By: Christopher Hess | April 11, 2017

What is your insurance company saying about your BI Values?

One of the services we provide to clients is the preparation of annual business interruption values and exposure analysis. In doing so, we have noticed several red flags that indicate something may be wrong with how these values are being reported to the insurance company. It’s not so much what the insurance company is telling you about your business interruption values, but what they are not telling you.


Here are three red flags insurance companies are waving by not saying anything:



Great Rates - "We are paying a lot for insurance, but we are getting a great rate!”


Beware, great rates for property policies have the potential to be misleading. The business interruption values are one of the many variables in determining rates. If you are over-reporting your values and the insurance company realizes it, your rate will appear better than others reporting more accurate values. Sure, a better rate may sound like a win, but it may just mean that the insurance company is calculating your values for you. Just as you wouldn’t trust a car salesman when he says you’re getting a great deal, you shouldn’t rely on the insurance company to do the same.



Free Services - "Our insurer analyzes our values for free.”


The insurance company may actually offer to calculate your values for you - for free. Everybody loves free things, right? Unfortunately, the insurance company will use a benchmark approach to underwriting your risks combined with COPE data and any other information you provide. The result will likely be a higher business interruption value that is not representative of your exposures. When your story is vague, the insurance company will make assumptions about your business based on what others are doing. Let all of your hard work creating incident response plans, business continuity plans and other contingency plans pay off where it can have a direct effect on your premiums.  



No Resistance - “The insurance company accepts what we give them for BI Values.” 


Watch out - if there are no questions or pushback on your values, that can mean one of two things: 1) you have done your values perfectly and they require no explanation, or; 2) you are reporting higher values than what your insurer is calculating. If you have done your values perfectly, congratulations on being one of a kind. More likely, the insurance company has calculated your values at a lower level than you have. If this is the case, wouldn’t you want to know? 



At the end of the day, no one is more qualified to value your business interruption risks than the people who run your company, but you have to know the criteria being applied and how to apply it. Underwriting is a mysterious process, so it’s better for your bottom line to take the mystery out of it by bringing clarity to your business interruption values. If you leave it up to the insurance company, chances are that the number is going to be higher than it should be.  


Don’t expect insurers to guide you to the answer that is best for you. They have a different agenda and process. They will categorize and group your risks based on some information, but if you do not provide what they need, they will default to general assumptions. You may get lucky and end up with a reasonable assessment of your risk. Or you can have a say in your luck by matching your opportunity with preparation.


For more, contact any of the professionals at RWH Myers and we will be glad to help.


Category: Insights 

Tags: BI Values 

By: Christopher Hess | June 01, 2016

Remember the classic 80’s film “War Games” where the computer system named War Operation Plan Response, or WOPR for short, asks Mathew Broderick in that See ’n Say computer voice “Shall we play a game?” The movie was a tense thriller that was topical for my Cold War childhood but pointed out, among others things, that all games are not fun. Insurance claims should not be a game, where one side is playing games as a tactic to delay or reduce claim payment. It’s much like a battle in a war, in which one side is lured into an ambush. Unfortunately,  I see this all to often when preparing property and business interruption claims for my clients. 


The reason it is so frustrating is that my client is usually struggling to recover from a major loss to it’s business, affecting them financially and emotionally. They have done their best to protect from such an occurrence via loss control, insurance procurement and a proper claim filing. So when they document their losses and present their claim under the terms of their insurance contract, they should not have to battle bullying, stall tactics and misguided theories. 


As an example, I had a chemical company as a client whose business was heavily dependent on the supply of raw materials from specific international locations. The exclusive relationships with these international suppliers and their governments took decades to forge and represented a distinct competitive advantage. Their business was cyclical and during a low point, their manufacturing plant was devastated by a hurricane. If they were not able to get back up and running quickly, the long term contracts with their suppliers would be cancelled undoing years of supply chain efforts.  


The CEO had a legal background and recognized the real possibility that his company would not recover from this loss if the insurance they bought could not reimburse in a timely manner. He knew he was facing the possibility of laying off over 1,000 employees as well as losing long term supplier relationships.  


The insurer’s tactic was to overwhelm the client with requests for information while demanding time and attention to explain the operational complexities. While scrambling to answer the flurry of questions, my client had to accommodate a large group of insurance investigators at their chemical plant that was still underwater. Contractually, the insurance company has the right to gather information they need; however, there is a tact and decency that should be observed. The insurers strategy was to leverage the policyholder's crisis situation to establish reasons not to pay the claim based on misguided theories about their business. Because of the chaos, when the insurance consultants arrived on site to survey the damage, the client was not prepared. They did not have a proper escort for the insurer consultants to review the damaged facility. As a result, information was gathered from which they made critical assumptions about the damaged equipment that formed the basis for their theory on the valuation of replacement equipment and lost production.  


The client was not informed about these conclusions until some months later when the report was presented. They were ambushed and put on the defense, backtracking trying to disprove the incorrect information. All the while, claim payment is withheld until the issues are resolved. 


