Page 2: Avoiding Insurance Disputes
Loss Assessment
In co-operation with the appointed loss adjuster, a complete and accurate investigation into the circumstances and causes of the incident must be carried out. Because the loss adjuster is appointed to protect the insurer's interests, and on-site personnel may not appreciate the insurance implications of what is said to them, the assured should involve someone knowledgeable about insurance claims in the investigation, to protect their interests by ensuring that all pertinent facts are established accurately.
In equipment failure and machinery breakdown claims, investigating the cause of failure is often left to the manufacturer. It is unwise to assume that they will always provide a completely impartial evaluation. Therefore an appropriate independent specialist should always be appointed, either jointly on behalf of the claimant and insurers, or solely on behalf of the claimant. Joint appointments help to avoid the delays that can be caused by disputes among experts.
A well-recorded, thorough and detailed survey of the loss and damage, carried out at the first opportunity and jointly signed off by the representatives of both the assured and the insurer, will avoid many difficulties that can arise in disputes over the facts of a claim. Without proper records, it may also be difficult to identify or justify all the actions taken to mitigate the loss.
Significant increases in claim estimates have been known to cause serious damage to insurer relationships. Regardless of whether a claim involves property, business interruption, control of well or other classes of insurance, the full extent of loss may not be evident from the outset of the claim. So claim estimates should always be qualified, and adequate contingencies should be included; it is generally advisable to present a range of figures, rather than a single amount.
The policy wording should be considered carefully when determining or estimating the recoverable loss. Particular attention should be paid to the ‘Basis of Indemnity' and exclusion clauses. Certain expenditure, such as expediting costs, increased operating expenses, standby costs, etc., can be the subject of close scrutiny and debate.
When specific accounts are set up to capture claim-related expenditure, costs are often misallocated. It is important to ensure that all recoverable expenditure is identified, and that non-recoverable expenditure does not lead to unrealistic claim estimates.
In order to demonstrate ‘fitness for purpose' and comply with statutory and regulatory safety requirements, it may be more cost-effective to replace components than to repair them.
When replacement versus repair decisions are taken, the justification for doing so should be properly documented.
