RW in The Press NZ "Call to Check Policies"
Businesses are being urged to look hard at their insurance policies because they may be entitled to business interruption insurance well after the February 22 earthquake’s one year anniversary.
Insurance recovery consultant at Risk Worldwide, Michael Childress, says what insurers will not promote is that each big earthquake since September 2010 might trigger a new BI claim.
It was the same principle that was clarified by the High Court in respect of the Earthquake Commission’s obligation to treat each damaging earthquake as a separate event with a $100,000 cover. United States-based Risk Worldwide consultants set up an office in Christchurch in September and will be talking soon to the business members of the Canterbury Employers Chamber of Commerce. Childress said that multiple earthquakes could mean that the indemnity period kept starting over again. Some of the loss of profits were covered under the material damage section and some policies said indemnity did not start until material damage was paid. Loss of profits payments were intended to put the company back into the position it would have been in and that could only be measured once the company was back on its’ feet.
Fellow consultant George Keys said: “Loss of rents or business interruption, we don’t believe in a lot of cases that 12 months has even started running yet”
Risk Worldwide offered services assessing claims in order to recover more from the insurance company than they were offering. It charged a success fee which was 35 per cent of the additional amount the insurance company agreed to pay. Keys said part of the assessors’ pay was based on keeping the claim between certain parameters that provided a financial return to the insurance company. US statistics showed only 9 per cent of policyholders took professional help and that was good for insurance companies. “People only come to us reluctantly after they are exhausted financially, emotionally and every other way,” Childress said.
They offered a review of an assessor’s assessment to ensure the calculations and coverage interpretations were consistent with the policies. Childress said they knew how the policies were supposed to operate and what was covered. They investigated the damage and documented it and packaged it in such a way “that tells the insurance company they must pay. We know what they need in their file. They are not bad people; they are just not motivated to fully investigate. They don’t look for all the damage.”
Packaging of the claim was critical. How the different aspects of coverage such as business interruption, material damage, loss of rent, contents and demolition were organized and presented, took experience and made the claim easy to manage for the insurer. Keys said an insurance company might tell a home owner who was to have a new home built that they had to have different fittings because the old ones in the former house were not available, but under a replacement policy the home owner was entitled to have the same as they had or entitled to the difference in payment between the cheaper new materials and the dearer materials.
For instance, lathe and plaster walls were much more expensive than cheaper gib walls. Risk Worldwide documented what was there and the cost of replacing that and that became the claim value and then they negotiated a resolution. Old houses could have quite a lot of value contrary to what people thought in Christchurch. “People don’t understand that. They think because they have old materials they get less. It’s just exactly the opposite,” Keys said.
Risk Worldwide had recovered more than US$1 billion (NZ$1.1b) for its clients. The company did not have a lot of results yet in Christchurch but results were starting to “burgeon”.
The insurance industry had changed its modus operandi to “delay, deny, defend” after the 1990’s with influence of American consultants McKinsey and Co on one of the world’s largest insurance companies and that had spread right through the insurance world.