Page 4: Avoiding Insurance Disputes
Substantiation of a Claim
The efficient collection of claims data is essential to obtaining prompt payments on account and final settlement.
Loss adjusters need more than a schedule of costs and a bunch of invoices to substantiate a claim. Detailed technical documentation is required to define the full extent of damage and to demonstrate that the repair specifications correspond to what is necessary to remedy the insured damage on a cost effective basis. Commercial and contracting documentation will also be needed to show that the remedial costs have been incurred in an efficient manner.
It is quite reasonable for an assured to conduct planned modifications or maintenance work when equipment or facilities are out of service because of an insured loss. However, the time and costs involved in this ‘opportunity' work should be identified and separated from the recoverable costs.
Gathering the information needed to substantiate an insurance claim can prove difficult, because the project and operations personnel from whom it is needed generally assign a lower priority to providing claims data than they do to their immediate functional responsibilities, oriented towards safety, project deadlines and performance targets. As time passes, memories fade, and collecting good data can become more time consuming. In this activity, it can be helpful to use additional external resources to put together a more timely, comprehensive and reliable package of relevant claims documentation.
The sooner procedures are put in place to capture the necessary information, the easier the collection process becomes. These procedures should enable the capture of detailed information about direct employee costs, as well as the more readily available costs of purchased materials nd contracted services.
Significant increases in prices and unit costs can give rise to insurer concern. It is important to provide sufficient information to substantiate post-loss increases, and to show that the data relates to the same quality of product or service as that in use prior to the loss.
The assured is obliged to take all reasonable steps to mitigate the claim and to reinstate their facilities in a reasonable and cost-effective manner. Documentation needs to be provided regarding all loss mitigation activities, all remedial operations and any constraints that have influenced the measures adopted. Loss adjusters should be given the opportunity to comment on remedial actions before they are implemented, to avoid arguments in hindsight.
