they are managing the claim for the insurer and will be working on their advanced draws. The Consultant would probably handle one or two of them a year and each would be in the range of five figures or more. There are three major kinds of engineers that property claims really need to address a loss. They are structural, building envelope, and geotechnical types. The other categories such as mechanical electrical etc. are specialized and maybe required at the say so of the primary engineer.
  • 27. Engineers should be brought in when the structure appears to be unsafe to enter the building, and again after the emergency service has been performed and the demolition and debris removal completed before any reconstruction takes place. This is the biggest mistake adjusters, and restorers make, by bringing in the engineer in the beginning and not following up with another site visit by the engineer to see the site after the demo and debris removal.
  • 28. IF THE ONLY THING YOU REMEMBER OF THIS SLIDE SHOW IS THIS ON THE NEXT PAGE IS INSURE TO VALUE!!!!!!! WE HAVE DONE OUR JOB!
  • 29.
  • 30. There once was an adjuster who liked to man the outback of his firm’s locations so they sent him to Northern Alberta. He was stationed in their Peace River office, and today you can find him wandering the streets of Peace River. Moral of the story is shown on the next slide. Be careful of what you wish for.
  • 31.
  • 32. Older buildings, and many newer buildings, were built during times when building codes were less strict than they are today. If you are rebuilding or restoring a building, you may need to meet the newer and more demanding building codes. Even undamaged parts of the structure may have to be rewired or plumbed to meet current codes. Building codes may also require you to replace windows with safety glass or replace roofs with fire- retardant materials. Building code changes can add tens of thousands of dollars to the cost of restoring a damaged building. Obsolescence of material and labour practices can invoke the Principle of Substitution on a regular basis in today’s marketplace; therefore quality of like kind must be monitored closely. Dangerous materials can also lurk in these buildings which can render the undamaged portion of the building obsolete. If you have a building that you think falls within these parameters, call one of us for a free consultation today. Al Brown al.integral@shaw.ca (250) 681 – 3161 Dan Lambert dan.lambert2013@yahoo.ca (604) 657 – 2545 Dave Lemay dlemay@live.com (778) 347 – 0417 Ron Wilkes integral@shaw.ca (604) 614 - 8350
  • 33. The Associated Restoration & Replacement Network (ARRN) is a consortium of Property Loss Consulting Firms who's members have in excess of a quarter of a century of experience in this field and have access to all faucets of services for remediation of property. On behalf of all of us at the ARRN, thank you for taking time out of your busy schedule and attending this presentation.