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"Proper
Planning Prevents Poor Performance"
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INTRODUCTION
The 'big
fire' arrives without warning accompanied by an immediate need to deliver
a flawless performance by the loss adjuster. The ability to perform
at this level is entirely dependent upon how quickly and efficiently you
answer the bell.
The goal
of this paper is to provide a 'roadmap' to more effectively plan and proactively
deal with a major fire by using effective case-management techniques.
Success in
handling a major fire loss will be dependent upon 'teamwork'. An
effective 'team' requires strong leadership.
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LOSS READINESS/
BUSINESS CONTINUITY
In considering
your readiness to handle a major fire, you might consider the following
points:
1.
As an insurer (underwriter), have you pre-selected your preferred loss
adjuster? What experience, training and education does h/she have?
2.
Once the loss hits, how quickly can the adjuster have a complete copy
of the policy declarations, wordings and pre-loss inspection reports?
3.
Do you have a formal emergency response plan? Does it include:
a)
Determining the level of response using pre-agreed protocols.
This could apply not just to major fires but environmental spills,
serious personal injury, etc." Have you defined what you consider
a "large loss"? Is it based on a damage or reserve threshold?
Serious personal injury? Environmental exposure?
b)
A listing of emergency phone contacts including pagers, cell phones
etc. This list should be matched to an 'escalation protocol'.
c)
Mobilization and deployment plans for internal and external resources,
i.e. fire services, emergency response teams, etc.
d)
Clearly defined roles for all personnel, i.e. Local manager, regional
manager etc.
e)
Clearly defined chain of command.
f)
Media/communication plan (internal/ external).
g)
Supplies.
h)
Equipment.
i)
Occupational Health and Safety Officer.
j) Environmental
Protection Officer.
4.
Were your loss adjusters or business continuity consultants' part of
the planning process? Do they have a current copy of the entire
plan?
5.
Do you have a 24-hour, 7 day a week after-hour response system in place
to effectively deal with your emergencies? "Time is of the essence"
to effectively control and handle a loss.
6.
Have you ensured that your 'After-Hour Service' has 'protocols' in place?
Do they know that if one level does not respond, then the call escalates
to another level? Whom else do they have to notify in the 'chain'
if the loss meets a certain criteria? Do they have back-up phone
numbers? What 'experts' need to be put on stand-by in case their
services may be required?
7.
If a loss does occur, what instructions do on-site personnel have to
protect the interests of their employer? Should they be taking
photographs? Should they begin videotaping activity including
firefighting efforts? Do they take names of witnesses? Do
they record names of "officials"?
8.
Have you considered the individuals in your organization should be part
of the first response group? Your selection should be limited
to the fewest number of people who will be the most effective.
9.
Have you considered the impact of municipal, state and federal disaster
plans? Have you considered how these plans might influence your
ability to investigate and handle a loss? Who has jurisdiction?
Much of this information is available and may be obtained by contacting
local government disaster coordinators.
10. Will your adjusters have the right equipment on
hand at the time of loss? Equipment may consist of the following:
film, digital camera, portable printer, diskettes, AC/ DC power source,
calculator, video, safety boots, safety glasses, hard hats, coveralls,
breathing apparatus, measuring tapes, flashlights, hammers, hand tools,
shovels, brooms, evidence gloves, nylon evidence bags, mason jars, evidence
tags, recording devices, cell/satellite phone, laptop/question templates,
financial/inspection release forms, insurance forms, paper, proper corporate
identification etc.
11.
Have approved vendor lists been developed? Do these lists pre-select
subject matter experts?
a) Experts
(Origin & Cause, Metallurgical, Electrical, Environmental, Structural,
Project Management, Seismologist, Hydrologist, Transportation, Forensic
Accounting etc.) The selection of the 'right' expert has been
the subject of much debate. In the U.S., the "Daubert Rule"
suggests that any expert must be eminently qualified to give appropriate
evidence as a subject matter expert and no "junk science" must be
involved. The reader can research extensive material on this
topic but its fair to say that the engaging of the appropriate expert
should not be taken lightly.
b) Contracting
Specialists (Building contents, IT, equipment, dehumidification, HVAC,
off-site storage, etc.)
c) Law
Firms who specialize in fire litigation. Do they know the impact
of NFPA 921? Spoliation issues? Solicitor-client privilege?
What sort of court time do they have? What training / education
have they committed themselves to in this specialized field of litigation?
12.
Has "pricing" of services been pre-negotiated with all experts?
13.
On local levels, have needs been addressed to obtain equipment rental
demolition/debris removal, etc.? Its not the time to do it after
the fire has taken place.
14.
Have contracts or deals been established with private security firms
or off-duty government authorities to preserve and protect loss sites?
15.
What controls are in place in terms of information dissemination?
16.
The key decision-makers must be a short list and available for instant
contact.
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INITIAL
SITE MANAGEMENT
Once a loss
happens and your emergency plan is triggered, the adjuster will be faced
with many challenges. beginning with gaining access to the fire scene.
In numerous instances, the public authorities will restrict access, which
will create its own set of unique challenges for the adjuster or the private
fire investigator.
