By: Jeff Esper | May 28, 2015

The major storm and flood waters in parts of Texas and Oklahoma have caused death, destruction and despair affecting residents and businesses.  Those in Houston certainly remember similar experiences from Tropical Storm Allison in 2001.  Just like Allison, the waters will eventually recede and properties will be restored, but the impact will be felt for years to come.

To rebuild and restore businesses after an event like this involves time, effort and a good strategy. When it’s time to file a claim, having the right strategy will relieve much of the financial burden to your business. Coverage for the property damage may involve FEMA, Commercial Insurance, and other forms of aid. Maximizing recovery from all applicable sources is a daunting task, especially in the aftermath of catastrophic events. This is why informed policyholders turn to RWH Myers.

Just like the rebuilding and recovery effort itself, the financial recovery requires a team approach, but involving the right team is imperative. There are always those looking to take advantage of a disaster, so be cautious of who you hire for any service. It is always best to work with people you can depend on and trust. It is almost impossible to completely prepare for a disasters like this, but when it comes to preparing your claim, involving an experienced team will make a huge difference in both the process and the outcome.

The partners at RWH Myers have been through every named storm in the last three decades-including Allison, Ivan, Katrina.  We know how to accurately measure your losses, prepare your claims and recover what you deserve. Recovery may not come easily, but with the right team, it will be easier on you and your organization.

If you are in need of financial recovery assistance - including the preparation of insurance and FEMA claims related to this event - please contact the specialists at RWH Myers.  We are independent and devoted to the policyholder.

For more helpful information or to contact us visit- www.rwhmyersinsights.com.

By: Jeff Esper | May 07, 2015

It was another exciting RIMS Annual Convention last week! New Orleans is always a great destination and with the city filled with insurance professionals, it was really bustling. 


The RWH Myers exhibit booth had frequent visitors. Some came by to learn about our company and several friends and clients stopped by to say hello.  And, everyone wanted a chance to win our booth prize, The Parrot Bebop Drone. With a fish bowl filled with business cards, the winner was pulled: William McBain, Assistant Treasurer at Samsonite. Congratulations William!


After each day at the exhibit hall, the nights were spent at industry events from The French Quarter to the Superdome. We capped off the week with our annual client dinner Wednesday night at Bayona which was a brilliant venue for a relaxing and delectable evening.


Well, another RIMS Convention is in the history books so we're looking forward to next year in sunny San Diego!

Category: News 

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By: Jeff Esper | April 15, 2015

When a property claim occurs, with or without business interruption, it is very common to assume that it will be straightforward. Just submit your invoices, and your insurer sends you a check. You may think, “We can do it ourselves,” or, “We have it under control.” If this has been your approach, you need to read on.


There are many potential issues when preparing a property claim that are commonly overlooked or misunderstood. The challenge is even greater if there is a business interruption component to your claim.


From experience, my partners and I have identified the most common property claim issues that can slow down the claim process and have an adverse affect on recovery.


 


1. Repair vs. Replacement

Repair vs. replacement comes up in almost every significant property claim. The issue arises when it becomes a battle of opinions and assumptions. We all know the humor on opinions and assumptions — but your property damage claim is no laughing matter, so let’s explore what can happen.


If you have a replacement policy, you have the option to repair or replace. If it makes more sense to replace with a new and improved item, then you should do what’s best for your business. However, if repairs are possible and at a lower cost, the adjuster will undoubtedly dispute the claim, and you’ll be debating a matter of opinion. When the adjuster’s experts recommend repairs that you know are not guaranteed to work, especially long-term, you face a challenge. As a business, you cannot afford to risk a failed repair, so you elect to go with new equipment with a warranty. The repair option will now be a theoretical scenario that your insurer can leverage to adjust your claim payment. Regardless of the adjuster’s position, you did what was best for your business, but there’s a way to neutralize this potential adjustment.


    •    First, the worst thing you can do is proceed on a plan without sharing your logic with the adjuster. Include the adjuster in the initial assessment and decision-making process. While you have the right to do what is best for your business, the adjuster’s involvement and buy-in early on will make them part of the decision and can help to avoid an issue down the road.
    • Next, get several (at least three) independent quotes to repair or replace the equipment — these quotes should include the time, expense and predicted reliability of the repair. If you only get a quote from the original manufacturer, there could be a perception that it has an ulterior motive. Armed with data, you will have an easier time justifying your decision. For example, the repair option may be cheaper, but if it takes longer to complete, it will add to your business interruption claim and ultimately cost more.
    • Finally, perform a realistic analysis of various failed repairs scenarios and the potential impact on timing and costs. Discuss your findings with the adjuster to ensure any subsequent repairs and resulting business interruption would be covered as part of this claim and not a separate occurrence. After all, everything is technically repairable — it is just a matter of determining the most practical solution given all the circumstances.

