Vetting Your Vendors

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When your property suffers a loss, you enter the insurance and property loss marketplace to pursue your claim.  This world is filled with professionals who provide wide-ranging services, many of which you need.

How to choose?

Take, for example, board-up companies.  In most cases, you MUST hire one if you just had a fire.  On what basis do you pick amongst the competing businesses?

It’s not easy.  There might be 10 board-up companies in your area, and each one will vie for your business, sending solicitors to your property immediately upon hearing about the fire.  You are required by your policy to secure the property and prevent further damage after the loss.  They know you have to pick one to carry out what is essentially required work.  They canvas the area and hope their representative makes a favorable enough impression that you pick them.

These vendor selections must happen right away.  First-hand experience is important, but so is the personal connection you make with the individual vendor.

Let’s take a quick look at the types of vendors you’ll encounter, which ones are indispensable, and how you can evaluate them for maximum satisfaction and effectiveness.

Board-Up Companies

Boarding up is mandatory because, under your insurance policy, you have a duty to protect the property from further damage.  This means more than just preserving the site for the required insurance investigation – it also means keeping out trespassers, vandals, vagrants, etc.

Tips for vetting:

  • Ask if they plan to board up second-floor windows.  This is often unnecessary and can lead to a padded bill for you, as well as a difficult time for investigators who rely on natural light.  Pick the vendor that isn’t looking to expand the project beyond what is necessary, and do only what the municipality requires.

  • What does the roof need?  Sometimes it doesn’t even make sense to put up a tarp if the area below is completely ruined. The vendor should understand that and have a point of view that recognizes this.

  • Will the vendor simply board up the windows, or are they ‘through-bolting’ them?  Standard industry practice favors the latter.  Otherwise, it’s very easy to tear away plywood and gain entry.

  • What will the cost likely be?  If the interior isn’t going to be saved, the vendor should only do the minimum required to secure the premises.

  • Ask for proof of insurance!

Restoration Contractors

Restoration contractors come into the property after a fire or water loss and mitigate damage by stabilizing the building in the following ways: extracting standing water in the basement; pulling down ceilings or supports that are about to collapse; preventing mold-mildew by pulling up and removing all heavily damaged carpets; cleaning up shattered glass outside; “dropping” equipment for drying or deodorization purposes.  Their goal is to stop any additional damage from occurring.

Shortly after taking these steps, the restoration company will examine how the building reacts and determine, for example, which areas still have high levels of moisture.  As experienced public adjusters, we hold the firm view that these remediation companies – especially in the beginning – should only be doing demo on areas that won’t dry on their own.  If a hardwood floor gets wet and buckles, there’s no reason to pull it up until after the insurance adjustment takes place.  But if a wall reads 100% wet and won’t dry, the restoration contractors should demo that area.  Remember – the insurance company wants to examine the damage as part of its claims evaluation.

Their top job is to dry things out so things don’t get worse and so the place is construction-ready ASAP.

Tips for vetting:

  • Ask your public adjuster for a recommendation.

  • If you don’t yet have a public adjuster, call your insurance company or agent and have them send their preferred restoration company.

  • Not all remediation companies are the same, so pick wisely.  Even different franchise offices of the same national company will likely provide differing levels of service.

  • Make sure they perform moisture mapping immediately.

  • Address environmental issues.  Asbestos testing is mandatory, for example, but other tests may not be required.  Remember that these vendors are businesses and are happy to provide any services they can bill.  Limit them only to those you absolutely need.

  • If anyone is performing any demo, be sure they get a building permit and an asbestos survey.  The town can stop any remediation work if the company does not get the proper permits!

  • Demand an experienced restoration company that appreciates the investigative importance of preserving (i.e., avoiding altogether!) the area where the fire started.  The origin area is where the investigation occurs, and any entry or disturbance by a restoration vendor could sully an otherwise “clean investigation” and possibly prejudice the insurance company’s right to subrogation - which could harm your rights under your policy.

  • Note: At this point in the claims process, the insured should sign authorization forms for emergency services only.

 Stay tuned for Part II of “Vetting your Vendors” – focusing on dry cleaners and movers…


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

The First 24 Hours: How to React Immediately After a House Fire

Fire!!!  Now what?

It’s not quite that sudden a shift when you suffer a major property loss – but it’s close.  What actually occurs during the first few hours following the news that your house is on fire?

Here’s a quick timeline of the first 24 hours – including likely events and decisions you should know about to help prepare yourself to face such a situation.

Choose Board-up and Restoration Vendors

The fire trucks come and douse the flames.  Then they leave.  What do you do?

Well, right off the bat you will have multiple solicitations from both “board-up” and “restoration” companies.  These companies are important – they will secure the property and physically stabilize the building. You’ll probably also have 4 or 5 public adjusters pitching their (indispensable!) services.

[Note: in two upcoming posts – “Vetting the Vendors” – we will provide tips on how to evaluate the various contractors and other service professionals who solicit your business. Watch for them!]

First thing first: pick one of the board-up companies and one of the restoration companies based on relevant factors (trustworthiness, personal connection, online reviews, etc.).  Both of these companies will help you fulfill the requirement within your insurance policy to protect the home from further damage.  The board-up crew will secure the premises, and the restoration crew will perform remediation – likely pumping out the water to mitigate against additional structural and other damage.

Be careful: Don’t let any of these vendors push you to commit to any long-term obligations. These vendors should address their respective immediate priorities, and you can focus on longer-term decisions later.

 “Direction of Pay” agreement

Whichever board-up company you choose will present you with a “Direction of Pay” agreement.

Before you sign this agreement, note that you are agreeing to have them do the immediate work and nothing more.  In most cases, the insured will encounter no issues at this stage and the board-up company will duly negotiate its invoice with the insurance company.  Nonetheless, you should only agree to pay the rates that the insurance company will pay.  

It's worth noting that most board-up companies simply want to help the homeowner and do a good job – not take advantage of them.  If you do have a bad feeling, it’s a “Vetting the Vendors” issue.  Taking these steps enables your insurance company to pay the board-up company directly and to negotiate the bill should there be any discrepancies.  This is very important!

Immediate Next Steps

You’ve hired board-up and remediation companies, and started the PA selection process.  What else can you do?  Here is an outline of activities to set your expectations:

  • Report the loss to your insurance company.

  • Hire a Public Adjuster (PA)

  • Retrieve valuables – Go into the house and get your silver, cash, firearms, jewelry, and important documents.  Take them out and secure them in a safe place.  Leave behind any prescriptions, food, alcohol, etc.  Ingest nothing that has been affected by the incident.

  • Touch nothing in the area where the fire/loss started.  Always let the professionals manage it – otherwise you breach your opportunity for potential subrogation.

  • Make arrangements to install a lock box on the front door.  That way all the vendors can easily get in.

  • Book lodgings – Where to go?  Where to stay?  Rent a hotel for at least 2 weeks.  Make sure it has a restaurant on-site and can accommodate your family and pets.

  • Purchase clothing to last a few days/weeks.  Keep all receipts for anything purchased.

  • Refill any prescriptions you left behind, and call your physician if necessary.