This tactic is common in claim war games. While the insurance team may just be doing their job as instructed, a company’s existence is at risk. Adjusters are often cavalier about this process and will hide behind their “duty” or policy wording, while in reality they are just playing games with the money owed to the policyholder. 


Despite the games, I am happy to report that through a lot of hard work and foresight, we were able to overcome these obstacles and secure advanced payments to stabilize the client’s operations, maintain supplier relations and create an equitable settlement. The CEO and other executives were relieved and appreciative of the results we achieved considering the situation we were facing. 


So how did we do it?  


It takes an effective strategy and careful execution to be successful and here’s the approach that we know works best: 


  1. Take Control - You do not want to put off the insurance company too long, but it is okay to let them know you are going to control when they get access and who they can interview. More claims are derailed in the first week by uncontrolled access and miscommunication. 
  2. Agreements in Real Time - one of my favorite risk managers relates this mantra during claims, “we make decisions in real-time.” What he means by this is that when confronted with a decision - say rebuild or replacement of equipment - you use all the information you have at that time to make the decision. As long as the adjuster is aware of the decision and your reasoning, they should not second guess what you have done down the road once more information is known. For example, immediately after a loss you think you need two cranes onsite to move equipment and debris. After the fact, you realize you could've got by with just one. You made a decision in real-time that was based on what you knew at the time and should not be penalized based on your initial estimation. If the adjuster doesn’t object at the time of the decision, they have no grounds to object after the fact. 
  3. Clarify Requests - the insurance company is going to ask for information - a lot of information. In general, these requests are broad in scope and may even be used to fish for something that can be used against the claim. Don’t let this happen. Ask that requests be specific - if they are not specific, send the request back. Ideally, claims are presented with supporting documentation and that should be the focus of requests. I am often used to filter this information down to what is really necessary to provide - which should be specific to what is being claimed. Extraneous information can create confusion and lead to more requests. Your loss accountant, if experienced, will be helpful with interpreting these requests and focusing on what is relevant to the claim. 
  4. Recruit Experts  - Adjusters and their team work on claims every day. It’s their full-time job. For you, it is an infrequent part of your job. If you want a smoother process and positive outcome, you need experts working on your behalf. In addition to your internal team, your brokers claim experts, as well as independent forensic accountants, engineers and outside counsel are critically important. Ensure that those on your team are working on your behalf and match-up well against the insurance company representatives. In my claim example, we were not engaged from the onset, so it is vital to have your independent team vetted and agreements in place ahead of a loss. Remember, like this example, many claims are hindered by mistakes made in the initial weeks post loss. Immediately after a loss is no time for shopping. 
  5. Don’t play games - In other words, focus on the claim, not the games. Prepare an accurate claim from your perspective, be upfront with relevant information and be reasonable in final negotiations. As stated before, games have no place in claims. Just because insurers may play games to offset your recovery, doesn’t mean you need to do the same. You are much better off being prepared, being professional and being confidently in control of the process. 


If you follow this advice, you will stand a much better chance succeeding with claim recovery. Just like WOPR realized in the movie, with claim war games there are no winners.  Avoid this ambush by being prepared and informed.



Published 6-8-16: InsuranceThoughtLeadership.com

Category: Insights 

Tags: Claims 

By: Christopher Hess | February 01, 2016

Partnership

We are excited to announce that two of our most devoted and experienced managers have been promoted to Partner!

 
Jerry Liberatore
 
Russell Zinn

Jerry Liberatore, CFE, has served as manager of the Pittsburgh office for 5 years and has worked with the Partners of RWH Myers for his entire 12-year career. Jerry always employs a proactive client-focused approach to handling business interruption, property damage, extra expense, and fidelity insurance claims both domestically and internationally. Jerry has extensive experience across a diverse range of industries, including chemical, manufacturing, retail, mining, hospitality and consumer products. His efforts have directly contributed to the recovery of over a billion dollars in insured losses for our clients. 


Russell Zinn has served as manager of the Connecticut office for 5 years and has worked with the partners of RWH Myers for 11 years. His extensive knowledge of the insurance claim process, tireless work ethic and willingness to go above and beyond have been recognized by clients, his peers and Partners. Russell’s experience includes preparation of claims in the manufacturing, health care, energy, hospitality and services industries. In addition to his work domestically, Russell has traveled extensively overseas to serve our intentional clients. 


Please join us in congratulating Jerry and Russ!



JerryLiberatore@RWHMyers.com p: (412) 897-3134

RussellZinn@RWHMyers.com p: (203) 240-3889 

Category: News 

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By: Christopher Hess | January 23, 2016

More often than not, a large property and business interruption insurance claim turns into an “us vs. them” scenario, creating a rough process for all involved. Not unlike a football game, someone is trying to win - at any cost. As a forensic accountant for over twenty years, specializing in quantifying business interruption losses and documenting property claims for policyholders, I’ve seen the good, the bad and the ugly. The problem is that the process is designed to focus on disagreements. 


