Traversing the obstacles presented in complex claims- Lessons learnt
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This document summarizes a presentation given by Nish Chandra of LKA Group at the National Conference & Exhibition 2014 about complex claims. Complex claims can involve large losses, contaminated sites, multiple parties, heritage buildings, or potential mold issues. A mold claim was used as a case study to illustrate how a claim that initially seemed minor grew to $50k as more extensive damage was discovered. The presentation stresses the importance of using experts, not rushing decisions, considering future litigation risks, and realizing that claims may become complex even if they first appear minor. Proper claims handling requires qualified loss adjusters and considering all factors, not just initial cost savings.
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Traversing the obstacles presented in complex claims- Lessons learnt
- 1. Platinum Sponsor NATIONAL CONFERENCE & EXHIBITION 2014 Silver Sponsor Bronze Sponsor Risk Manager of the Year Award Sponsor Traversing the obstacles presented in complex claims- Lessons learnt Presented by Nish Chandra LKA Group Conference and Exhibition Partners
- 2. WHAT MAKES A CLAIM COMPLEX? National Conference & Exhibition 2014 Nish Chandra - LKA Group
- 3. WHAT MAKES A CLAIM COMPLEX? Large loss, leased commercial property Contaminated site Multi-unit sites with various insurers involved Heritage listed buildings Multiple buildings damaged with different usages Various considerations to identify including contract law, common law and local laws Pressure to mitigate long-term costs Potential mould issues Liability/ recovery considerations Et cetera….. National Conference & Exhibition 2014 Nish Chandra - LKA Group
- 4. HOW DO WE IDENTIFY IF A CLAIM IS COMPLEX? National Conference & Exhibition 2014 Nish Chandra - LKA Group
- 5. CASE STUDY - MOULD National Conference & Exhibition 2014 Nish Chandra - LKA Group Tenanted property
- 6. CASE STUDY - MOULD National Conference & Exhibition 2014 Owners Corporation claim Quote from agent’s handyman $3,410.00 for patching walls and painting. Quote for floors $7,387.00 New tenant has signed lease so repairs are URGENT Nish Chandra - LKA Group
- 7. CASE STUDY - MOULD National Conference & Exhibition 2014 Our inspection identified efflorescence on the external brickwork including seepage We noted MDF skirting board damage in the rooms surrounding the laundry We suggested EXPERTS in restoration become involved We were under pressure from the Broker and also the Insurer to settle the matter quickly Nish Chandra - LKA Group
- 8. CASE STUDY - MOULD National Conference & Exhibition 2014 Mould found inside kitchen cabinetry Mould found under floorboards High levels of airborne spores and surface mould identified Kitchen had to be gutted Extensive amounts of plasterboard was removed Entire floor removed Entire unit was remediated according to IICRC standards Nish Chandra - LKA Group
- 9. CASE STUDY - MOULD National Conference & Exhibition 2014 Nish Chandra - LKA Group Currently the damages are being scoped ready for quoting Our estimate on repairs is $30-$38K Mould remediation has cost over $8k Initial estimate (at first glance) was just over $10k, now we are looking at just under $50k HOW IS THIS JUSTIFIED??? Authorising initial quotes would have masked the issue Looks good now, claim closed… but what is happening under the floor and in wall cavities? Tenants – Pregnant lady, young children, elderly parents, immune suppressed, respiratory issues… Cross-contamination of un-insured contents items WHAT COULD OCCUR IN 1-3 YEARS FROM NOW? Tenant is suing agent/owner for health, the rest of the lease term and for total loss of their contents Owner joins his insurer who should have identified and remediated correctly in the first place Insurer joins the loss adjuster and all trades who were involved in making recommendations costing hundreds of thousands of dollars not to mention court proceedings.