  • Meet the insurance adjuster – make an effort to meet him/her as soon as they can get to the site.

  • Coordinate with the appropriate insurance company representative who will want to inspect the property right away.  This insurance company representative will come out, take photos of the loss, and possibly provide (non-committal) advice.

Prepare for the coming weeks

This is an emotional event for you, to be sure.  But for the insurance company, this is about money, not emotions.  You must recognize that everyone is looking at this from a financial perspective – except for you.

After these first 24 hours, the process really kicks into gear.  The insurance company commences its formal investigation, and the estimation process gets underway.

Stay tuned for upcoming posts providing detailed advice on vetting a vendor and how to best manage other steps in the process!


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

Want To Speed Up Your Claim Process? Then Slow It Down!

When it comes to managing a successful insurance claim process, everyone wants a quick resolution. Identify the damage, submit the claim, get your check – fast and easy, right? Not always. Sometimes, in our rush to speed things along, we miss some key steps early in the process – opportunities to facilitate or expedite the claim process.

Like we always advise: “If you want to speed up the claim process, then slow it down!”

We love this advice so much, we drafted an entire blog article around it. Originally posted in August of 2018, the advice in this article remains relevant. To give you a quick taste of this enduring advice column, we decided to run it again. Enjoy!

Are you just beginning the claim process?  If you’ve suffered a loss and you’re making a claim under your homeowner or commercial insurance policy, you’ll want to speed things along.  Want a tip for speeding up the claim process?

Slow it down!

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As public adjusters, we run into situations where the insurance company moves quickly to clean up a damaged house or office after an event such as a fire or a flood.  The insurance company adjuster thinks it's helpful to go in and immediately remove all the damaged furniture and personal belongings – even the fixtures.

This is NOT helpful to your claim.  And in the overall scheme of the claim process, it will slow things down considerably.

First of all, you will want a complete inspection “take-off” of the building damage and inventory of the personal property.  If the insurance company adjuster hires a remediation team to strip out the fixtures “full gut”, you will lose all evidence of those custom countertops, the hand-crafted trim, and the grasscloth wallpaper that was specially ordered by your interior designer.

The same rule applies to your personal property.  Don’t throw away that sofa – it was purchased from a high-end decorator and was made with imported fabric. If you don’t get a scope and price agreement with the insurance company for this unique piece of furniture, you may recover only the value of a department store model.

Think about it this way: after a fender-bender, you don’t take the dents out of your car until you know how much money you’re getting.

Preserve the evidence and get quotes for EVERYTHING.  Only then should you make decisions about what gets tossed in the dumpster.

If you have a public adjuster – and you should – let them prioritize the buckets of coverage you will use.  Do you have enough insurance to pay a restoration company to “gut” the entire house and then rebuild?  They might charge two to three times the amount another contractor will charge.  That payment gets taken out of your coverage, which is a limited pool of funds.  If a huge chunk gets gobbled up by remediation – or worse, to send old and unwanted clothing to the dry cleaners – it can’t be used in other aspects of the process.  After your coverage runs out, you’re personally on the hook for related expenses.  These are issues where you’ll want to get advice from your public adjuster as one wrong decision could be detrimental to the claim.

You’re not properly managing the claim process unless you know – and endorse – everything. Every single activity and cost associated with your policy needs to be understood and signed off on by you.

If you’re not effectively managing your claim, then your claim is managing you.  Don’t let the process run things for you – slow it down.  Halt all activity until you have a moment to get informed about everything that’s happening.  Get bids and make informed decisions.  Once you have pulled in the reins, you can quickly choose the steps you want to take.  

Here are some tips to help you manage the claim process the right way:

Know Your Coverage Limits – Remember: this is a zero-sum game. The coverage limits in your policy may look adequate, but they can add up very quickly. You are personally responsible for all costs in excess of that amount.  And keep in mind that every dollar you spend on one item leaves one dollar less for another, perhaps more helpful, ancillary service.

Do Your Due Diligence – Talk to your entire professional services team for guidance on what you need and how to proceed.  This team includes your personal attorney, your insurance agent, and your accountant – anyone who has a professional interest in your well-being.  Get recommendations on what services you need and who to hire.  This is a good time to get a list of qualified public adjusters, and to start vetting them to determine the right fit for you.

Understand the Costs – Before anyone else starts spending your money, ask questions about the services they’re providing.  Insurance agents and their adjusters often contract with remediation services to clean house very early on in the process.  This expedites the claim for them but can run counter to your own claim interests.  Remediation services can be very expensive – did the insurance adjuster compare multiple bids?  The remediation team isn’t worried about making a list of customized cabinets and high-end furniture, which you will need to optimize your own claim.  They just want to gut the house and move on to their next job.  Before you know it, your entire coverage limit has been gobbled up by an expensive remediation company.  And only after the fact are you realizing that they have undermined your ability to itemize lost personal property.

Itemize and Inventory – We touched on this above.  Don’t let anybody take anything out of your property until you have compiled a comprehensive list of all personal property.  This is where a public adjuster can be invaluable.  If you spent $10K on a designer couch, you want to be able to demonstrate that in your claim.  You can’t do that if it hits the dumpster before you arrive (at which point the insurance company will offer you $2k for it).  Do you have custom cabinets?  You must itemize them or risk losing out on the claim.  Granite countertops are pricier than Formica – that needs to be accounted for before they are hauled to the dump.

Mitigate and Protect as Warranted – As the insured, you do have a responsibility to mitigate and protect your property.  So, don’t let your “slow it down” mantra result in a 6-month work freeze.  We warned you against runaway clean ups, but sometimes it’s appropriate for remediation and other construction specialists to do demolition right away.  If an area won’t dry on its own, that area should receive priority demo attention before it buckles or collapses.  As long as the remediation team runs it past you and your public adjuster, it’s ok to let them proceed with demo that mitigates against further damage.

Recognize a “Dead Loss” – Sometimes a property is a total loss and a full demo is in order.  You still need to protect your interests in this case.  You or your public adjuster can get bids to demo the entire property if this is necessary.

If your house or business has a fire or some other catastrophe befalls it, you will be cast into a claims system that can rapidly spin beyond your control.  Managing your claim the right way means slowing down the process to carefully choose the steps you want to take.  This will allow you and your public adjuster to document and strategically use the insurance funds coming your way.  By understanding the process and all related costs, you are more likely to get the best return for your coverage.

And remember:  If you’re not properly managing your claim, then your claim is managing you.


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

Why Exactly Do We Celebrate Labor Day?

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Why exactly do we celebrate Labor Day?

As you’re packing up the car this weekend, heading out to the beach or maybe a country retreat, you may find yourself wondering: why do we celebrate Labor Day? What does it represent? How did we get started on this holiday?

Here at SMW, we love us some long weekends – no matter what the origin. But we recently asked ourselves some of the very same questions, and we simply did not have any answers. So we did some research. And this is what we found – we hope this makes for some enjoyable light reading as you embark on your weekend adventures!

What is Labor Day?

Labor Day is a uniquely American holiday – it celebrates the American worker. This year’s Labor Day – on September 2, 2019 – marks the 125th anniversary of Labor Day being celebrated as a national holiday.