We’ve heard the concerns from our clients and the insurers, and we can understand both perspectives. Policyholders accuse the adjuster of being  unreasonable - trying to stick it to them at every turn. Insurers accuse policyholders of trying to take advantage of the claim in an attempt to get more than they deserve. The battles can become very heated, even on a personal level. Once during a claim meeting on a large loss, the discussion between the parties intensified until an executive, from the insured, ordered the adjustment team to “get out of my building!” 


Disagreement in the course of a property insurance claim is an anticipated part of the process, but there are ways to keep it civilized and productive. It is possible to come to a fair representation of the loss without all the aggravation. The fix is really quite simple but will require the insured and insurer to take responsibility for their contribution to both the problem and the solution.



Here are some ways insurers can improve the claim process: 


Take time to understand the insured’s business 

Too often the adjuster wants to appear to know it all. It is better to listen first and try to understand the insured's position. Understanding your customer is common business sense. 


Adjusters should have superlative people skills

A big part of an adjuster’s role is to coordinate with experts needed for the situation. These are management and organizational skills. In other words, the adjuster does not need to know all the technical aspects of every loss and would be better served knowing more about how to manage people and deal with customers. Whether it’s from retiring baby boomers or cost cutting, there is a lack of well trained and experienced adjusters. 


Give the adjuster more control 

Even the best adjusters are impaired by the current claim process. Adjusters seem to have limited authority to make decisions. Policyholders find it pointless to explain their issues in great detail, when the real decision maker is somewhere in the background. When pressed to make a decision, they just throw their hands up. It’s difficult to make any progress, when the adjuster has to get every little decision approved by their superiors. To the insured, it just seems like it’s a delay tactic to put off payment, and only adds to feeding mistrust.



Here are some ways policyholders can improve the claims process: 


Give the process a chance 

While there are many times you will experience some of the problems mentioned above, the process can work with the right people involved. Communicate with the adjuster and their team. Be responsive to all requests that are reasonable and appropriate. If otherwise, ask for clarification and then address your concerns right away. 


Maintain good relations with realistic expectations

Set realistic expectations for what you want, like advance payments and resolution of differences. Though insurers are not obligated to finance a rebuild project, they should be willing to advance money to stay ahead of the cash expenditure. By maintaining good relations with the adjuster, they’ll be more open to working with you rather than against you. 


The best defense is a good offense 

Be prepared and organized on your end so that you can require the same of the insurance company. You cannot withhold information until the last minute and then demand resolution and payment. The faster you answer questions and requests, the faster they can review them. Often times it takes them longer to review the support you provide because they review the information in a vacuum. Don’t assume they understand what to ask for or what has been presented. Promote frequent meetings and discussion to make sure misunderstandings are not made part of their reports to underwriters - once it is on the record, it is harder to change. 


Escalate when needed

If issues start to arise that cannot be resolved, rather than letting it fester, escalate it to the markets involved. It is no different than speaking to a manager at a restaurant. It’s better to deal with decision makers when action is needed. This should only be used as a last resort to avoid litigation.


The insurance claim process has it's flaws. I don’t think it’s intentional, but rather a result of how it has evolved. The best approach to improving the process is by recognizing the challenges with an “us vs. them” mentality and finding a way to work cooperatively through the claim. Both sides need to help to fix it, so that more claims get resolved as they should.



Published 2-1-16: InsuranceThoughtLeadership.com

Category: Insights 

Tags: Claims 

By: Christopher Hess | July 15, 2015

The world is getting smaller. Companies of every size do business around the globe. This poses business interruption risks both direct and indirectly. Recent examples include the devastating flooding in Thailand and the Tohuku earthquake and subsequent tsunami in Japan. Property claims can be hard enough when they are at home; adding distance and language differences can make things more time-consuming and add expense to resolving a claim. There is good news, though: International claims are not that different than any other claim. 


For example, in 2013, when Ingersoll Rand suffered an $11 million-plus flood loss at a manufacturing plant in Shanghai, we calculated the property damage and business interruption loss amounts, prepared the claim and worked with the loss adjustor and the insurance company’s forensic accounting team. We effected a settlement within three months of the end of the loss. 


Experience is the key. 


The Language 

The insurance world speaks English. The first question we are asked about preparing international claims is whether we have someone who speaks the local language. While this might have some benefit, it is far more important that someone understand the process and the numbers. On the rare occasion where a translator is necessary, that is all that is needed: a translator. It is not necessary to have a claims practitioner who is fluent. You are much better off with practitioners who know what they are doing on a property claim. 


The Location  
The time and cost to fly consultants around the world is a real concern. Often, policyholders will be inclined to hire less experienced professionals because of their proximity to the loss. This is a mistake. For the most part, information can be transferred electronically and explained over the phone. For companies based in the U.S. with operations abroad, all information necessary to prepare a claim can be transferred through headquarters. 


