A nuanced approach is necessary to work through claims involving multiple perils, according to Bob O’Brien, managing director of Marsh’s National Property Claims Practice and Paul McVey, managing director and Marsh’s National chief property claims officer.
A recent blog post by O’Brien highlights some common issues that may arise when adjusting business income claims after multiple disasters. For example, the time frame for restoration may be extended when an insured suffers multiple losses close together, he said. Adjusters should consider whether the extended time for restoration is accurate.
Another issue that could arise is if a policy change occurred between the two losses. O’Brien offered the example of Hurricanes Florence and Michael. With one storm occurring in September and another in October, a policyholder may have switched carriers as of the first of the month. This could result in a dispute between carriers, he said.
It’s not the first time multiple storms have occurred in a short time frame. O’Brien said that in 2004, multiple hurricanes crisscrossed Florida. During a six-week period in August and September 2004, Florida was struck by four hurricanes – Charley, Frances, Ivan and Jeanne.
“The key is to try and establish what the scope of damage is immediately after any event, regardless of whether you’re potentially going to have multiple events or not, because if you do have this second event you’re going to have to try and figure out what additional damage that second event caused and what additional length of time will go into the period of restoration,” said O’Brien.
Sometimes a second event may not create much damage, only affecting debris from the first loss, he said. That’s why it’s critical to establish the scope of damage as quickly as possible.
McVey emphasized the value in differentiating the scope and quantum of the initial loss, since the determination will drive the property damage and time element claims. In addition, different deductibles may apply.
For example, he said “One could be more flood-oriented or surface waters-oriented, versus wind-oriented.”
If a dispute arises, insurers tend to work it out.
“The key is to keep the insured out of the middle and have them fully understand that they are two separate and distinct occurrences, and you have to do the best you can as far as allocating from one storm to the other, as well as the terms and conditions of the contract,” McVey explained.
He added that a transparent, structured approach to loss allocation is important. A common cause report will address what caused the physical damage and the down time.
O’Brien added that good communication among all parties is vital. Any questions that arise can be addressed by having everyone participate in the investigation and discussion.
“The more facts you can have in the discussion, the less likely you are going to open areas up for dispute,” said O’Brien. “Nailing down the facts early on is critical.”
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