While many seasoned insurance and risk professionals are unlikely watching the Bravo television series Girlfriends Guide to Divorce, my wife is currently tuned-in as I create this blog. Besides, Risk Managers Guide to Dating...a Property Loss Advisor is certainly a better title than, “Alternatives and/or Limited Engagements for Risk Managers and Qualified Property Loss Advisors to Develop a Mutually Beneficial Relationship in Today’s Insurance / Business Environment.”
When my career started in the early 90’s as a licensed public insurance adjuster, my co-workers and competitors were simply known as “public adjusters.” Many public adjusters would only contact risk managers when their employer sustained a large property loss at one of their assets from a catastrophic peril such as a fire, earthquake or hurricane. The public adjusters’ proposition for the risk manager / affected business was as follows: The public adjuster would propose, negotiate, and charge a fee of 5-10% depending on the size of loss and other considerations such as the anticipated service hours, market conditions and risk factors (e.g. complications such as coverage issues) involved with the specific claim. The public adjuster would sell the Service, which would alleviate time and burden of handling and managing the claims process from the risk manager and/or other employees of the business, and the Value such as the extra dollars (or any extra insurance benefits) that would potentially come from a subject matter expert’s know-how who was working exclusively for the business and not the insurance company. While public adjusters believe that the service and know-how would be more valuable than the cost of the public adjuster’s fee, the risk manager needs to buy-in to same.
The problem for public adjusters is that certain risk managers / businesses feel, at times, that this proposition is too esoteric, and/or theoretical. Additionally, even when the risk managers or businesses feel that they could really benefit from a subject matter expert advocating on their behalf, 5% of a $7,000,000 claim is still a large contract to award to an unknown entity in a post catastrophe pinch and sometimes risk mangers and/or businesses pass for this reason alone. The problem for risk managers / businesses is that they sometimes discover too late in to the claims process on large, complex claims that they are often overwhelmed and/or undercompensated without a property loss consultant working on their side of the table.
Father Cavanaugh said in the movie Rudy, “Son, in 35 years of religious study, I have only come up with two hard incontrovertible facts: there is a God, and I'm not Him.” Similarly, in my 23 years of property insurance loss consulting, I have only come up with two hard incontrovertible facts in connection with catastrophic and complex commercial property insurance claims: “Every claim is different and absent a loss exceeding the policy limits - there is no finite settlement number.”
It does not take much of an imagination or professional insight to realize every claim is different. There is little standardization in the commercial insurance claims process since there are numerous types of perils, insurance companies, exposures, policies / contracts, states with its own set of regulations and, most explicitly, individuals throughout the industry.
Over the years, I have heard insurance company adjusters say on catastrophic commercial property claims “I will pay the same amount whether there is a professional loss consultant working for the policyholder or not.” I don’t think this is an accurate statement. In fact, it simply makes me chuckle when I hear it. With that said, I have many good professional relationships with insurance company adjusters and would say over the last twenty years or so, I would have actually become friends with several of them if I thought it was appropriate. Moreover, I don’t think there are more bad actors working for the insurance companies than there are bad actors acting as property loss consultants for policyholders or in any other industry / walk of life. However, I think it is a more accurate and appropriate statement for an insurance company adjuster to say, “I will evaluate a claim with the same professionalism whether or not the policyholder utilizes their own advisor.”
Just some of my reasons as to why the insurance company adjusters are not paying the same amount whether there is a policyholder advocate or not, and, absent a loss exceeding the policy limit, there is no finite settlement figure in connection with large commercial property insurance claims are as follows:
The scope of a building loss is almost always subjective and/or in the eye of the beholder, and even when the building scope is actually straightforward or agreed upon between the policyholder and the insurer – three different contractors will still give you three different prices. Also, even when physical inventories between the parties are identical, there tends to be varying opinions on whether business personal property should be repaired or replaced, the cost to repair or replace and/or the salvage value. There is also typically subjective depreciation issues involved in most commercial property claims. Moreover, even when the period of restoration is not disputed between the parties, what a business would have made during the downtime if there had been no fire or hurricane is certainly debatable as well. I could go on and on and on.