There are certain elements of a property claim where on-site assistance is needed (physical inventories, building or equipment inspections, etc.) This type of specific technical assistance can be coordinated with the insurance company and local resources. As with accounting information, the results of these physical inspections can be documented and sent back home. There is usually no need to send someone from here to there. 


As real examples, we have prepared and settled dozens of claims around the world without setting foot on the loss site. This is accomplished by sharing information electronically and communicating by phone, web meeting, web sharing portal, etc. The alternative of using local, less experienced professionals would undoubtedly add confusion to the process. Experience is the most important requirement in preparing any property claim. Don’t get the wrong impression – we have traveled all over the world for our clients when asked. Sometimes, the parties involved require the travel, or the loss simply demands it. However, this type of travel is less frequent now. If required, travel should be scheduled to maximize productivity to reduce the amount of travel needed. Again, experience and expertise allow this to be accomplished most efficiently. 


The Local Policy  
Local policies that cover losses abroad may have some differences from the global policy. If these differences affect recovery, in general the master policy can be invoked to make up any differences. You will want to prepare the claim according to the local policy, but be aware of differences. Your broker should be able to help sort out any differences and the reasons for those differences.

 

The interpretation of the local policies by local adjusters can create confusion. Just be aware that the intent of the local policies should fit in with your global program – to indemnify for the loss. 


Summary  
Losses happen all over the world. Just because you are in New York and the loss is in Paris, France, does not mean you should treat it any differently than if it were in Paris, Texas. Language and location are not a barrier in this day and age. If you compromise expertise for proximity to the loss location, in the end it will cost you more. Look for a team that has had success managing international claims throughout the process, leading to results for clients.


Published 7-9-15: InsuranceThoughtLeadership.com

Category: Insights 

Tags: Claims 

By: Christopher Hess | March 09, 2015

How to Recover from Winter Losses

Ten things you should do immediately after a loss

As far as winters go, this one has been a doozy in the Northeast. Record setting snowfall coupled with record low temperatures means roof collapses, frozen pipes and sprinkler leakage. If you are one of the unlucky businesses affected by this winter, this list is for you. 


Here are ten things you must do after disaster strikes:


  1. Safety first - make sure all employees are accounted for and safe.
  2. Secure the location - temporary fencing and security may be required to make sure the site is secure. You will want to preserve the damage for inspection by the insurance adjuster and other interested parties. Do your best to salvage and preserve undamaged property.
  3. Report the loss - call your broker or insurance agent to report what has happened. Do not speculate on damages at this point but act fast to get in line - adjusters will be busy. Alert third party vendors that you may need their help with recovery, including forensic accountants, forensic engineers and attorneys. 
  4. Secure temporary facilities - try to get up and running in temporary space as soon as possible.
  5. Assign internal responsibilities - you will need point people for information gathering and communications. If you have a risk manager, much of the coordination will be through them related to insurance, but operations and management will have to be involved as well.
  6. Locate/acquire "as was" estimates of damaged property - the "as was" estimate will likely become the baseline for your property claim, regardless of what you actually do to repair or replace property.
  7. Prepare estimates of property and business interruption losses - even early in the process, it is important to develop the best estimates you can so that the insurance company can set reserves.
  8. Meet with management - it is important to set reasonable expectations for recovery. Do not overstate how much might be recoverable.
  9. Meet with adjustment team - the initial meeting should cover procedural and communication protocols as well as contact information. If estimates are available for reserves, those should be shared.
  10. Finalize and execute reconstruction plans - decisions to re-build, not re-build or build differently can take time. Do your best to finalize these plans in a reasonable amount of time.

RWH Myers is a forensic accounting firm dedicated to assisting policyholders through all stages of the insurance process. We assist in calculating loss amounts and presentations to insurance company representatives on your behalf, with the goal of settling your claim for what it's worth as quickly as possible.  If you would like a personal consultation about winter losses or anything related to property damage claims, please do not hesitate to contact any of our offices.  We take great pride in our services and enjoy helping when we can.

Category: Insights 

Tags: Claims 

By: Christopher Hess | March 05, 2015

New Office Location in Austin, Texas

Welcome Sara Coleman to RWH Myers!

We are excited to announce that we have opened a new office in Austin, Texas, to serve organizations throughout Texas and along the Gulf Coast.


"Austin is the perfect location to support our clients throughout the region and to develop new relationships with organizations looking for an independent specialist to serve their forensic accounting needs," says Bob Kirchmeier, Managing Director of Business Development.


We are delighted that Sara Coleman has joined us as Manager of the Austin office and the most recent addition to our professional forensic accounting team.


Sara Coleman, CPA
Sara has a unique blend of experience and expertise, and she knows- first hand- the value of independence in forensic accounting. Having previously managed a consulting firm that analyzed and reported on critical data in the regulatory utilities space, Sara is poised to tackle the challenges of business interruption accounting. Sara has over 21 years of accounting experience in the Gas, Electric, Nuclear, Water and Cable industries and frequently served as an expert witness in proceedings. Like all professionals at RWH Myers, Sara is known for her consistency, work quality, and reliability, and we're confident you will have the same experience. 