Why do we celebrate Labor Day?

Observed annually on the first Monday in September, Labor Day was an idea borne out of the U.S. labor movement. Labor leaders originally envisioned this annual holiday as a dedication to the social and economic achievements of American workers. This includes recognizing the many contributions workers have made to the strength, prosperity, and well-being of the United States.

When was the First Labor Day?

The first Labor Day holiday was celebrated on Tuesday, September 5, 1882, in New York City. And on June 28, 1894, President Grover Cleveland signed a law making the first Monday of each September a national holiday.

How do Bostonians pronounce Labor Day?

Layyyba Day

Enjoy the long weekend everyone!


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

Why Hire a Public Adjuster?

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If your home or business suffers a property loss, you must immediately make a series of critical, but difficult, decisions. Amidst the chaos of a property loss, perhaps no decision is more important than hiring a public adjuster (PA) to guide you along the claims process. 

The bottom line is that, after a property loss has occurred, you need a public adjuster. Most home or business owners find themselves in a completely foreign situation and become overwhelmed dealing with the loss and the complex insurance claims process. Where else can a policyholder turn for true expertise and advocacy in the area of claims processing? 

What about your insurance agent? The insurance agent’s job is to put the insurance policy together, and report your loss to the insurance company. Their professional expertise is supplying coverage – not preparing detailed estimates of the damages for the insurance company. Good PAs will always work closely with a client’s insurance agent, but maintain a distinct role in that the PA represents the client – not the insurance company.

What about the insurance company adjuster? Insurance adjusters work on behalf of the insurance company. Most insurance adjusters work hard to be fair to the policyholder, but they also want to save the insurance company as much financial exposure as possible. After all, they owe their allegiance to the insurance company who pays them a salary. PAs, by contrast, are hired to represent the insured’s interests. From beginning to end, the PA will handle prep work, claims negotiations and settlement to ensure that the policyholder gets everything they’re entitled to under their insurance policy.

What is a PA exactly?

A public insurance adjuster is a professional who is licensed, trained and experienced in claims processing – and who works exclusively for you. A public insurance adjuster’s only stake is in protecting your interests and making sure that you receive what you are entitled to under your insurance policy.

Simply put, the PA devotes personalized attention and industry expertise to facilitate and expedite claims processing. A good PA will understand every detail in your insurance policy, know the entire claims process inside and out, and have ongoing and long-standing relationships with the various professionals and consultants that the insurance company retains.

Here are a few additional traits you should require from your PA:

  • Professionally trained and licensed by the state

  • The same people who prepare your claim should be involved from the beginning of the claims process to the end of it.

  • Fluent in insurance coverage, damage evaluation, and claims preparation

  • Assists and advises on the application of your insurance coverage

  • Works directly with the insured with undivided loyalty

  • Negotiates settlements with the insurer and secures the most favorable recovery

  • Shifts the burden and provides peace of mind!

When to hire your PA

Even if you understand the need to hire a PA after a property loss, it can be hard to pull the trigger on picking one.  Several PAs will directly solicit an insured at the time of a loss. It’s important to avoid making a rash decision on retaining a PA until you have processed the initial shock of suffering a property loss. Take a breath and make an intelligent decision about which PA to retain because you want the right professional managing what for you is a major asset.

At the same time, you need professional direction from the outset of this process. So, after the initial turmoil of suffering a major property loss, get back to business. Get recommendations from your professional network, get the board-up restoration services in place, and find a PA who is a good fit for you and your claim.

Remember, PAs have relationships with the insurance adjusters and other players, and understand how to navigate these interactions. A good PA will assert control early in the claims process, making sure your interests are primary and protected. This way, the process favors you and not the other stakeholders.

The value of a PA

The insurance adjuster’s job is to investigate the incident and report back to the insurance company. Insurance adjusters formulate their opinions on the amount of the loss – the “reserve” – decisions that tend to be made quickly and with limited information.  An assessment by an inexperienced insurance adjuster, unmitigated by a PA’s counter-influence, can negatively impact the tone and substance of your entire claim going forward.

When you and the representative from the insurance company meet, it’s CRITICAL to have a PA on hand!  Otherwise, the insurance company will take the first step, and you’ll be playing catch up, reacting to moves made by the insurance company.  The PA can do the talking on your behalf.

Hiring a PA is a decision to have a true partner – someone to help navigate the issues and advocate on your behalf. A PA will get you the best possible recovery so you can get back on track – whether it’s your business or your life.


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

Adventures in ITEL: When Independent Analysis Contradicts Your Insurance Claim

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When you suffer a property loss at your business or home, your insurance company sends one of its adjusters to evaluate the damage.  This insurance adjuster makes a preliminary determination of the cause of the loss and what your payout will be.

When the property damage claim involves items such as hardwood flooring, carpeting, siding or roofing, an insurance adjuster will often send a sample of the damaged material to an independent testing lab for analysis.  The goal of having such a lab test the materials is to produce accurate pricing for the lost items and to find the best available match for replacement materials.  After all, this information is the basis of a fair settlement.

In our experience as public adjusters, this analysis typically happens at ITEL, the nation’s leading independent testing lab.  We most often encounter ITEL on losses involving large areas of carpet.

Why ITEL?

Xactimate – the software system that serves as the insurance industry’s standard program for estimating the cost of repairs and reconstruction for residential and commercial structures – offers only a few options for determining replacement costs for certain materials.  In the case of carpets, for example, these options are limited to one of four “grades”: Standard, Average, High and Premium.  Because costs vary so significantly between grades, insurers increasingly elect to use ITEL rather than guess which grade is most applicable to the damaged carpet involved in the claim.

How does ITEL function?

The insurance adjuster will take a small sample of one of the damaged products – e.g., carpet – and then sends it to ITEL for an analysis of materials and cost.  ITEL sends back the test results within 24-48 hours after conducting the tests.

And this is where things get interesting.

 As PAs, we often see a very large discrepancy on carpeting costs.  The insurance adjuster might send damaged carpet to ITEL that has a manufacturer’s logo stamped on the back, and ITEL will send back an analysis based on a product made by a completely different manufacturer.  We also see situations where we send in a claimant’s wool carpet, and ITEL responds with the conclusion that the carpet is actually not wool at all.

What the heck?!?

Believe it.  In upcoming posts, we will provide real-world examples of ITEL analyses that are totally out of whack with our own assessments, and how we resolved these seemingly impossible differences on behalf of our clients.


BRYAN HOLTZMAN

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Bryan is Vice President of Swerling Milton Winnick, and has more than 15 years of experience helping businesses and homeowners navigate complex insurance claims. He specializes in building estimates and policy interpretation.  


 


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

Homeowners Beware: A Tree Falling On Your Roof Is Different Than A Tree Falling In Your Yard

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The tornado that swept through Cape Cod and other parts of Eastern Massachusetts on July 23rd caused some serious property damage. The storm took down a lot of trees, leaving many homeowners with pressing questions about their insurance coverage and possible solutions.

