By Jill Dalton, partner-in-charge, New York office,Dempsey Partners LLC

If your client has a catastrophic claim, it's critical to workwith the client to manage the process. In many respects,managing a large catastrophe claim is like a football game. It starts with the quarterback—and you want to avoid having theinsurance company or the insurer's adjuster play quarterback. Youalso don't want to put public adjusters in that position.

Read related: “Preparing Clients for Catastrophe Loss: A Step-by-Step Guidefor Agents.”

The quarterback can be the broker, someone at the client, orsomeone with the forensic accounting team. Once you and the clientidentify the quarterback, put the insurance company on notice,identify the time requirements and mitigate the loss. Documenteverything. Assemble the claim team, open the communication linesand keep them open. Calculate the loss estimates and drive theprocess.

There will be many individuals involved in the claim, both fromthe insurer's side and your client's:

• On the insurer's side, there will be the claim adjuster, aswell as their account executive, underwriter and reinsurers. Theinsurer also will involve third parties, including engineers, claimauditors, construction consultants and coverage attorneys. Theirkeys to the game will be adjusting the claim, substantiating theloss, mitigation activities and understanding how operations aregetting restored.
• Your client's team likely will include the CEO, CFO, plantmanagement and possibly their legal and accounting departments. Inaddition to the broker or agent, your client also may involve otherthird parties including contractors, forensic accountants andoutside coverage counsel. Their goal is to expedite andoptimize the recovery. Their keys to the game are the safety ofemployees, restoring the business as quickly as possible,mitigating the loss and getting the insurance recovery paid as soonas possible.

Now, let's look at the playbook. The first part has to do withvaluation:

• Looking at the property damage, is the policy going to respondon the basis of actual cash value or replacement cost?
• Is the client going to repair buildings and equipment, orreplace them? Will they use internal work groups to get some ofthis work done?
• What's the valuation for inventory? Is it selling price?Replacement cost?
• Control of damaged merchandise is important. Who makesdecisions about damaged merchandise? Indeed, you want the client tobe in position to make all those decisions.
• Is there debris to be removed? How will that be paid for? Whatbusiness interruption and expediting expenses will the client incurafter a loss?

Carefully consider the business interruption indemnity period ofthe loss. Remember, the property damage and period of restorationwill drive the business interruption. Notably, the period ofrestoration will change based upon whether the decision is made torepair or replace equipment—and it's critically important to getthat understood at the beginning of the claim process.

Read related: “Picking Up the Pieces.”

You also want to understand any expenses that will be incurredto help get the client's firm back into business as quickly aspossible. If there's a partial impairment, what issues are likelyto arise?

Look at the projections for sales and profit, and understand theclient's ability to make up sales (or not). For example, cansales be generated via the Internet if a retail location is down?The insurers will look at the business interruption and themitigating expenses in adjusting the claim. Which functions havebeen outsourced? Which have been performed internally? Review theclient's incremental costs of marketing, advertising, and logisticsand discuss any discounts offered by the client to retain marketshare.

With all this work done, you're ready for the “fourthquarter”: the settlement. Keep in mind, the settlementprocess is a negotiation. For brokers and agents, it's important tounderstand the major issues for the client, the major issues forthe insurers, and their key arguments. During the negotiation, tryto focus only on the weakest elements of the claim. The elementsthat are not disputable should not be part of the negotiation atthe end of the claim. The good news: 99.9 percent of physicaldamage and business interruption claims eventually settle.

When the claim has settled, go back over the process. Were therefailures in any of the steps along the way? What went well and whatdidn't? All of this needs to be reviewed with the client so theprocess can be improved promptly in the event of another claim.Were the pre-loss preparations adequate? Was thecommunication flow positive and did it work? Did everyone worktogether toward the resolution? Were there any issues with theclient's expectations? How about at the plant level, the locationlevel and all the way up to the CFO and senior executives? Discusshow the process can be improved if there is another event.

When the claim is closed, what should the broker or agent do as“Monday morning quarterback”? Take a look back at everything.Make claim service a key point during the next renewal if there'sbeen a major event. What is the promise of better claim serviceworth for the agent/broker and insurer? What are the insurersprepared to do after a loss?

Read related: “BePrepared.”

From the client's perspective, the value of the agent or brokercan be greatly enhanced by strong support during the claim process,and the client may perceive you as a first-string member of theteam. Indeed, you can achieve both improved retention and newbusiness by providing value-added claims support before and after aloss. And that's a winning formula!