We’re extremely proud to spread the good news that Sara is now a part of our team. Please join us in welcoming Sara to RWH Myers!


SaraColeman@RWHMyers.com p: (512) 577-4346

Category: News 

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By: Christopher Hess | January 26, 2015

Business interruption (BI) losses are among the most confusing types of claims in the insurance industry. As claim specialists, we are often asked for a “checklist” filled with action items for when a loss occurs. A “checklist” isn’t practical because there are too many variables and “if/then” scenarios to map out. When you have a significant property damage and business interruption claim, only experience can guide the way to a fair recovery. 

However, there are actions that can be taken ahead of a loss to ensure you are prepared. The following seven items represent such a “checklist.” It will not only help with your next loss but can have an immediate benefit to your risk management program.

1.    Prepare accurate ratable business interruption values 
The annual ritual of preparing the business interruption worksheet is often treated as an administrative nuisance.  It should be looked at as an opportunity to accurately account for the insurable risk for which you pay your premium and to accumulate annual values for future trending. 


The worksheet provided by the insurance company is woefully inadequate to explain the nuances of most businesses. Go beyond the worksheet and explain your business more completely to underwriters. For an effective BI values methodology, solicit help from the specialists, such as an experienced forensic accountant. The results will be appreciated by underwriters and should translate into more appropriate coverage and possibly a more favorable rate. Once a system is in place, accuracy, consistency and efficiency should be improved. 


2.    Analyze exposure scenarios and calculate MFL and PML 
Once the ratable BI values are calculated, policyholders should explore realistic loss scenarios. The BI value is an annual number that does not factor in real-life responses that would generally mitigate a claim. To get to the actual exposure to risk, companies should determine the maximum foreseeable loss (MFL) and probable maximum loss (PML) measurements. The MFL measures a “worst case scenario” in which all of the loss-control protections fail. The PML is the more realistic loss scenario, in which mitigation systems work and contingency plans are executed properly. In both cases, the property damage and business interruption effects would be calculated as if they had occurred. 


Loss scenarios should be postulated in detail, e.g. by location and by occurrence, considering all factors. These numbers should not be measured by simply applying a daily “BI rate” to an engineered loss period. It is more realistic to prepare as if presenting a claim, exploring all “what if” possibilities. Insurers may offer some assistance in this process, but remember, their version will be from their perspective. As with any claim, you should always prepare your own scenarios and your own calculations according to your understanding of your operations. An independent forensic accountant will have prepared claims just like your scenarios and would be able to accurately value the losses. 


3.   Analyze contingent risks 
Concurrent with the MFL and PML analysis, you should work to understand contingent risks to your business. Knowing what your suppliers’ and customers’ exposures are is important. Policyholders should involve leaders in operations, procurement and sales to help identify contingent exposures. If you have a sole supplier, your contingent exposure may be greater than anticipated and should be examined. 


It is important to understand how your current policy language would respond to the contingent loss scenarios you’ve identified. For example, if suppliers in your policy are referred to as “direct supplier,” make sure you understand how this would be interpreted in a claim. If “direct” means only those suppliers with whom you have a direct contract, and an indirect supplier, i.e. a second-tier supplier, has a loss that affects you, would you be covered? These scenarios should be discussed with your broker and underwriter to ensure your policy will respond as expected. 

Once the values and scenarios are updated, you will be better able to make informed decisions about your insurance coverage, limits and terms. 

4.    Business interruption vs. extra expense 
Another common discovery from performing an exposure analysis is which type of time element coverage is the best risk transfer solution. Considering each location, if the risk is a lost of sales, BI would cover the lost earnings. If sales are not the risk or they can be sustained at an extra expense, extra expense coverage would be more appropriate. If sales are at risk but can be mitigated to the degree contingency measures are enacted at an additional expense, it’s a combination loss exposure. 


It’s of value to risk managers to know what the exposure truly is because, if an exposure can be covered by extra expense coverage, it may eliminate or reduce the need for BI insurance. For example, if you are a distributor with multiple warehouses whose inventory is insured at selling price, what’s at risk? If you have alternative space or can quickly secure temporary space, the likelihood of experiencing a sales loss that exceeds the sales value of your lost inventory is remote. How much BI coverage should you buy vs. extra expense? Exploring your loss scenarios and subsequent contingency plans would allow you to better quantify your risks and select the option best suited to your needs. Extra expense is a more “tangible” risk than BI, making it easier for underwriters to rate, and it generally will cost less. 

5.   Gross earnings, gross profit and business income 
The names are different, but the intent is the same – to protect earnings lost because of damage or loss of use of insured property. The history of each of these forms would take a separate paper to detail, but, in a nutshell, gross earnings is a form commonly used in the U.S. with a basis in manufacturing risks, while gross profit is used throughout the world and has its basis in mercantile operations. Business income is the term used for the current ISO forms. Today, all forms have been modified to accommodate almost any business — however, there are some situations where one form may be preferable. The terminology and the mechanics of calculating business interruption loss varies among the forms, but the answer should be the same, regardless. 