Here are some of the top tips we have been sharing with these homeowners:

Take a look at your homeowner’s insurance policy – it’s likely the standard HO-3 policy, with whatever endorsements and deductibles you elected to include in the most recent renewal discussion with your insurance agent.

There are two issues with a tree that has fallen on your house: 1. Getting the tree off your house; and 2. Disposing of the tree once it’s on the ground.

Your HO-3 should provide coverage for virtually any reasonable expense related to taking the tree off the structure and getting it to the ground.  Once it’s on the ground, however, coverage for removal stops.  Now you’re looking at “debris removal” coverage to dispose of the on-the-ground tree.

Your policy likely only covers $1,000 total for such debris removal.  It’s important to note that that $1,000 covers the total cost of removing all trees that are on the ground – regardless of how many there are.  We recently had a homeowner call us with 25 fallen trees on the ground, and tree removal services were looking to charge $500 per tree for removal.

That quickly becomes a big number.

If you have trees on your house or in your yard, give Swerling Milton Winnick a call.  We can help you maximize your coverage for such events.

 


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

Business Interruption Coverage: Part III - Real-World Examples of How it Applies to Your Business

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In Part 2 of our multi-part series on Business Interruption (BI) coverage, we offered some real-life examples of BI coverage at work.

To continue this examination, Part 3 of this BI series looks at a uniquely complex aspect of BI – “Cost of Goods Sold” – as an additional scenario business owner might encounter in their BI coverage.

Cost of Goods Sold

Businesses that sell products or goods have a different format for their financial statements than service businesses, i.e. law offices or consultants.  Product-selling businesses crunch profit numbers by deducting the cost of the goods sold from the sale price.

What exactly is the “cost of goods sold” to a business?  It’s the cost of the raw materials or finished goods that the business sells to the end customer.

In a restaurant, the goods sold are food; in an ice cream store, it’s ice cream and cones.  For retailers, clothing represents the primary cost of goods sold.

For BI purposes, the calculation accounts for what the sales should have been.  From there, the accounting should reduce by the Cost of Goods Sold that the business is not incurring.  After all, if you don’t make the sale, you don’t have the cost of the product.

It’s helpful to look at this in a product scenario.  Suppose a manufacturer makes charcoal grills.  The manufacturer might have one hundred grills in stock, or even one thousand.  But for clarification, let’s look at the cost of a single grill which retails for a price of $1,000.  Let’s say the cost of all the materials to produce this grill totals $400.  So, for $400 spent, the retailer hopes to profit by $600.

In the event of a property loss, the business owner has coverage for the grill under two different provisions – Personal Property and BI.  The insurance company will first pay the business owner $400 under the personal property coverage of the commercial insurance policy.

Note: If you endorse your policy to value your inventory at selling price rather than at cost (which is what you will get under the typical BOP), the insurance company can serve as the buyer for your ruined inventory.  How?  With the Selling Price Endorsement in your BOP, the insurance company will pay you as if they were the customer for that damaged inventory.

The remaining $600 is the basis of the BI claim.  BUT: the business owner will not collect for the full remaining $600.  Why?  Remember the definition of BI coverage: it restores you to where you would have been had the loss not occurred.

Stay tuned!

We hope this additional discussion of BI helps your understanding of this important insurance provision.   In our next installment, we’ll cover the “Saved Expenses” portion of BI.  Watch for it!

 

 


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

While Vacationing This Holiday Weekend, Will Your Homeowner's Personal Property Coverage Go With You?

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If you’re a homeowner, you might be going on the road this Independence Day, packing up the car with expensive outdoor gear for camping, grilling and enjoying water sports.  If your adventure results in damage to any of this personal property, don’t worry; you’re probably covered.  How?  Under the Personal Property coverage of your homeowner’s policy.

That’s right: under the Special Homeowner’s Policy and other standard homeowner’s policies, your Personal Property coverage travels with you – even when you’re far from your home.

Let’s say that again: anywhere in the world you might go, your homeowner’s policy provides coverage when your “stuff” gets damaged by a covered cause of loss.

Suppose your 4th of July trip involves hauling a packed station wagon full of expensive fishing and camping gear to Cape Cod.  You’re staying in a small cottage that your friend owns.  While you’re grilling, some kids shoot a bottle rocket into the dry brush next to the cottage.  A fire starts and burns down the entire cottage – with all your expensive stuff in it.

Your friend’s homeowner’s policy doesn’t have adequate personal property coverage.  What about all the gear you brought with you?

Not to worry!  You’re covered.  Call your insurance agent and report your loss.  Inventory all of your damaged items, and you should be on your way to collecting for your loss – thanks to your homeowner’s policy’s Personal Property coverage.

Hopefully you won’t have to activate this lesson.  But it’s good to know!

Happy Independence Day from SMW!

 


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

Business Interruption Coverage: Part II - Real-World Examples of How it Applies to Your Business

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In one of our recent posts, we explained what “Business Interruption” (BI) coverage is and how it works.  Our readers responded with thanks – and with additional questions.  While they understood the importance of BI – how it makes you whole, and restores you financially to a position you’d be in if you had not suffered any loss at all – they wanted more specifics.

We had several requests for real life scenarios to which BI applies.  So, we decided to put together a couple of examples of BI coverage at work.

Projected Revenue/Business Earnings

You have a sense of what your business will earn on a month-to-month basis.  But how do you explain that to an insurance company that isn’t familiar with your day-to-day operations??

Historical sales are one possible way – but they don’t often paint the whole picture.  There are usually many other factors besides historical sales that must come into account to show what you would have earned during a period when your business operations are interrupted due to a property loss.

Take a pizza shop owner, for example, who has made several business improvements: he increased his menu options, installed additional seating in the shop, and added a breakfast menu to his existing food options.  All of those improvements affect what his sales would have been during the BI period.  If an insurance company accountant reviews the books and sees a declining trend, that accountant will naturally apply that declining trend to the financial projections.

The business owner, on the other hand, already saw that declining trend and took steps to reverse it.  Because of the property loss, however, the business owner won’t have the chance to enjoy that turn-around in the real world.  The revenue spike that the business owner would have enjoyed (because of the improvements made) needs to be accounted for.

Another good example is a restaurant that had a bad year, but secured an excellent promotional appearance on a premier dining show - say Phantom Gourmet - just before experiencing a big fire.  The Phantom Gourmet appearance would reliably have led to a big spike in revenue – but it didn’t happen because of the fire.

Left to most forensic accountants hired by the insurance company, the restaurant would not receive the benefit of the doubt.  But a public adjuster would take steps to account for the spike the restaurant would have had.  The PA can: look at sales at other locations; look at similar periods of time in the past (e.g., 4th of July in Cape Cod when it falls on a Wednesday, which historically delivers huge revenue boosts to restaurants); or talk to trade organizations that have supportive data.

To read about an additional example of BI coverage in a real-world scenario, please see our upcoming post on “Cost of Goods Sold.”


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Mindi Labella

Mindi specializes in commercial losses, business interruption, extra expense and time element claims, and draws on her business background to advocate on the clients’ behalf.


