When an owner suffers a significant property loss, the necessary next steps are crucial to the insurance claims process. The experience can overwhelm property owners, especially if the loss event is their first.
From catastrophic fires to colossal water damages, large or complex losses require an action plan. However, the insurance claim process is new to many property owners, and when coupled with the loss itself, the experience can feel daunting and disconcerting.
But it doesn’t have to be that way.
The following are important steps and guidance should an unfortunate event occur.
Who Should Be Called?
During or following the loss event, the first priority is to check the wellbeing and safety of any occupants. If it’s an emergency situation, such as a fire or safety threat, first responders (fire, police, EMTs, ambulance) must be notified immediately.
The next call should be to your insurance broker. Your HUB advisor will initiate the claims process with the insurers, help secure a restoration contractor and expediate the assignment of an insurance adjuster within its approved network.
Who Gets Involved and Why
Your Insurance Broker: As your insurance broker, HUB works for you and is committed to ensuring the claim process follows our program parameters.
Property Insurers: The insurers underwrite the policy, review claims and issue payments for losses falling under the scope of coverage afforded by the policy.
Insurance Adjuster: HUB maintains a list of approved independent adjusters who understand our policy and claim handling expectations. From this, a smaller group of experienced senior independent adjusters are called on for larger/complex claims handling. The adjuster liaises with all parties and typically resides at the center of both the process and communication lines.
Restoration Contractor: The choice of restoration contractor is up to the property owner. That said, HUB, the insurers and the adjuster can assist in recommending restoration contractors suited for larger/complex losses.
Who Else Might Be Involved?
Cause and Origin Professionals: Often employed by insurers, they help determine the cause of a loss. This includes site investigators for fire losses but can also include forensic engineers who may examine mechanical equipment, appliances or other material.
Site Security: This may be required by the fire department, by municipal order (fire watch or health and safety), and/or as a matter of scene preservation, building security and liability exposure control. Security is typically involved by the adjuster or restoration firm but in some cases may be involved by the strata/condo corporation at the onset.
Construction Consultant / Appraiser: The insurers may involve a consultant firm to help plan initial mitigation/demolition work, determine the scope of work, obtain estimates and review costs.
Legal Counsel: Any contracts for work at the building are between the condominium/strata corporation and their chosen contractor. The condominium/strata corporation may wish to retain legal counsel to review these contracts.
Property Management: While the condo/strata corporation may already retain a property manager, their services may be expanded beyond the norm to assist the corporation with a claim.
Insurance Trustee: Provincial legislation may mandate that insurance proceeds associated with a claim are paid to an insurance trustee appointed by the condo/strata corporation.
Engineers and Architects: These firms may be required to provide professional guidance at various stages of work. Their involvement may also be necessary in project document preparation and monitoring as required by municipal building departments. In the case of engineers, multiple disciplines (structural, geo-technical, environmental etc.) may be required depending on the project.
Unit Owner / Tenant Insurers: Occupants may need to involve their personal insurer for things such as contents, living expenses, assessments and/or unit betterments. These insurers may involve their own professionals as well.
Municipality: The municipality is primarily involved in granting work and occupancy permits.
Initial Stages of the Claim
The safety and security of the site is usually the most pressing requirement following the release of the scene by first responders. This can include boarding up the building to secure against entry, prevent exposure to the elements or preserve a scene, site security for fire watch and general building security or site safety, fencing around affected areas of property and locksmith services.
In the case of fires, a cause and origin expert may be retained to provide insurers with an independent report on what contributed to the loss. In some cases, insurers may be able to recover from a third party (manufacturer, installer, developer, etc.). In those cases, multiple parties may involve their own cause and origin expert to secure an independent opinion.
It is important that all parties with a possible interest in the loss be permitted to secure their own causation expert before any evidence is altered, destroyed, or lost. It is critical that the area where the loss originated is preserved until all cause and origin experts involved have completed their investigations.
The condo/strata corporation will also need to retain a restoration firm to begin mitigating damage and cleaning up debris. The scope of their initial work may be limited until the cause and origin investigation is complete.
The goal at this stage is to make the site as safe and secure as possible as per recommendations made by the appropriate experts, insurers, and the condo/strata corporation.
Assessing the Damage and the Repair Process
Depending on the circumstances, the restoration of the property may be divided into several stages after the initial mitigation efforts. These could include demolition, expedited repairs, and final repairs.