2. Betterments

Losses often present opportunities to make useful changes and improvements to operations. Adjusters anticipate this and will be prepared with reasons to limit recovery by labeling certain repairs, reconfigurations, and replacements as betterments. Most of the time, newer is better, and that is why you pay for a replacement policy. However, just because something is better does not mean you should not get full replacement value.


Let’s say you are replacing a piece of production equipment that was damaged as part of your loss. In searching for a replacement, you find that the as-was capacity replacement for your equipment is no longer available and that the alternative equipment has a 10% greater production capacity than the damaged property. In this case, the adjuster may argue for a credit for the increased capacity. Though the new equipment is clearly a benefit to your business, because the exact model that is being replaced is no longer available, you don’t have an equivalent alternative. If required to justify and validate your decision, simply compare the cost/time differential between your decision and a custom order built to spec. In cases like this, you should not be penalized for the betterment.


There are valid adjustments for betterments, but it’s important to understand the difference between a betterment and your rights to a replacement of like kind and quality.


3. Property Damage vs. Extra Expense

From a policyholder perspective, the types of expenses related to the claim do not really matter because they are necessary to get back in business. The insurance company, however, needs to see expenses segregated into their proper insurance claim buckets. To ensure a smooth claim process, knowing how best to account for expenses is critical to the outcome of your claim. Let’s say you have payroll expenses for cleanup and remediation. If you consider that property and extra expense are subject to different limits and deductibles, it makes good sense to claim them according to your coverage limits. As a rule of thumb, look at the property bucket first for expenses related to cleanup and repair of the property because the extra-expense bucket will offset business interruption, thus allowing you to operate as normally as possible during the indemnity period.


As an example, assume you have production labor working overtime to keep production going and to clean up and repair damage from the loss. This time should be separated as normal labor, property damage cleanup and repair and extra expense. To complicate things further, both normal rates and overtime rates need to be factored into each calculation. Finally, you have to keep detailed records that document the who, what, when and where that is involved in the work being done.


Remember, when appropriate, it’s best to claim expenses as property damage, provided the costs can be documented. It is a more tangible approach and will avoid conflicting with the business interruption calculations for extra expense and inefficiencies, which are based on assumptions and subject to debate.


4. Actual Cash Value

Immediately after a loss, you are entitled to recover the documented actual cash value (ACV) of your damaged property. You may claim ACV as the amount you are due before exploring replacement options. This is a good tactic if you want to get the cash flowing early in the process while the replacement values are being determined and decisions on replacement are made. However, accurately determining ACV can be challenging.


Typically, the starting point is the asset ledger that shows a depreciated value of the asset. However, this number is usually used for tax purposes and may not represent the actual value of the asset. Other options to value the asset include pricing based on what a willing buyer would pay or replacement less physical depreciation based on the actual life of the asset. These methods vary state by state. Do your research to value the asset appropriately under the circumstances and know that there is not one right answer.


Additionally, some policies allow you to recover full replacement value for assets even if you do not replace them. The policies usually require that you spend the money on a capital project that was not approved at the time of the loss. The capital improvement does not necessarily have to replace capability of the lost assets. If this is of interest, check with your broker about adding this option to your program.


5. Period of Indemnity Impact

In general, the period of indemnity is the length of time it takes (or should take) to make property repairs. Once repairs are complete or should have been complete, the period of indemnity terminates. While you can, and should, attempt to settle portions of the property claim as you go, any agreements related to the property side of your claim can have a costly impact on the indemnity period for the time-element portion of the claim. It is critically important to address property issues in tandem with time element, to avoid unnecessary recovery issues.


This can be a little confusing. As an example, let’s assume you have a total loss to a piece of equipment, and the replacement cost is known. It would be reasonable to settle for the replacement cost of that equipment. However, the adjuster assumes an aggressive timeline to order and install the equipment, not considering how installation might affect continuing production. When this happens, make sure the timeline and assumptions for installation are clear and acceptable before settling on the cost to replace the equipment. Otherwise, you might get what you want on the property settlement and then lose on the time element.


If you have a separate team working on the property and time-element claims, collaboration is essential to avoid assumption-based adjustments, This becomes especially important when repairs are theoretical, as this will be the basis for the time-element recovery. Always remember to consider all assumptions needed for time-element claims as part of any property settlement.


6. Residual Value Adjustment

If you have a significant property claim, you may need to purchase equipment or supplies on a temporary basis. The validity of these purchases is not in question, but their use once permanent repairs are made is. For items such as this, the adjuster may look to take a residual value credit. Essentially, the adjuster agrees that you needed that item, but when the permanent repairs are made (and paid for), you will no longer need it. This may be true, but this does not always mean you should not get full value for the item.


For example, you have an electrical loss that will keep you out of business for an extended period. You purchase a generator to provide basic power to areas of your business. When repairs are complete and power is restored, you no longer need the generator but still have the unit. Because you still have it, the adjuster takes a residual value credit. Is that fair?