On arrival,
your adjuster should seek to identify himself or herself to the senior
public authority in command. Quite often, this will be difficult,
as the front-line level of authority will seek to keep you away from the
loss site. Persistence may be required on the part of your adjuster
since it is critical for the person in command to know of your presence
and role. At bare minimum, the senior public authority must know
where they can reach your adjuster at all times. As the 'emergency'
situation diminishes and the site is ready to be released by the authorities,
the adjuster's role will take on greater importance.
The policy
of insurance requires the insured to protect their property from further
loss or damage. This can put the adjuster into a difficult position,
at times, particularly if there is any suggestion that the policyholder
may have committed an "intentional act" to cause the loss. This
does not, however, remove the onus on the policyholder to authorize steps
to protect the property. If the adjuster gets jammed up in this
type of situation, a critical path letter delivered to the policyholder
should be considered.
The role
of the public authorities is to determine the cause of the loss.
Their investigation conclusions can have a huge impact on the claim process.
The authorities should be made aware of the investigative steps you will
be taking to determine the cause after they leave the site. Your
adjuster should request a de-briefing from the authorities of their scene
investigation before they depart. If applicable, the authorities
should be given clear instructions of your wishes to maintain continuity
of evidence at the site once they are releasing the scene. Any issues
relating to spoliation of evidence should be relayed early in the process.
Clear communication, up front, by the adjuster is critical to the evidentiary
chain.
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INITIAL
SITE INVESTIGATION
Given that
on arrival at a fire scene, you may be prevented from entering the fire
scene, there are still a number of investigative steps you might perform
or consider. This includes:
1.
Document weather conditions at time of loss.
2.
An early 'walk about' on the perimeter of the loss site should be considered.
If it is"arson", consider where the arsonist may have parked their vehicle
or where a container might have been discarded.
3.
Early efforts to canvas the area around the scene of the loss to uncover
witnesses.
4.
Statements from the discoverer(s) of loss event.
5.
Complete perimeter photographs and/or video before site is disturbed.
Progress 'shots' should be taken during the course of the investigation.
6.
Arrange for the insured to be present. Be sure you know who (?)
your named insured's are on the policy. Consent and/or authorizations
should be signed for each of the following:
a) Authority
to access the premises and to remove any evidence that relates to
the origin and cause of the fire.
b) Authorization
to board up the premises to protect the property from further loss
or damage.
c) Authorization
to provide security and protect the property. Entry to property
should be logged and controlled.
d) Authorizations
to interview the insured's accountant, bank officials, etc. to obtain
financial records.
7.
Leases and insurance records.
8.
Building plans from municipality.
9.
What other 'paper' documents are available through public access?
(Mortgage, land title, tax rolls, court records etc.)
10.
All discussions with the insured should be properly recorded.
This can be done by video or audiotape.or.reduced to writing.
Effective use of open-ended questions should be considered.
11.
All interviews and discussions should be recorded in an effective fashion
using good note-taking techniques.
12.
Give thought to when (?) where (?) and who (?) will conduct a detailed
recorded interview of the insured. Have you an interview plan
in place with a template of pre-determined questions?
13.
Determine other 'interested parties' to the determination of cause?
Consider what 'agreements' might have to be struck to allow for a joint
investigation. What is going to happen with the removal; storage
and/or testing of significant evidence from the loss site.
14.
Consideration of your civil laws regarding 'spoliation of evidence'.
This should be done in concert with approved legal counsel.
15.
Entrance plans for tenants outside the area of loss should be discussed
and agreed upon.
16.
A lead investigator should be in place early. A site meeting should
set out the documentation plan. This plan should include complete
photographing/ videotaping of the scene before any overhaul is completed.
Attention should be given to doors, locks, windows, and alarms where
applicable.
17.
Site security is of prime importance and has to be coordinated with
the public authorities. A site log should be considered to document
who and what is going in and out of the loss site. This may become
an important issue later if allegations are made about spoliation of
evidence.
18.
The loss adjuster should ensure that he is aware of any insurance contract
provisions that might contain "warranties or conditions". These
might require the policyholder to maintain his alarm, sprinkler or burglar
systems. If a loss occurs and these systems were not maintained
in accordance with the policy terms and conditions, it could preclude
payment of the entire claim.
19.
Notify the insurer of the first wave of information and establish clear
communication methods on a 24-hour basis.
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CASE DEVELOPMENT
A number
of plans evolve out of the initial scene attendance.
1.
The investigation into the cause of the fire will be a continuous process
that will eliminate or confirm investigative leads. In determining
the truth behind the cause of the fire the adjuster will be able to
determine the impact on insurance coverage or perhaps this might lead
down the path of subrogation. This latter path could expose a
product failure that could result in a product liability investigation
for a major manufacturer.
2.
The control and investigation into the damage issues will evolve.
Part of this plan will deal with damage mitigation issues as well as
with the physical restoration of the premises.
3.
The process of documenting and calculating the business loss will be
driven by internal and external accountants, consultants, and adjusters.
