Claim preparation is as much about being prepared, as it is the information you are preparing. Knowing ahead of time what the final claim should include will help expedite the process and avoid delays or loss of recovery.
- As to format, all claims prepared internally by the business should:
- Contain a comprehensive index
- Include thorough explanations of unusual circumstances and events
- Be easy to understand and evaluate
- Provide maximum supporting documentation
The following generalized content is suggested for all claims:
- A brief narrative providing the factual background of the loss, the effects on assets and businesses, and the basis of loss calculations. The narrative can be several paragraphs in length to many pages, depending on complexity. But stick to the facts!
- A schedule entitled Summary of Loss listing losses by coverage type (Property Damage Repair Cost, Inventory Loss, Business Interruption Loss, Extra Expense Loss), and the total of all losses sustained.
- A schedule summarizing each loss by coverage type. These schedules should roll up to the Summary of Loss, and provide the mechanical calculation by component. For example, the property damage loss summary could include a summary of all invoiced charges, stores issues, internal labor, internal engineering allocations, and other sundry expenses. The business interruption loss summary could include the number of lost production days, calculated average production per day in units, the average sales value of lost production, the amount of non-continuing manufacturing cost, and expenses incurred to reduce an otherwise greater BI loss.
- Detailed schedules supporting each amount appearing in the summary schedules. For audit purposes, each number appearing on the summary schedules should be supported by a subsidiary calculation. For example, the vendor invoice component of a property damage claim could be supported by a detailed listing of each invoice charged to repair cost work orders, including the vendor name, invoice number and date, purchase order number, description of the service performed or material sold, and amounts paid. The average production per day statistic utilized in a business interruption claim could be supported by a listing of historical monthly production quantities, days worked, and a delineation of the base period utilized to compute the projected quantity per day.
- Source documentation providing further support of claimed amounts. In theory, every number appearing in the claim should be supported by the appropriate financial statements, subsidiary reports, or other source documentation used in the calculation. This is not always possible, but every reasonable measure should be taken to support the claim with business books and records. As such, any numbers that are not well documented will receive the greatest scrutiny during the adjuster’s review.