In recent history, after disasters such as Hurricane Georges in 1998, 9/11, the 2004 hurricanes in Florida, Katrina in 2005, Ike in 2008, Hurricane Irene in 2011, and Superstorm Sandy in 2012 – there were so many opportunities for qualified public insurance adjustment firms; the whole industry thrived and many of MLA’s competitors saw no need to evolve its service offerings.
While MLA Claims has engaged in numerous typical public adjuster jobs over the years, i.e. small percentages on large claims in the days following a loss, we recognized the “large ask” for what it is, i.e. a potential hurdle to establishing a relationship with a risk manager / business.
For over fifteen years, MLA has been adding service lines, being more flexible in how it charges (e.g. charging hourly or utilizing blended fee arrangements) all in an effort to provide services and fees in a manner that risk managers prefer and/or could more easily purchase. Today, MLA has a Fortune 500 company / Director of Corporate Insurance that outsources its entire property claims department to our firm for an annual flat fee arrangement. Also, we participate in numerous other assignments such as limited scope, hourly work or entire projects on blended fee arrangements. With that said, there are still plenty of small to medium sized business owners that would prefer a straight contingency fee arrangement after a large claim.
At times, MLA Claims will engage on an hourly basis for a limited period of time early in the process. This way, a risk manager / business can have a professional working on their behalf coordinating the necessary emergency and/or temporary repairs, identifying potential areas of conflict by delivering expedited insurance policy analysis and attending the initial site meeting(s) with the insurance company’s adjuster(s) and/or other experts, as well as ascertaining whether there is potential subrogation. MLA often provides its findings for these limited engagements in a deliverable report that also includes immediate damage assessments and/or estimated quantum loss ranges. Sometimes our engagement ends here or a credit for these hours is provided and applied to a contingency fee arrangement to handle the claim to its conclusion.
Other hourly or flat fee arrangement services MLA Claims provides to risk managers / businesses that are alternatives to the percentage of the recovery relationship include but are not limited to the following:
- Perform commercial building and business personal property replacement cost valuations
- Calculate warranted business interruption limits of coverage
- Consult on insurance policy renewals
- Identify business insurance and commercial insurance coverage needs and gaps
- Insurance Producer (Agent) of Record selection and evaluations
- Insurance policy review pre and post placement
- Development of claims handling and best practices manual
- Appraisal services on disputed commercial property claims
- Litigation support for commercial property claims
- Hourly or flat fee property claims adjustment services as partially described in this blog
Today, a much larger percentage of MLA’s competitors are in fact now starting to identify as being property loss consultants or property loss advisors that are also licensed public insurance adjusters. This allows risk managers the flexibility of only buying a limited portion of available property loss consulting services and/or of entering in to fee arrangements that they prefer.
About The Blogger:
Bob Landow specializes in resolving large residential and complex commercial property losses stemming from catastrophic events such as fires, hurricanes, earthquakes, and floods across the country, throughout the Virgin Islands, Mexico, and in Puerto Rico.
Bob has handled all types of claims for clients ranging from homeowners and small businesses to Fortune 500 companies and large municipalities. Bob’s experience includes handling a residential fire for a national celebrity; a mine collapse for an energy company; a power failure for a major acute care hospital, and a hurricane that caused wind and/or flood damage to hundreds of city owned properties including office buildings, fire and police departments, and waste water treatment plants for one of our nation’s most populated cities.
Bob assisted Universal Health Services, Inc. in reaching a $264,000,000 settlement relating to damage resulting from Hurricane Katrina to three separate hospital campuses in New Orleans, Louisiana.
Bob is a licensed public insurance adjuster in over 30 states and jurisdictions. Bob earned a B.S. in Consumer Economics from the University of Maryland and a MBA from Georgetown University’s McDonough School of Business. He lives in Villanova, PA with his wife, Arlyn, and their three daughters.