Effective
case management of the loss revolves around developing a "critical path
plan". This plan can include:
4.
Members of the investigative team should document and control damage
issues relating to the contents, equipment and/or tool components of
the loss.
5.
Other members of the adjusting team may document specific damage issues
to the building as it relates to the area outside the area of origin
of the loss.
6.
The lead fire investigator needs to be making a number of early recommendations:
a)
What is the air quality in the building? Is it safe for access?
b)
What structural safety concerns should be addressed?
c)
Are temporary lighting and heat required?
d)
Special equipment needs to overhaul scene and/or began reconstruction.
e)
Site security controls?
f)
Debris removal?
7.
As the dig evolves, further consideration of subject matter experts
should be given. These experts may include the following fields:
electrical, mechanical, HVAC, metallurgical, chemical, toxicology, materials,
environmental, etc.
8.
While your investigation unfolds, consideration should be given as to
how the insured might mitigate his claim with respect to issues of:
9.
Electronics restoration.
10.
Document restoration.
11.
Magnetic media recovery.
12.
Interview teams should be briefed to ensure there is a clear understanding
of specific areas to be covered in the interviewing process.
These teams
will be directed to interviews by the public authorities.
These interviews
will be of witnesses, tenants, public officials, etc. Interviews
should be taken of witnesses, tenants, public officials, etc.
13.
Investigative material should go back to the group leader who will accumulate
this information. If the case involves arson, the material should
be segregated into the Arson Triangle (Motive, Means and Opportunity).
Many of the same dynamics will apply in cases involving subrogation.
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Business
Continuity Issues
On any major
commercial loss, a document trail must immediately unfold. This
is critical in evaluating the business loss with a view to obtaining an
early advance payment for the policyholder. Some of the documents
might include:
1.
Historical data on the business. Copy of organizational chart
outlining internal and, perhaps, external reporting functions.
This information may be quickly available through promotional brochures
or perhaps the corporate web site.
2.
Place(s) and/or factory(ies) where the business is carried out.
3.
Copies of financial statements and budgets for the past three years.
4.
If available, copies of monthly financial statements for previous two
years.
5.
Sale Information (turnover).
a) Historical
volume data by day, month and year.
b) Size/
type of market for product line(s).
c) What
is the market mix? Countries? Product type?
d) What
are market conditions?
e) Obtain
copy of customer lists. Review impact of loss on top ten customers.
f) Contractual
arrangements that impact sales. e.g. force majeure
g) Inventory
levels by product group.
h) Methods
of tracking inventory.
I) Consider
seasonal issues that might impact the sales cycle.
6.
Major changes made in recent years and/or proposed in the future:
(a)
Types of production.
(b)
Sales policy.
(c) Expansion
or reduction in the number of lines.
(d)
Expansion or contraction of factory(ies).
(e) Formation
of subsidiaries.
7.
Patents or trademarks to protect principle products.
8.
A close review must be done of the operating expenses of the business.
This might include:
a) Historical data on costs covering three years of monthly data prior
to the loss.
b) Variable
cost savings.
c) Consumable
supplies, services and materials.
d) What
expenses do not continue as a result of the loss. Examples are
advertising, depreciation, utilities, miscellaneous supplies and expenses,
repairs and maintenance, wages and benefits, rent, property taxes
(rebate) etc.
e) Are
the loss-related expenditures being captured in separate loss-related
general ledger accounts apart from normal operations?
f) Were
any cost inefficiencies incurred as the facility was brought back
online after an outage?
g) Need
to understand nature of loss expenditures in order to differentiate
between extra and expediting expenses.
It is
critical that any analysis you are performing is keeping a close eye
on the relationship between the costs to reduce the loss and the turnover
of the business.
It is
also important to review the benefits of any non-recoverable continuing
expenses when you do your analysis of the numbers.
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Business
Interruption Considerations
Again, there
is a lot of documentation to gather, but obviously you are dealing with
a "contract" of insurance and a close review of the policy wordings is
critical. In particular is whether you are dealing with a 'Gross
Earnings" policy as opposed to a "Profit" policy.or.perhaps a manuscript
wording that provides unusual coverage. All of the information that
we have itemized as "business continuity" issues will form the basis of
determining the indemnity dollars that are available to the policyholder
in the event of a loss.
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CONCLUSION
This paper
gives you a snapshot into the many action items that face a loss adjuster
on a major claim. Teamwork is essential in accomplishing what needs
to be done. How would your selected loss adjuster or expert do if
they were "tested" on their action plan for a major hit? Have they
pre-planned? Will they answer the bell promptly and efficiently?
Are they aware of all the issues they need to consider to protect your
interests? Do they have the leadership skills to "take control"
and exercise appropriate case management skills to produce effective results?
The common
vision that we all should have is that if a major event happened the response
would be quick, responsive and effective. Consider the words of
George Bernard Shaw:
"People
are always blaming their circumstances for what they are. I don't
believe in circumstances. The people who get on in this world
are the people who get up and look for the circumstances they want.and.if
they cannot find them.. they make them!"
To repeat, "Proper Planning Prevents Poor Performance".
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