In most cases the scope of work associated with each phase will be prepared by the appraiser but in some cases, scopes can be prepared by the lead contractor involved. In all cases it is important that the condo/strata corporation, appraiser, and adjuster/insurers understand and agree on the scope(s) of work.
While the adjuster, consultants/professionals and insurers will lead the estimate tender process(es) and establish the cost the insurers will pay, the condo/strata corporation will select the contractor.
Your insurance broker, the adjuster, and the appraiser can recommend established and qualified firms the condo/strata corporation may want to consider.
Establishing Communications & Expectations
Establishing clear communication expectations early on is critical to ensure a smooth and pro-active claim experience for all stakeholders. Everyone has a role to play. While the type and frequency of communication can, and should, be customized for each loss, HUB recommends implementing the following as a basic framework:
Day 1-3: The condo/strata corporation representative(s) (including the property manager), adjuster and restoration firm should have met on site at least once to discuss the status and process expectations. For large, catastrophic losses, the municipality may organize a town hall-type meeting open to all stakeholders, including occupants. Speakers may include the municipality, first responders, emergency social services, property manager/building representative, restoration firm and adjuster.
Day 4-7: It is typical for ongoing site meetings to continue involving the primary stakeholders and additional professionals as they are involved. When primary stakeholders cannot meet on site, a conference call should be scheduled to keep everyone informed as to status.
Day 7-14: Regular site attendance may be limited to the restoration firm and professionals directly involved in that process. In addition to the initial town hall meeting (or in place of the town hall if not done) a meeting involving the condo/strata council, property manager, HUB, adjuster and restoration firm should be held to discuss the status and process.
Milestones: After the initial two weeks, the progress of a large claim is typically measured in milestones. These milestones will vary but may include when initial mitigation/stabilization efforts are complete, demolition is complete, building is ready for repair, scope of repairs has been determined and agreed upon by all parties, contractor has been selected, occupancy has been regained, and repairs are completed.
Communication through these milestones and their achievement should be ongoing via scheduled conference calls every 15-45 days. These should include the adjuster, your broker, the restoration firm, appraiser, property manager, and condo/strata counsel representative. The purpose of regular, established communication is to ensure everyone receives updates and to identify areas of concern early on for proactive resolution.
It is also critical for the condo/strata corporation to consider how they will be sharing information with the owners. This is frequently done by posting regular updates and important information on a bulletin board or preferably on the property manager’s or corporation’s website.
What About the Insurance Policy?
It is important for the insurers, adjuster, your broker and condo/strata corporation to review all aspects of the policy as they may relate to the loss. Discussions at all stages should include how the policy may respond as the loss evolves.
Other Important Considerations
Provincial legislation may dictate that insurance proceeds (indemnity payments) are paid directly to the condo/strata corporation or their appointed insurance trustee. This means that instead of the insurer paying the restoration firm and other parties directly, they must direct funds to the condo/strata corporation or their appointed trustee.
While some condo/strata corporation and/or property management firms are equipped to process and administer the insurance proceeds, some may not be. In those situations, it is possible for the condo/strata corporation to appoint an insurance trustee such as an accounting firm experienced in insurance claims to disperse funds at the recommendation of the adjuster and with the approval of the condo/strata corporation itself.
In large losses, extensive demolition is frequently required and to accomplish this, affected units are often partially or completely emptied of contents. This is the responsibility of the content owners (unit owners or tenants) who should coordinate with their personal insurer or, if they are uninsured, coordinate themselves.
In more extensive losses, some contents may have been damaged beyond salvage and, for many reasons, may be left on site/in place by the occupants. Ultimately, removal of this material is usually required to advance the building mitigation/repairs. Working with the contractor and the adjuster, the condo/strata corporation will need to secure a written release and permission from the individual occupants if it becomes necessary to remove non-owned occupant content with the building debris.
Subrogation and recovery are the process by which insurers seek to recover from a third party, on behalf of the insured, in relation to loss concerning which the insurers have made payments. The process of subrogation is no different from any other pursuit of one party by another for the recovery of costs in that the other party must be liable. To be liable the party must have been negligent, and that negligence must have given rise to the loss.
The insurers’ investigation as to whether there is an opportunity for recovery begins during the initial stages of the claim. While the success of recovery efforts can never be guaranteed, the insurers will include any uninsured costs of the condo/strata corporation, such as the deductible amount, with their recovery effort.
Though the path followed from the initial loss to final resolution may vary depending on many things, communication and follow-through are essential. The claim process should be openly and transparently discussed between all parties.