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

2019 Annual NAPIA Meeting

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June 12th kicked off this year’s Annual Meeting of the National Association of Public Insurance Adjusters (NAPIA) in Napa, California.  There to congratulate new President, Jeff O’Connor, were SMW’s Diane Swerling (NAPIA’s 2016 President), and first-time attendee Bryan Holtzman.  We were happy to visit with the exhibitors to learn about the cutting-edge technology in the field today, and enjoy the local wines at the Hall and V. Sattui vineyards.  

The Annual Meeting also proved to be highly educational.  Brian Goodman, Esq. and Ann Frohman, Esq. spoke on the hot button issue of the Unauthorized Practice of Public Adjusters.  Victor Jacobelis, Esq. and Chip Merlin, Esq. explained how a loss can still sometimes be covered, even when there is an exclusion in the policy.  Rocco Calacia talked about how meteorologists can assist public adjusters.  Frank Winston, Esq. spoke about the application of named storm provision of wind deductible.  And the event wrapped up with talks from Joey Childress on the value of building officials, and advice for public adjusters going to trial from Michael Duffy, Esq.

Thanks to NAPIA for another great Annual Meeting full of food, friends, and education.


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

Contractors and Public Adjusters: Can Do & Can't Do Activities

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The Massachusetts Division of Insurance has become increasingly aware that consumers are often confused by the role of various participants in the claims process.  As long-standing public adjusters (PAs), we share this concern, as our industry has faced ongoing challenges stemming from the unlicensed practice of public adjusting (UPPA).

The UPPA problem often rears its head in the form of contractors who – intentionally or not – end up playing a “double role” as both contractor and PA.  This is a clear conflict of interest!  Not only is this not legal, it’s deeply problematic for homeowners looking for guidance and assistance in advancing their claims with their insurance company.

At SMW, we are licensed and regulated by the state of Massachusetts.  This means that we must meet certain criteria to gain and maintain the license, including ethical standards and professional guidelines. We regularly work with contractors – and value their services! – and don’t want them to be dragged into a situation where they face a conflict of interest or a professional pitfall.

Oftentimes, the contractor is merely trying to help the homeowner and unwittingly ends up doing PA work.  To help both contractors and homeowners understand appropriate roles, we offer this list of “Can Do” and “Can’t Do” activities for contractors.

What contractors can do without a public adjuster license:

1. Approach a homeowner or business owner offering repair or reconstruction services.

2. Offer an opinion to a policyholder as to whether damage is from a storm or other incident normally covered by a homeowners policy.

3. Prepare an estimate and scope of work for the loss.

4. Discuss the estimate or scope of work with their customer.

5. Recommend that the policyholder file an insurance claim with his or her insurer.

6. Be present when an insurer’s adjuster inspects the damage.

7. Answer questions the insurer or the insurer’s adjuster has about the estimates.

What contractors cannot do (unless they are licensed as a public adjuster by the State of Massachusetts):

1. Investigate, appraise, evaluate, give advice, advocate on behalf of or assist their customer in adjusting a claim.

2. Prepare the insurance claim for their customer.

3. Negotiate the claim with the insurance company on their customer’s behalf.

4. Offer to review the insurance policy or advise their customer on the insurance policy’s coverage.

5. Advertise or provide written materials that state they can negotiate or investigate a claim on their customer’s behalf.  This includes advertising to be “claim specialists” or “claim analysts,” or any other similar terms, or advertising or claiming that they can “deal with insurance companies” or in any way increase the claim settlement amount for the policyholder.

We love our contractor colleagues, and hope this list helps them and homeowners understand what is allowable – and what crosses the line into UPPA.

For more information, visit https://www.naic.org/


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

Congratulations, Cedardale! We Knew You Could Do It!

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Thursday, May 30 marked a truly momentous day for one of SMW’s favorite clients – the grand reopening of Cedardale Health and Fitness in Haverhill, MA.  Cedardale’s many loyal members turned out in force to celebrate the brand new, state-of-the-art facility with the visionary Veasey family.

It wasn’t easy.

We know because we met with the Veaseys days after the devastating fire in March 2017 that left the old facility in ashes.  There were so many decisions and so much work to do, that the thought of a grand reopening seemed so far in the distance.

We’re proud to have helped the Veaseys in this process, and so happy for the entire Cedardale family.

Any business that suffers a crushing property loss can attest to the difficulties of starting over. As public adjusters whose clients are often those same businesses, we know firsthand how daunting these challenges can be.  But we also know that success often comes from these moments, and opportunities lie within what seem like devastating property losses.

The story of Cedardale’s successful reopening last week is the perfect example.

We are so proud of the Cedardale family – congratulations on this wonderful occasion!


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

Did You Know? Your Landlord in Massachusetts Must Carry Tenant Relocation Coverage for EVERY Rental Unit

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If you reside in a rental unit located within Massachusetts, your landlord must carry insurance to cover some of your expenses and property damage caused by a fire.

That’s right.  Every insurance policy in Massachusetts that covers a multi-unit residential property must include a fire endorsement for up to $750 for each rental unit.  The $750 is available without deductible, but only for damage by fire.

This is important, so let’s go over it again: If you rent an apartment in Massachusetts, and your building suffers a fire, your landlord should have an insurance policy that covers your unit for damages incurred up to the amount of $750.

The $750 limit is available per rental unit, not per resident.  In other words, if you and your best friend share an apartment, the $750 is the total available to you both – you can’t each collect $750.

What does that $750 cover?  Actual costs shall include hotels, security deposits, clothing, furniture, and other reasonable costs and living expenses.  It will also cover the first month of rent for a new unit if you’re not owed a security deposit or last month’s rent from your landlord.

What do you need to do if you’re a renter and you have suffered a fire in your building?  The landlord’s insurance company will deal directly with you, and will make the payment for this coverage to you.  After a fire, be sure to request the adjuster’s contact information and keep your receipts.  You will need to prove your expenditures to the insurance company, so receipts and proof of payment are vital.

As helpful as this coverage is, for anything but a very small fire, this coverage by itself is insufficient – even more so if you have a roommate, a water loss, or a catastrophic loss.  We suggest you buy your own renter’s insurance to cover your personal property and any additional living expenses you would need in the event your unit becomes uninhabitable.

To determine how much renter’s insurance you need, simply take a quick inventory of the big things you own.  This list should include computers, furniture, electronics and clothing.  Estimate their collective value – and then round up!  You should also factor in the cost of temporarily living in a hotel and eating out while searching for another place to live.  Local agents can help you to purchase the proper amount of insurance.  And remember: if you make large purchases or move into a bigger space, those are the times to increase your insurance.


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Mindi Labella

Mindi specializes in commercial losses, business interruption, extra expense and time element claims, and draws on her business background to advocate on the clients’ behalf.

 


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

What Accountants Need to Know About the 'Business Income Worksheet'

SMW’s Mindi Labella recently authored a helpful article on the challenging ‘Business Income Worksheet’ that is featured in the May edition of SumNews, the monthly magazine of the Massachusetts Society of Certified Public Accountants (MSCPA).

In the article, Mindi explains the importance of understanding the Business Income Worksheet and the value CPAs can deliver to their clients by knowing the correct way to fill out this confusing insurance form.