The exception to this has to do with the period of indemnity — the gross profit form is usually limited to a specific time, while gross earnings will continue until repairs are (or should be) completed with “due diligence and dispatch”; there is the ability to add an extended period to recover sales. It is important to make sure the form you have would cover your potential loss period. For example, if you have a manufacturing company with specialized production equipment that have long lead times to replace — longer than the period that a gross profit form would cover — you should probably have a gross earnings form. If you do not see a scenario that would exceed the gross profit period and you cannot accurately predict an extended period required to add to gross earnings, the gross profit might be a better option. If there isn’t any scenario that would create a loss that exceeds the gross profit period of indemnity and you are comfortable that you can cover that time to recover sales, than either form would work. 


There are new options that allow you to pick which form you would like to use up until the closure of a claim — these forms eliminate the need to determine which form is right for your business. Just make sure you have a form that will cover your worst-case scenario. 

6.   Professional fees coverage 
Most policies now include professional fees coverage. Insurers recognize the need for dedicated claim preparation experts and are willing to pay for it as part of the claim. Often, this coverage is subject to limits that can be negotiated. If you are not familiar with this coverage or do not have it, you should discuss with underwriters. For the most part, this coverage can be included at some level just by asking. The benefits of having specialized claim preparation experts available as a resource for a claim can make the difference between a successful claim and a headache. 

7.  Organize your claim team 
In addition to forensic accountants, a claim may include forensic engineers, attorneys and others. It is a good idea to know those you want to use before needing their services. Meet with the various providers beforehand and select those that fit best for your organization. Typically, paperwork associated with hiring someone can be completed before needing their assistance (i.e. non-disclosure, purchasing, W-9, etc.) so that if something happens they can begin work immediately. Additionally, there may be an opportunity for the provider to help with reporting issues on business interruption values. 

While no business wants to suffer a loss of earnings, the more prepared you are the better the results will be. The steps shown above may take years to fully develop and should be evaluated annually to account for changes to your business. 

If these recommendations are incorporated into your insurance program, there’s no need for a claim checklist. Your risk management team will be prepared for any worst-case situations with the best-case solutions.


Published 1-26-15: InsuranceThoughtLeadership.com

Category: Insights 

Tags: Business Interruption 

By: Christopher Hess | January 16, 2015

Companies have many risk management concerns. It’s a part of business and a part of life. So which areas are of most concern to risk managers today?


According to the fourth annual "Allianz Risk Barometer," which surveys over 500 risk managers and corporate insurance experts, business interruption (BI) and supply chain, natural catastrophes and fire/explosion are the biggest concerns at the start of 2015. This should come as no surprise considering this unstable global environment. With today’s integrated business world, the ripple effect from catastrophic events affects businesses in ways that are hard to fully comprehend. We all remember the 2011 Tohoku earthquake and tsunami. The endless images and footage of the massive destruction is forever imprinted in our minds, and the ripple effects reached deep into the insurance industry. Companies worldwide that depended on Japanese suppliers suffered a supply chain disruption creating a wave of contingent business interruption (CBI) claims. Calculating these CBI claims was not the trouble. The coverage issues related to how policies defined “suppliers” left many companies without coverage.


So what does this mean to risk management?


If you concur with the survey results, then it’s a sign that you may need to examine these risk areas a little closer. You may not be able to avoid a loss, but there are steps you can take to make sure you are prepared for what could happen. If you want to be prepared, the best solution is a study we call “BI Values and Exposures”. First, we will analyze and correct the BI values that are being submitted at renewal time. In our experience, the “worksheet” provided by your property insurer rarely produces an accurate BI value. Next, Risk Management will enlist the help of management, operations, sales and purchasing to fully identify and examine your exposures based on the loss scenarios that are of major concern. Our forensic accounting experts will then analyze each loss scenarios based on the probable maximum loss (PML) and maximum foreseeable loss (MFL) as if it were an actual claim. Armed with this knowledge, you’ll be able to better manage your risks, improve your insurance program and best of all; you’ll have less risk to be concerned about.


In the words of John F. Kennedy: “The time to repair the roof is when the sun is shining.”


If you have concerns about your values and exposures, or an actual claim, send an email to jeffesper@rwhmyers.com and he will arrange a call with one of our partners.


We are always available to you as a resource and service provider, and we are experienced, independent and devoted to the policyholder.


Read more about the "Allianz Risk Barometer" on InsuranceJournal.com


Category: Insights 

Tags: BI Values 

By: Christopher Hess | November 19, 2014

Property insurance claims require significant time, effort and attention from risk management, finance and operations personnel. From the moment the loss is reported, insurers will have what seems like endless requests for information, and they’ll scrutinize every figure presented. Then the insured has to put the claim together and present it to the property insurers. The amount of activity is often more than the policyholder anticipates. Insurers understand the burden this places on the policyholder, and it is the reason most insurers offer professional fees coverage. This minor endorsement can be a major difference maker both in effort and outcome.