The first question you need to ask is whether you want to keep the generator. If there is some value to you, a fair credit can be negotiated with the insurance company. If you do not want to keep the item or do not feel the credit is reasonable, you can have the insurance company take possession — after all, the insurer paid for it. If the insurance company thinks it can get value from the generator by taking possession and selling it, the company will probably take you up on this. More often than not, this is not cost-effective, and you can minimize or eliminate the residual value credit.


7. Documentation

If you have never been through a significant property claim, you might not appreciate the level of detail that is required to document your claim. The general perception is that you gather some invoices and quotes on a sample basis, and that should be enough. Unfortunately, the requirements for an insurance claim are more detailed than most capital projects and audits. Quotes and estimates need to be extremely detailed, and proof of payment needs to be documented almost entirely — if you cannot properly document a claim, it will likely not be paid. It may not be acceptable to the insurance company to use a dollar threshold for charges because the company will insist on auditing 100% of the charges.


To demonstrate the level of scrutiny that claims come under, I refer to an experience I had on one of the largest claims I worked on. The property portion of the claim was close to $200 million. Months of work and tons (literally) of paper were presented to support this claim. During a meeting between the accountants and engineers, one of the engineers made copies for everyone of one invoice presented for payment. He adamantly pointed out that the invoice had been duplicated in our claim submission. It was for one $5 roll of duct tape.


The point is that handling and organizing all the documentation required to support your claim can be daunting. To avoid mistakes, it is advisable to assign a dedicated person or team to locate, scan, print and manage all the support documentation. Bringing in an expert forensic accountant is always a good option to consider, especially for larger, complicated claims or just to relieve your team from these tedious and burdensome tasks. Forensic accountants that specialize in claim preparation may be covered in your policy to work on your behalf. Though you will still have some work to do, your claim will go more smoothly, with fewer pitfalls.


Now you know why property claims are not as easy and straightforward as you might expect. After decades of preparing claims for policyholders, we can attest that what you don’t know comes at a cost in both time and money. We hope the information above can help you prepare for at least some of the issues you might encounter should you have a future property damage claim.



Published 3-31-15: InsuranceThoughtLeadership.com

Category: Insights 

Tags: Property Damage 

By: Jeff Esper | March 27, 2015

March 10, 2015: Orange County RIMS

Jim Gillespie and Jeff Esper presented to the Orange County RIMS Chapter on the topic of Property Damage Claim Challenges. They shared the most common pitfalls that influence the timing and recovery of property claims through an engaging and interactive luncheon presentation.

To learn more about the topic, submit the request form on this page for our featured Insights Brief, Property Damage Claim Pitfalls
.

Category: News 

Tags: Presentations 

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

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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: Jeff Esper | December 03, 2014

Chris Hess, Pittsburgh Partner at RWH Myers, participated on the forensics panel at the 2014 Partner Day RIMS meeting in November. Partner Day consisted of various panel discussions throughout the day. Chris represented the forensic accounting service of claim preparation.


The questions posed to Chris led him to share several claim stories, best practice tips for risk managers and recommendations that could be applied immediately. During the Q&A several questions were directed at Chris. One of which was related to Professional Fees Coverage limits and another was actually a compliment on the approach Chris took on a claim in anticipation of the adjusters argument. The risk manager was impressed by the ingenuity used to resolve the claim. To Chris and the other Partners of RWH Myers, it's not out of the ordinary. In fact, it's what we expect from our team for our clients.


Watch a clip on professional fees below...

Category: News 

Tags: Presentations 

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: Jeff Esper | October 24, 2014

Jeff Esper, the Director of Marketing, and Jerry Liberatore, CFE, presented Understanding Employee Dishonesty in the Workplace at the Great Lakes Regional RIMS conference in October 2014. This topic is relevant to everyone although the Risk Managers in the audience appreciated it most. As a part of Crime Coverage, Employee Fidelity presents a challenging risk to organizations in any industry. Though some may think of Retail employee theft, Jeff and Jerry shared a variety of theft cases from theft of parts sold as scraps to stealing funds. They discussed the most frequent offenses and the best ways to detect and prevent them. When the loss results in an insurance claim, the forensic accountants and CFE's investigate and measure the financial impact of the loss. Jerry explained the techniques they use to piece together the data even when much of it was hidden or destroyed. One of the highlights of the presentation was a clip from the cult classic film, Office Space, in which disgruntled employees launched a virus that would skim fractions of a penny and deposit them into a private account.

Category: News 

Tags: Presentations 

By: Jeff Esper | October 17, 2014

RWH Myers Pittsburgh based Partner, Chris Hess, presented to a full room of Risk Management professionals from MI, OH and PA at the 2014 Great Lakes conference. Chris was accompanied by Tim Flaherty from Alcoa who spoke from the risk management perspective and emphasized the importance of having adequate coverage for Claim Preparation, also known as Professional Fees Coverage. Chris shared his insights on BI valuation, PD claim preparation and working with insurance side adjuster and accountants. Chris and Tim have worked on several complex losses together and shared their stories throughout. The room was filled and after the session Chris and Tim were surrounded by attendees with follow-up questions.


Category: News 

Tags: Presentations 

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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