Read the article below:

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Mindi Labella

Mindi specializes in commercial losses, business interruption, extra expense and time element claims, and draws on her business background to advocate on the clients’ behalf.

 


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

What is Business Interruption Coverage, and How Does It Work?

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Many owners of small- and medium-sized businesses have “Business Interruption” (BI) coverage in their commercial insurance policies.  But we often hear from business owners who aren’t fully sure what BI is exactly, or how it comes into play in the event of a property loss suffered by their business.

The question they most frequently ask: Why do I need BI coverage?

The answer we always provide: Because it makes you whole – restoring you financially to a position as if you had not suffered any loss at all.

Basically, BI compensates you for lost profits.  After all, if your business burns down, you won’t have customers coming in.  And if you don’t have any customers coming in, you can’t get paid. BI accounts for that shortfall.

So, if your business has a catastrophic event, and it’s covered by your insurance policy, BI pays for lost net income and expenses incurred while you undertake reconstruction.

Imagine your business has a major fire.  It might take you 12 months to rebuild and refurbish the premises before you can reopen.  Your BI policy pays you whatever revenue you would have earned during that time (minus revenue you actually did earn during this period, of course).

Let’s look at some real-world examples to get a sense of how BI works in practice.  A BI policy will pay:

  •  Salary – If a florist, for example, typically pays himself a salary from his business earnings to cover his personal expenses (home mortgage, cost of living items, etc.), BI will pay that salary.

  • Interest Expenses – Suppose a store owner took out a loan to purchase expensive equipment for the business.  That note still exists, even after the property loss.  Facing the absence of revenue, the business owner must nonetheless continue paying interest on that loan.  BI enables her to keep paying the interest expense until business revenue returns.

  • Fixed Overhead Expenses – Most businesses have an array of fixed overhead expenses – the contracts for trash removal or pest control services, for example, or the building lease.  And sometimes you aren’t able (or don’t want) to get out of a contract after a loss.  BI allows you to continue to pay your fixed overhead expenses.  That way you don’t lose the great rate you negotiated on a contract.

As these examples show, BI is a hugely significant form of assistance.  BI allows you to pay your mortgage or rent, and to continue drawing your standard paycheck from the business.  BI lets you maintain a presence in your industry while your business is in the process of recovering from a disaster.  Think about it: 12 months is a long time, and you want to reopen after that recovery period as if nothing happened.  BI helps you keep your industry profile while you deal with the disaster.

Calculating BI coverage is complex, and can vary depending on your policy.  The period of time for which BI covers lost revenue, for example, can change from policy to policy.  What’s more, determining both the projected revenue of your business and the lost revenue – the basis for BI pay-outs – requires expert accounting.  There’s also the question of duration – how long your policy covers the business, and the period of time for which the business is affected for coverage purposes.  And this is before we get into variable and fixed costs, payroll coverage for employees, and other complicated matters relating to BI that come into play during settlement discussions with your insurance carrier.

We will follow this post with a separate piece examining these carrier-related BI complexities and other elements of BI.  Of course, the real takeaway is that you really should get a public adjuster to optimize your BI claims.  Almost every element of utilizing BI coverage requires expertise and back-and-forth with the insurance company’s claims team, which is using its own expertise to minimize coverage payout.

What you really need to know about BI coverage is that you should have it, because it will pay (most of) your costs during the time when your business is recovering from a covered event. Once you need to use your BI coverage – hand it over to a public adjuster!


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Mindi Labella

She specializes in commercial losses, business interruption, extra expense and time element claims, and draws on her business background to advocate on the clients’ behalf.

 


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

SMW Share Highlights From Recent MAPIA Continuing Education Seminar

May 8th 2019

May 8th 2019

On May 8th, SMW team members met with our public adjuster (PA) counterparts from across Massachusetts to hold a dialogue on the issue of top importance to the PA industry.  Hosted by the Massachusetts Association of Public Insurance Adjusters (MAPIA), the seminar took place in Waltham and addressed several trends that directly impact PAs – both in Massachusetts and across the nation.

Among the numerous compelling topics, the following updates by MAPIA presenters resonated strongly with us:

UPPA – The Unlicensed Practice of Public Adjusting has dogged the PA industry for decades.  A big source of UPPA problems involves roofers and contractors.  These professionals are very important, but they are not licensed as PAs and are NOT qualified to handle an insurance claim. Some of them, however, try to convince homeowners that they can indeed fill a PA role.  What’s more, some roofers and/or contractors sometimes try to claim a percentage of the claim payout. This is not legal and harms the homeowners and legitimate PAs.

Assignment of benefits – This holds similar challenges to UPPA, because you’re assigning your claim to another party.

Professional fees endorsements – In policies, the insurance companies say they’ll pay up to a certain amount for an accountant – but they refuse to pay any fees for a public adjuster.  This is inequitable and leaves policyholders without the expertise they need to successfully navigate the claims process.

NAPIA – The National Association of Public Insurance Adjusters (NAPIA) provides many valuable services that complement the state-level work, including legislative tracking, standards development for membership and ethics, and involvement with the National Association of Insurance Commissioners (NAIC).

To learn more about MAPIA, NAPIA or recent developments affecting the PA industry, please contact us!


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

In Mass., Value-Based Disputes Can Go to Reference Instead of Litigation

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The two sides of a potential compromise don’t always agree.  This is often the case in property insurance settlements, where an agreement must be reached before the claim can be finalized and closed.

What happens when the two sides – the insured and the insurance carrier – simply can’t agree on the amount of a loss?

If you’re in Massachusetts, you enter a mediation process known as Reference.  If you are anywhere else in the U.S., you enter into a similar, but slightly different, process known as Appraisal.

At SMW, we have broad experience in both of these dispute resolution arenas.  Given that our headquarters is in Massachusetts, however, we have particular familiarity with Reference.  Let’s take a close look at this Mass.-specific solution to value-centered disputes.

Massachusetts lawmakers have codified Reference in General Law Chapter 175 Section 100 et seq, setting forth the definitions and relevant procedures.  

 Section 100. If a claim is presented under any policy of fire insurance issued on property or interests in the commonwealth in the standard form set forth in the preceding section, and if the parties fail to agree as to the amount of loss, the company shall, within ten days after receiving a written demand from the insured for the reference of the amount of loss to three referees as provided in such policy, submit in writing the names and addresses of three persons to the insured, who shall, within ten days after receiving such names, notify the company in writing of his choice of one of the said persons to act as one of said referees.

The insured shall submit in writing the names and addresses of three persons to the company, which shall, within ten days after receiving such names, notify the insured in writing of its choice of one of said persons to act as one of said referees.

If, at the expiration of ten days from the choice of the second referee, the two referees chosen as hereinbefore provided, shall not have agreed upon and selected a person to act as the third referee, then either of the said referees or parties may make written application on oath to the commissioner in such form as he may prescribe, for the appointment of the third referee and the commissioner shall, after such summary inquiry or hearing, if any, as he may deem expedient, appoint a person to serve as the third referee and shall notify such person and the parties in writing of such appointment

It’s important to recognize that you can only go to Reference to resolve value-based disputes – i.e., the extent of loss and the amount of damage under an insurance policy.  Reference is not the venue to address questions of liability or coverage.