Here’s an example of professional fees wording from a recent policy referring to the coverage for actual costs incurred by the insured: “reasonable fees payable to the insured’s: accountants, architects, auditors, engineers and other professionals; for producing and certifying any particulars or details contained in the insured’s books or documents, or such other proofs, information or evidence required by the company resulting from insured loss payable.” 

As you can see, the wording is intended to cover the additional costs associated with the claim. Here’s what’s generally not covered: 

1) “attorneys, public adjusters and loss appraisers, including any of their subsidiary, related or associated entities either partially or wholly owned by them or retained by them for the purpose of assisting them, 

2) “loss consultants who provide consultation on coverage or negotiate claims.” 

The specific wording of the endorsement will vary and should be carefully reviewed before engaging outside claim services. Some wording is broad and will cover most consultants. Other wording is more restrictive and eliminates certain classes of consultants. To determine what’s best for your business, consider the available service providers and evaluate who would best represent your interests. 

Often, policyholders don’t fully understand the nature of this coverage. Some don’t know of it. Some are unaware if they have it. Others may not know if or when to involve a specialist in their claim. 

Don’t confuse the purpose of this coverage with the “free” help that the insurance adjusters offers. The adjuster’s job is to confirm coverage and audit the claim. It is the responsibility of the insured to measure, document and present the claim. If the adjuster’s consultants offer to help measure the loss and put the claim together, it would be like having the IRS prepare your taxes. As a courtesy, you should notify the adjuster that you plan to use a claim preparation firm and disclose billing rates and proposals, but the decision is yours to hire, and if the work matches the coverage the insurance company is required to pay for it within reason. The consultant is engaged by the insured, and invoices are reimbursed by the insurance company as part of the claim. 

So who is the best choice to help you prepare your claim? Forensic accountants are the most common and appropriate service provider for claim preparation. Forensic accountants can help with: 

1. the tedious and burdensome tasks associated with the claims process 

2. expertise on the adjustment process 

3. efficient interface with policyholder data gathering resources 

4. maximizing recovery and expediting claim resolution 

5. making the formal claim presentation 

While the policyholder still needs to produce information, the claim preparers will efficiently package the information in the form of claim presentations. Some brokers have a claim preparation unit, but there could be a conflict of interest there, as well. The broker is an intermediary between the insured and the insurer. It is difficult to walk that line and truly be supportive of the insured. Most brokers accept contingent commissions based on the profitability of an engagement during the policy year, and the client executives have incentives to use their own services. While not a clear conflict, it certainly has potential to influence the position of the insured. 

The good news is there are firms that won’t come with baggage — i.e., conflicts of interest. The best solution is a third party, independent firm that has ample experience and can represent your interests with a specialized skill set. Remember, the firm must be skilled in the complexities of property damage and business interruption claims. 

It is critical to have your claim preparation team vetted ahead of a loss. Finding time to interview forensic accountants and review proposals after a loss can waste precious time and derail a claim before it even gets going. 

“Do your due diligence and find the best fit for your organization by arranging introductions to your finance/accounting leadership. It is worth the effort when you find the right partner,” says John Lafferty, manager, risk and insurance management, at Air Products & Chemicals.” 

If you have property exposure, it’s wise to have your forensic accountants in place and to have the coverage for their services. Risk managers should include professional fees coverage in their discussions with underwriters. With most carriers, it should not materially affect your premium — if at all. As the market continues to soften, many policyholders are enjoying rate reductions with improved terms, so this is the perfect market climate to explore professional fees coverage if you don’t have it. If you do have coverage, look for increased limits. A good benchmark for limits would be to 1% to 2% of your probable maximum loss. This should easily cover the costs for claim preparation from a reputable firm. 

If you apply this information and incorporate these recommendations, the next time you have a property loss with business interruption the process will be smoother and results will impress you and your executives. So find your team and get that coverage. You’ll be prepared to recover whatever loss comes your way.


Published 11-19-14: InsuranceThoughtLeadership.com

Category: Insights 

Tags: Claims 

By: Christopher Hess | October 01, 2014

No one wants to deal with a property claim. Unfortunately, claims do happen, and that is why you buy insurance. There are right ways and wrong ways to manage a claim — here are three common mistakes and how to avoid making them:

Too many cooks...

Too Many Cooks...
One of the first things you should do after a loss is assign a point person to handle communication and dissemination of information to the insurance company. Oftentimes, this role defaults to the risk manager, but she is not always the best choice. Obviously, the risk manager needs to be part of the team, but you need someone who can dedicate a substantial amount of time to the claim. This ensures consistent communication and avoids the insurance team’s relying on information that has not been vetted.


Not controlling the schedule...