- 10. CASE STUDY – MOULD, LESSONS LEARNT… Regardless of external pressures, don’t make rush judgements Use appropriate experts in their field; a good starting point would be to utilise the services of a good Loss Adjuster to coordinate, decipher and bring together experts and expert reports for the insurer to make an informed decision Don’t ‘jump the gun’…… mould, mildew exclusion exists in most policies…… understand the intention before making decisions/recommendations With water damage any action needs to be swift, if considerable time has already passed mitigation needs to also be swift but most importantly by a suitably qualified (IICRC) expert Settling claims is not all about saving initial cost, an insurer and all involved would rather save future litigation and additional costs which would in majority of cases be more than the initial proper cost Just like nurses do, consider litigation risk in all settings and cover yourself National Conference & Exhibition 2014 Nish Chandra - LKA Group appropriately
- 11. CASE STUDY – REMOVAL OF DEBRIS National Conference & Exhibition 2014 Nish Chandra - LKA Group
- 12. CASE STUDY – REMOVAL OF DEBRIS National Conference & Exhibition 2014 Nish Chandra - LKA Group
- 13. BEWARE THE ‘CLAYTONS’ ASSESSOR Not qualified to make indemnity recommendations as they often have no idea of the policy wording, nor expertise to interpret the policy Often have a conflict of interest They are not impartial or independent They have surfaced in the industry under the cloak of builders, restorers, National Conference & Exhibition 2014 Nish Chandra - LKA Group repairers. Their decisions may be unsustainable at FOS or litigation Their recommendations may prejudice potential recovery There is no one auditing their decisions/recommendations which could, if left unchecked, cost the insurer far more in the long-term in claim leakages They are a high risk to the integrity of a claim if not the insurer as a whole
- 14. CASE STUDY – HERITAGE LISTED BUILDING National Conference & Exhibition 2014 Nish Chandra - LKA Group
- 15. CASE STUDY – HERITAGE LISTED BUILDING National Conference & Exhibition 2014 Nish Chandra - LKA Group
- 16. LESSONS LEARNED/ SOLUTIONS A claim may not present as complex from the beginning, ask appropriate questions Always be weary of recommendations to go the ‘quick and easy’ way out, this may pose National Conference & Exhibition 2014 Nish Chandra - LKA Group issues down the track Insist that the insurer engages a fully qualified loss adjuster, preferably one who is a member of a professional organisation like AICLA (Australasian Institute of Chartered Loss Adjusters) A loss adjuster will act impartially and thus instil confidence in the process this will also be beneficial for recovery/liability purposes Always have potential litigation in the back of your mind JUST BECAUSE A CLAIM COMES ACROSS YOUR DESK WITH QUOTES ATTACHED AND IS RELATIVELY MINOR IN COST; THIS DOES NOT MEAN IT IS NOT A COMPLEX CLAIM……
- 17. NATIONAL CONFERENCE & EXHIBITION 2014 Thank you. Platinum Sponsor Silver Sponsor Bronze Sponsor Risk Manager of the Year Award Sponsor Conference and Exhibition Partners
Editor's Notes
- LKA Group. Commercial property loss Plumbing Liability specialist (Vic plumbers scheme) Trade liability and contract works Slip and trip personal injury Government departments including VBA, DHS Universities Research loss and BI We have access to experts in almost every field including materials testing, engineering, plumbing consultants, building consultants, investigators, fire scene investigations etc Today I’ll be talking about complex claims, I’ll provide a few case studies and run through the lessons learnt in each.
- As you can see, almost every claim can be complex in its own way
- This is a question that insurer’s , brokers and self-insured’s will ask initially. The reason being is they need to determine whether or not they can handle the claim in-house, give it direct to a service provider or assign a loss adjuster. Truth is, simple ordinary claims may turn complex and very fast. This can have devastating effects on customer service and long-tail costs Identifying those at high risk is critical (right from the start)
- Here is an example that I am currently dealing with. The story is that the tenants had moved out and on final inspection the managing agent was faced with water damaged floorboards to the laundry including some mould on the plaster wall behind where the washing machine. The agent thought they were doing the right thing, arranged a plumber to fix a leaking copper mains pipe, they removed affected plasterboard and then the agent obtained quotes.