Reference is useful because it offers a quick and cost-effective means of settling disagreements over the value of a claim.  So, instead of forcing the insured to undertake expensive and time-consuming litigation, the parties have the option of a more efficient way to resolve the dispute.


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

Extended Business Interruption Coverage Memorandum

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Dear Colleague,

We are writing to alert you to an important – and problematic – insurance policy position held by The Travelers Companies that might directly impact your commercial policyholders.  We hope you will join us in bringing this issue to the attention of underwriters at Travelers and advocating for a change in Travelers’ position in this area.

We identified this problem recently during our representation of a small business owner whose pizza shop suffered fire damage.  The owner had a Travelers-issued manuscript policy for small business owners (MP T1 02 02 05).

This MP provided Business Income (BI) and Extra Expense (EE) coverage to the insured for 12 months of actual loss.  Notably, the MP also provided an additional 60 days of Extended Business Income (EBI) for a period of 60 days and an additional endorsement that extended it to 90 days.

The landlord of the strip mall where the pizza shop was located took 18 months to rebuild.  Travelers duly paid 12 months under the BI clause.  However, when we submitted a claim for the 90-day EBI, the Travelers adjuster denied it.  In explaining this denial, Travelers stated that the EBI was included in the 12 months of BI coverage and therefore did not apply to any days subsequent to that time frame.

We believe this position is patently wrong.  In our view, the “extended” portion of Extended Business Income means “in addition to and beyond” the baseline BI coverage.  In our experience, EBI coverage starts on the day after the insured resumes normal business operations.  We base this position on years of industry practice and our shared understanding of the intention of EBI coverage: to provide a “ramp-up period” that enables the insured to get sales and revenue back to where they were prior to the loss.

The Travelers position poses a clear problem for any business owner who must rely on Travelers-issued EBI coverage.  These business owners will be short-changed – an injustice exacerbated by the fact that insureds are paying for an endorsement for EBI but are in fact getting less coverage.

We firmly believe Travelers should have paid the EBI claim described above, and should do so in other such cases in the future.

We wanted to alert you to this unfair practice by Travelers, and ask that you consider bringing this to the attention of your Travelers representatives and underwriters. We have attached a detailed brief providing specific information on this issue.

We value your role as advocates for your clients, and are confident you would object if Travelers similarly denied EBI coverage to one of your insureds facing a 12-month loss.

Please review the attached materials. We hope you will take a moment to contact us and discuss constructive next steps to address this important issue.

We appreciate your attention to this matter.

Sincerely,

SMW

MEMORANDUM

 

TO:                 Agents
FROM:          Mindi Labella, CPA, VP Swerling Milton Winnick Public Adjusters
RE:                 Travelers Position on Extended Business Income Coverage
DATE:            8 April 2019

 

Background

The Travelers Companies (“Travelers”) recently denied a portion of the property loss claim from a business (pizza shop) owner whose leased premises suffered major damage from a fire in December 2016.  The business owner (“the Insured”) purchased the manuscript policy MP T1 02 02 05 for small business owners from Travelers prior to the loss. This policy provided both Business Income and Extra Expense coverage to the Insured for 12 months of actual loss, as well as for 60 days of Extended Business Income.  Additionally, the Insured purchased the ‘Eating Establishment Endorsement’ form MP T1 68 03 06, which increased the Extended Business Income from 60 to 90 days. 

Repairs to the fire-damaged building, overseen and financed by the building owner (the Landlord), required more than one year to complete. The Insured was not able to resume operations until June 2018 – 18 months after the fire.

Travelers paid the Insured’s business interruption claim for the first 12 months of actual loss, but denied the Extended Business Income, which began in June 2018. According to the Travelers adjuster who denied the EBI claim, the 12 months of Business Interruption Insurance (BII) was exhausted, and this 12-month limitation includes Extended Business Income (EBI).”

Thus, having paid for 12 months of BII coverage, Travelers denied any additional claims for EBI.  What’s more, the Insured had purchased an enhancement endorsement – providing 30 additional days of coverage – and Travelers also denied additional claims under this coverage provision.  Based on Travelers’ position, the additional coverage given under the enhancement endorsement was included within the 12-month limit.

 Travelers’ position in this matter forecloses virtually any scenario in which the Insured – or, presumably, any business owner holding such a policy issued by Travelers – could utilize EBI coverage.  Even facing an endorsement providing 365 days of EBI, it seems, Travelers believes it can rightly deny any claims beyond the 12 months of BII.

 

The Relevant Policy Provisions

The Insured’s policy contains a header labeled “Business Income and Extra Expense” and has the following three sub-heads: a. Business Income, b. Extra Expense and c. Extended Business Income.  These are three separate and distinct coverages, each with their own definitions.

 For specific reference to the policy provision for Extended Business Income, please refer to Appendix A at the end of this Memo.

 The relevant section of the policy’s Business Income and Extra Expense Coverage – the final paragraph – is silent regarding the third coverage, Extended Business Income.  Because the Declarations page of the Insured’s policy likewise contains no reference to “Extended Business Income,” we must look within the policy to determine the limit for this coverage. 

Paragraph (c) of the Business Income coverage section addresses Extended Business Income.  In our view, reading this section would lead virtually any business owner to interpret the Extended Business Income coverage as being “in addition to”, rather than included in a limit that does not even reference the EBI coverage.

Because the word “Extended” is not explicitly defined in the policy, we must assume the common meaning of the word.  Black’s Law Dictionary defines “Extend” as: “To expand, enlarge, prolong, widen, carry out, further than the original limit; as, to extend the time for filing an answer, to extend a lease, term of office, charter, railroad track, etc.”  The definition says “further than the original limit.”

This definition clearly suggests that the original limit is capped by either the period of time it should take to repair or replace the property OR 12 months - whichever comes first.  If 12 months comes first, the Extended Business Income must go beyond that period.  This is the only logical and rational interpretation a business owner can take.  Otherwise, the Insured would have effectively purchased coverage that could never, under any scenario, actually be utilized.

The Insured paid an additional premium for an enhancement endorsement affording more coverage.  The first item in the enhancement endorsement extends the Extended Business Income from 60 to 90 days.  If we accept Travelers’ interpretation of Extended Business Income, this enhancement actually reduces the insured’s overall coverage. 

 In Travelers’ scenario, an insured with 12 months of Business Income coverage and 60 days of Extended Business Income would have to resume operations 10 months after the loss, and then would begin the 60-day Extended Business Income period in order to maximize both coverages.  By purchasing this enhancement, this insured would now have to resume operations in 9 months and then begin the 90-day Extended Period to maximize both coverages.  For even more protection, Travelers will gladly sell the insured 365 days of Extended Business Income coverage. But there’s a catch: this insured could never use both the Business Income and Extended Business Income coverage, according to Travelers’ interpretation.  Perversely, the enhancement for which the insured paid an additional premium ends up placing the insured in a worse position than they enjoyed prior to the loss.