Not Controlling the schedule... 
As with most projects, planning and execution are necessary for a successful outcome. It is critical in the claims process to assign responsibility to the team members at the policy holder and require that they provide information in a timely manner. This compels the insurance company to provide feedback in a similar fashion. A timeline should be established early on, and the parties should be held to it. For example, claims will be submitted by the fifth day of the month; feedback will be provided by the 15th day of the month; and payment will be received by the end of the month. Scheduling like this can improve cash flow and ensure progress on the claim. Get the parties to commit to this early! 

Unreasonable expectations...

Unreasonable expectations...
It’s true that the insurance company is not likely to accept your entire claim, but building up your claim to unrealistic expectations is not the answer. By claiming a “pie-in-the-sky” number, you can hurt your credibility and dramatically slow down or prevent a reasonable settlement. The better approach is to present a reasonable claim that is fully documented. This prepares you to counter the insurance company’s rebuttal with confidence. It’s reasonable to be aggressive, and, by all means, do not lower you claim in anticipation of pushback from the insurer. Just do not build up the claim to unrealistic totals with the plan to fall back to a lower position — this gives all the credibility to the insurance company.

Category: Insights 

Tags: Claims 

By: Christopher Hess | September 23, 2014

If you are like most companies, the annual ritual of filling out the business interruption worksheet is a nuisance administrative task. The worksheet is generally required by the insurance company to track changes in the business and may be used as the basis to price your program. Along with general industry knowledge, this worksheet may be the most important item that underwriters have at their disposal to price your risk. However, the worksheet is woefully inadequate to explain the intricacies of most businesses and is biased to err on the high side – which usually means a higher premium for you. For a routine that is regularly glossed over, the results can have some pretty substantial consequences.


The worksheet is meant to estimate the business interruption exposure for the policy period by estimating a value for the coming year. The business interruption value (BI value) is revenue minus certain specific direct variable costs, possibly adjusted to account for the payroll of for skilled wage employees who may be retained even if operations cease for a period. The result is an annual ratable BI value that assumes a complete outage for 12 months with no mitigation.


Only by coincidence can this BI value number come close to a realistic exposure to business interruption loss.


What does the ratable BI value tell the underwriter? In theory, the premiums required to cover the risk. How can this be when the number used is so unrealistic?


The underwriter would like to know more about your business. His problem is that he needs some mechanism to measure your risk against others in your industry. The BI values worksheet is an attempt to do this.


But, if the worksheet is so far off, what else can you do to tell your story?


You need to supplement the ratable BI value with information to differentiate your business from the pack. Developing realistic, worst-case loss scenarios, known as maximum foreseeable loss (MFL) and probable maximum loss (PML), and measuring them using a methodology that would actually be used in a claim is a better way to present your exposure. Measuring MFL and PML exposures will allow you to highlight your ability to mitigate losses through business continuity planning (BCM).


Just as improved physical safeguards generate lower premiums, adequate business continuity planning should also result in premium savings. This step is completely missed when providing the worksheet alone.


The effort to identify and measure exposures can be challenging — after all, it is impossible to predict everything that might happen. History of actual claims and current industry experience can be very helpful. In most cases, it is best to tackle this project in manageable pieces and try not to do it all at once. For example, start with the largest or most troublesome businesses or locations and work down from there.


This may end up being a multi-year project that will require some dedicated effort from you and third parties. But chances are the cost of a project like this will be justified by allowing you to make more precise decisions on coverage and possibly reducing premiums.


Published 10-3-14: InsuranceThoughtLeadership.com

Category: Insights 

Tags: BI Values 

By: Christopher Hess | September 17, 2014

October 1 – 3, 2014

Northeast Ohio Regional RIMS Conference

Cleveland, OH

RWH Myers has been selected to give two presentations at this year’s conference. Chris Hess and Tim Flaherty, Risk Manager at Alcoa, will present "Business Interruption: Case Study and Overview”. The second presenation, "Employee Dishonesty: Understanding Fraudulent Behavior in the Business Sector" will be presented by Jeff Esper and Jerry Liberatore. Please join our session to learn about these pressing topics. We look forward to meeting everyone that will be able to attend.

Category: News 

Tags: Presentations 

By: Christopher Hess | September 12, 2014

RWH Myers Insights is an educational blog dedicated to the risk management community from the experts at RWH Myers. As the leading loss accounting specialists, we are committed to remaining independent so policyholders have a forensic accounting firm they can always trust to put their interests first. Insights is our way of empowering policyholders with an independent perspective on relevant topics that are critical to their success.


The Partners of RWH Myers- Bill Myers, Sharon Wolfe, Glenn Rand, Bill Warren, Chris Hess and Jim Gillespie- will routinely post technical and strategic information, and comment on current trends in risk management. Plus, we'll share lessons learned from current and past experiences that apply to us all. We're here to be a part of your team because teamwork divides the task and multiplies the success!


We welcome your questions or comments.


Category: Insights 

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