- Quotes were reasonably low, but because it was water damage they lodged an insurance claim via the owner’s corporation insurer. Still at just over $10K, claim is relatively low and manageable. This could have gone to a “builder direct”
- However we were assigned. There was a tenant who had inspected (yes the damaged unit) and signed a lease expecting to move in within 3 weeks. Agent / Owner and new tenant were of the impression that the provided quotes would be authorised and repairs would be done…. SIMPLE RIGHT??
- Handy man…. Said “I’ve done the tap test” and the mould isn’t that bad.. It can be cleaned and painted over. This is dangerous; the handyman had no idea about correct remediation.
- We also note that the tenant that had signed the lease is now taking the landlord to VCAT for breaking the lease, as she is unable to move in on the date that she specified. We have written a report for the unit owner to provide as evidence regarding the unavoidable circumstances of the damage. And that in fact it was in the BEST interest of the tenant not to move in. This is another COMPLEX side issue for solicitors to get involved in.
- The value of a loss adjuster is sometimes not realised. In cases like this one, if a builder direct was arranged it is most certain that they would either recommend inappropriate repairs proceed or will throw their hands up in the air stating that the issue is far above their expertise (usually a lot of time has been wasted by this point and cross contamination if not issues becoming worse would have occurred). A good loss adjuster is suitably qualified and has the experience in dealing with complex situations where multiple experts are involved. They also should have suitable experience dealing with insurance policies and understand their wording in order to make sound and sticking recommendations. Most importantly they are impartial and therefore will have full confidence from the Insured and Insurer alike.
- Large factory burned down. We insure the TENANT only. Fire spread to the adjoining wrecking yard which had an asbestos roof. Direction of the wind spread burning asbestos back over our site deeming it contaminated. We only had $50K ROD limit BLD owner also had $50K ROD limit Quotes came in b/w $170K-$300K for ROD (total) We had the tenant and owner authorise repairs on a Cost Plus method up to $50K each (they had to bear additional costs from there). Final costs came in at $110K. Split was $48K owner/ $62K tenant which left the tenant a further $2K out of pocket when the owner still had $2K under the limit. I’ll also note that both the builder and tenant were insured with the same insurer, however different loss adjuster’s were involved.
- Debris removal contractor agreed the figures were flexible and arguable thus we approached the LA of the builder to consider amending this split to allow the limit on the building to be exhausted also. They refused to consider any adjustment. We spoke to the insurer and explained the position, they agreed that the other adjuster was being unreasonable and paid the extra cost. As the tenants items were a total loss they also agreed to waive the excess being $25K so the tenant was extremely pleased. The insurer would have also won brownie points for doing this.
- Be weary of those who CLAIM to be Assessors….. This does not mean they are a qualified Loss Adjuster!!! Although they provide the insurer with a claim recommendation for a very little fee (usually under $180), their interest is in getting repairs authorised and potentially repairs that are limited or not covered. And also to make their price within known authority in order to win job regardless of the actual cost – may include non covered items e.g repaint entire room rather than just one wall = claims leakage.
- Here we have a inner city subway which had its roof penetrated by an excavator doing tram works. We were acting for the owner of the subway being the local council. The subway below is listed with Heritage Victoria
- Due to the building being listed under Heritage Victoria we enlisted an approved HV Architect to prepare the Scope of Works and oversea the repairs. We encountered complexities with the HV rating including replacing the existing ‘modern’ ceiling airconditioning registers with those of the 1930’s ---- Even though like for like was the modern ones (someone had obviously completed repairs in the past without obtaining the relevant permits). These had to be hand-made in Ballarat with a cost of $1,500.00 each where modern ones are under $100.00 The odd thing here was that the entire arcade was already a mismatch of repairs being done presumably without permits, to satisfy the permit process we had to arrange it all to be put back to how it was circa 1930’s… however that is what HV required Repairs took a year, due to sourcing and reproducing items. Our file was open for another 2 years but because we crossed out T’s and dotted our I’s we were able to achieve 100% recovery from the contractor who caused the damage. So the Council were extremely pleased at the outcome.