The legal standard in Massachusetts is “consider(ing) what an objectively reasonable insured, reading the relevant policy language, would expect to be coverage.” Thomas McGregor v. AllAmerica Insurance Company 449 Mass. 403 (2007).  According to this standard, a reasonable reading of the Extended Business Income coverage provision would suggest an additional coverage that complements, or augments, the basic Business Interruption coverage.  Any other interpretation – e.g., buying additional Extended Business Income coverage that reduces the base Business Income coverage – renders the extended coverage illusory.

Because Travelers uses its own forms to draft coverage, all Travelers-issued coverage presumably reflects Travelers’ particular views and intentions. And yet, Travelers’ forms show a remarkable resemblance to standard ISO forms typically used in the general insurance marketplace. (Please see Appendix C for reference)

It is also worth noting that the Extended Business Income is listed with the Business Income coverage under the additional coverages (paragraph d), and that Extra Expense is afforded its own separate paragraph (e).  In the later edition (BP 00 03 01 06), Extended Business Income is given its own section under “Business Income,” along with Business Income and Extra Expense.  While it is very similar to the format Travelers utilizes, the wording is fundamentally the same in the later Business Owner’s Policy (BOP).

The other pertinent ISO form is the Commercial Property form CP 00 30 04 02, Business Income (with Extra Expense).  This policy affords coverage for Extended Business Income as well. (Please see Appendix D for reference)

Notably, all three policies contain similar wording regarding Extended Business Income coverage, including the outline of the coverage.  However, other carriers have agreed that the Extended Business Income coverage is in addition to – and not part of – the time limit for the Business Income and Extra Expense coverage.  The strikingly similar wording within all three forms suggests all carriers should similarly apply such coverage.

 

The Relevant Court Cases

The analysis above begs a compelling question: what if the Insured had enhanced the policy to include 365 days of Extended Business Income?  A recent case in New Jersey addresses this very situation.  In Milk Indus. Mgmt. Corp. v. Travelers Indem. Co. of Am. (D. N.J., 2018), the insured purchased an enhancement endorsement extending the Extended Business Income from 180 days to 365 days.  MIMCO rented a facility that was destroyed by fire and the building’s owner decided not to replace the facility.  MIMCO had purchased a policy from Travelers, and MIMCO made claim for business income for the term of a contract with a customer, as well as payment for the Extended Business Income for 365 days.

While the facts of Milk Indus. Mgmt. Corp. differ slightly from our situation, key holdings nonetheless directly apply to our own case.  As part of their argument, Travelers stated “(T)he purpose of Extended BI is to provide coverage to an insured during the time period after the property has been restored and the insured essentially gets back on its feet and resumes operations at the level it was operating before the loss.”  Travelers agrees that the Extended Business Income period starts after the business resumes operations and is intended to help the insured get back up on its feet.  However, Travelers inclusion of the Extended Business Income period in the Business Income limit directly violates the spirit of the Extended Business Income coverage.

 

Conclusion

Travelers has taken a position on Extended Business Income that is incorrect and unsupported by the policy.  Additionally, Travelers’ interpretation is not that of an “objectively reasonable insured,” thereby rendering the policy illusory.  Typically, carriers only change their position on coverage when an insured litigates – a costly and lengthy process that doesn’t always produce holdings that readily apply to analogous fact patterns.  Consumers and agents must be aware of the position which Travelers has taken, and through the consumers and agents we can work to change their minds.


 

 

Appendix A – Extended Business Income

The policy for Extended Business Income states:

c. Extended Business Income

If the necessary “suspension” of your “operations” produces a Business Income loss payable under Paragraph a. Business Income above, we will also pay for the actual loss of Business Income you sustain during the period that:

(1) Begins on the date property is actually repaired, rebuilt or replaced and “operations” are resumed; and

(2) Ends on the earlier of:

(a) The date you could restore your “operations” with reasonable speed, to the level which would generate the Business Income amount that would have existed if no direct physical loss or damage occurred; or

(b) Sixty consecutive days after the date determined in Paragraph (1) above

Appendix B – the final paragraph of the Business Income and Extra Expense Coverage

d. If the Declarations show for Business Income and Extra Expense:

(1) Actual loss for 12 consecutive months, then we will pay for loss of Business Income and Extra Expense that occurs within 12 consecutive months following the date of direct physical loss or damage; or

(2) Actual loss up to 12 consecutive months subject to a maximum dollar limit, then we will pay for loss of Business Income and Extra Expenses that occurs within 12 consecutive months following the date of direct physical loss or damage, subject to the limit shown in any one occurrence.

 

Appendix C – the Businessowners Policy (BP 00 01 01 97)

(2) Extended Business Income

If the necessary suspension of your “operations” produces a Business Income loss payable under this policy, we will pay for the actual loss of Business Income you incur during the period that:

(a) Begins on the date property except finished stock is actually repaired, rebuilt or replaced and operations are resumed: and

(b) Ends on the earlier of:

(i) The date you would restore your “operations”, with reasonable speed, to the level which would generate the Business Income amount that would have existed if no direct physical loss or damage had occurred; or

(ii) 30 consecutive days after the date determined in (a) above.

 

Appendix D -- Commercial Property form CP 00 30 04 02, Business Income
(with Extra Expense)

c. Extended Business Income

(1) Business Income Other Than "Rental Value" If the necessary "suspension" of your "operations" produces a Business Income loss payable under this policy, we will pay for the actual loss of Business Income you incur during the period that:

(a) Begins on the date property (except "finished stock") is actually repaired, rebuilt or replaced and "operations" are resumed; and

(b) Ends on the earlier of:

(i) The date you could restore your "operations", with reasonable speed, to the level which would generate the business income amount that would have existed if no direct physical loss or damage had occurred; or

(ii) 30 consecutive days after the date determined in (1)(a) above.



If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.

Homeowners Beware: A Tree Falling On Your Roof Is Different Than A Tree Falling In Your Yard

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When windstorms hit the leafy neighborhoods of Boston’s MetroWest suburbs, we go to work. Last month’s big winds took down a lot of trees, and homeowners had several questions about their insurance coverage and possible solutions.

Here are some of the top tips we shared with these homeowners:

Take a look at your homeowner’s insurance policy – it’s likely the standard HO-3 policy, with whatever endorsements and deductibles you elected to include in the most recent renewal discussion with your insurance agent.

There are two issues with a tree that has fallen on your house: 1. Getting the tree off your house; and 2. Disposing of the tree once it’s on the ground.

Your HO-3 should provide coverage for virtually any reasonable expense related to taking the tree off the structure and getting it to the ground.  Once it’s on the ground, however, coverage for removal stops.  Now you’re looking at “debris removal” coverage to dispose of the on-the-ground tree.

Your policy likely only covers $1,000 total for such debris removal.  It’s important to note that that $1,000 covers the total cost of removing all trees that are on the ground – regardless of how many there are.  We recently had a homeowner call us with 25 fallen trees on the ground, and tree removal services were looking to charge $500 per tree for removal.

That quickly becomes a big number.

If you have trees on your house or in your yard, give Swerling Milton Winnick a call.  We can help you maximize your coverage for such events.

 


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.