Complex claims are always accompanied by a series of very particular technical and logistical challenges that vary depending on each Insured’s type and line of business. However, the pandemic brought about by COVID-19 has complicated things even more when it comes to the actual handling of the claims, starting with the immediate access to the Insured’s property to investigate and determine the extent of the damage, progressing to the adoption of efficient loss mitigation measures, to the handling of the Insured’s expectations in respect of the claims, more so when said claims contain elements of Business Interruption. This reality must be considered by Insurance Brokers and Intermediaries so they can appropriately advise their clients and thus, ensure a good outcome of the claims and indemnity in the shortest time possible.
As a starting point for any claim, especially complex claims, it is imperative that loss adjusters and technical specialists who have been instructed by the Insurance Companies, be granted access to the affected sites as soon as possible, in order to inspect the damage and initiate any potential investigation into the root cause. We have seen numerous delays in conducting said initial loss inspections since April 2020 to date, given the travel restrictions imposed by the governments or simply due to the Insureds themselves, who have imposed sanitary restrictions within their respective organizations, to limit the spread of coronavirus infection.
To the above point, this presupposes problems, not only in the adjustment process, but also in the Insured being able to restart operations, as they tend to wait (under normal circumstances) for the visit by the Insurance Companies’ representatives before commencing with the debris removal, clean-up and repair work.
Where the Insured have to continue almost immediately with their operations (e.g. the hotel industry, electric power generators and suppliers, etc.), and a rapid inspection is not possible because of the aforementioned causes, or even a virtual inspection (a method used by loss adjusters because of these travel restrictions), it becomes imperative that the Brokers recommend to their clients that, before they commence the clean-up and repair of the damage, they conduct a detailed survey of the sustained damage.
To this point, an inventory of the affected property [items] must be taken, together with a wide-ranging photographic report, illustrating said damage, which will serve as support so the adjusters and investigators can perform their work, in the face of a delay or inability to visit to site.
In the case of machinery breakdown, the Insureds must be advised that they must not discard any affected part(s)/equipment which may be relevant in determining the root cause; said parts must be preserved and protected for any future inspections or analyses that may be necessary.
These measures will demonstrate proactivity and interest on the part of the Insured to continue with their operations, while simultaneously indicating their intentions to protect all available evidence, so the Insurers’ representatives can carry out their adjustment and investigation activities.
Having an identified action plan in place for any potential breakdown of critical equipment is another aspect that the Brokers must recommend to their clients as a best practice in the times of COVID-19. This will help them to identify in advance, potential suppliers who can repair damaged equipment or supply new equipment similar to the affected units. We have seen during numerous loss investigations, that complex and expensive equipment, that is critical to the Insured’s operations, is usually obsolete or there is no company with the necessary capacity to repair it in the countries where it is installed. This, in turn, leads to significant delays in identifying potential companies that could oversee the repairs or replacement of this equipment, in addition to the issue of the logistics planning required for its transport and transfer.
Another aspect we deem important for the Brokers to consider when faced with a complex claim, and in light of the reality surrounding the pandemic, is the handling of the Insured’s expectations when dealing with an aspect involving Business Interruption. We mention this due to the fact that on several occasions, we have found that when the Insureds estimate their consequential losses, they do not consider the impact that COVID-19 exerts on their operations.
This situation results in them filing claims based on accounting information from previous years, where there was no financial impact on their operations as a consequence of the pandemic; consequently, they present claims that are distant from reality and can result in prolonged discussions during the adjustment process.
To this point, we believe that the Brokers’ advice in these cases, given their expertise in the wordings and coverage afforded by the Policies, helps in maintaining a realistic expectation for their clients, when estimating the losses under Business Interruption.