Limiting Uncertainty in the Large Loss Claim Building upon case study - Ms. Sally Somebody - The Truth and Trauma of a Hurricane Claim Author / Trainer: Mark Phillips Provider # Copyrighted 2011: no permission to reprint without authorization

DUTIES OF THE INSURED IN EVENT OF LOSS General Conditions – Claims Activated Obligations General Conditions – Claims Activated Obligations Your Duties in Event of Loss: Your Duties in Event of Loss: “As often as we (the carrier) reasonably require” “As often as we (the carrier) reasonably require” Item c: Item c: 1)Show us the damaged property; 2)Provide us with the records and documents we request and permit us to make copies; and 3)Submit to examinations under oath while not in the presence of any other named insureds and sign the same. Item d: Send to us, within sixty (60) days after our request, your signed, sworn proof of loss (a legal document typically unknown to most insureds) which sets forth, to the best of your knowledge and belief: Item d: Send to us, within sixty (60) days after our request, your signed, sworn proof of loss (a legal document typically unknown to most insureds) which sets forth, to the best of your knowledge and belief: 1)The time and cause of loss; 2)Your interest and that of all others in the Covered Property involved, and all liens on the Covered Property; 3)Other insurance which may cover the loss; 4)Changes in title or occupancy of the Covered Property during the term of the policy; 5)Specifications of damaged buildings and detailed repair estimates; 6)The inventory of damaged and undamaged personal property described in policy

Uncertainty Ingredients Will Magnify Agent's Performance Uncertainty Ingredients Will Magnify Agent's Performance Agent's adequate analysis of insured? Insured's honest and reasonable state of mind? Does the insured have a clue of what the adjusting process will bring?

LOCATION LOCATION LOCATION WHERE WAS THIS POLICY PRODUCED? WHERE WAS THIS POLICY PRODUCED? Role of your Agent / Broker Role of your Agent / Broker Role of your Underwriter Role of your Underwriter Role of your Executive Review – accuracy, updates, values Role of your Executive Review – accuracy, updates, values WHO PRODUCED THIS MANUSCRIPT? WHO PRODUCED THIS MANUSCRIPT? Does it square with your notes and coverage needs? Does it square with your notes and coverage needs? Who is documenting Best Practices of this risk placement? Who is documenting Best Practices of this risk placement? Do you have backup communications ( s, boards notes, phone calls) made to agent / broker to validate policy designs? Do you have backup communications ( s, boards notes, phone calls) made to agent / broker to validate policy designs?

- CASE STUDY - MS. SALLY SOMEBODY POLICY DESIGNS AND DOCUMENTATED HISTORIES POLICY DESIGNS AND DOCUMENTATED HISTORIES HOW DOES THIS PATHWAY OF PREPARATION PLAY OUT IN THE CLAIMS EVENT? HOW DOES THIS PATHWAY OF PREPARATION PLAY OUT IN THE CLAIMS EVENT? WHAT DUTIES AND FIDUCIARY ISSUES APPLY? WHAT DUTIES AND FIDUCIARY ISSUES APPLY? WHERE AND WITH WHOM ARE MAINTENANCE AND REPAIRS RECORDED AND RETRIEVABLE? WHERE AND WITH WHOM ARE MAINTENANCE AND REPAIRS RECORDED AND RETRIEVABLE? HOW IS THE INSURED PREPARED TO DO BATTLE WITH EXPERIENCED OR INEXEPIENCED ADJUSTERS? HOW IS THE INSURED PREPARED TO DO BATTLE WITH EXPERIENCED OR INEXEPIENCED ADJUSTERS?

DESIGN x DETAILS = SUCCESS DIGITAL DOCUMENTATION OF BUILDING CONDITIONS DIGITAL DOCUMENTATION OF BUILDING CONDITIONS PRE-HURRICANE SEASON – CRITICAL FOR CLAIMS. MATCHING BUILDING VALUES AND LOCATIONS. MATCHING BUILDING VALUES AND LOCATIONS. COINSURANCE PERCENTAGE AND PENALTIES. COINSURANCE PERCENTAGE AND PENALTIES. DIGITAL STORAGE OFF-SITE OF NEEDED RECORDS – WITH AGENTS, CONTRACTORS, LEGAL TEAM. DIGITAL STORAGE OFF-SITE OF NEEDED RECORDS – WITH AGENTS, CONTRACTORS, LEGAL TEAM. MARSHALL & SWIFT REPLACEMENT COST VALUATIONS. MARSHALL & SWIFT REPLACEMENT COST VALUATIONS. WHAT DEDUCTIBLE PLAN DID YOU BUY? WHAT DEDUCTIBLE PLAN DID YOU BUY?

COINSURANCE PENALTY EXPLAINED F. Additional Conditions The following conditions apply in addition to the Common Policy Conditions and the Commercial Property Conditions. 1.Coinsurance If a Coinsurance percentage is shown in the Declarations, the following condition applies. a. We will not pay the full amount of any loss if the value of Covered Property at the time of loss times the Coinsurance percentage shown for it in the Declarations is greater than the Limit of Insurance for the property. Instead, we will determine the most we will pay using the following steps: Multiply the value of Covered Property at the time of loss by the Coinsurance percentage; Divide the Limit of Insurance of the property by the figure determined in Step (1); Multiply the total amount of loss, before the application of any deductible, by the figure determined in Step (2); and Subtract the deductible from the figure determined in Step (3). Calculus or Algebraic formulas do not apply – ONLY correct policy design and building valuations. Copyright, Insurance Services Office, Inc.

AND THIS IS HOW THE FINE PRINT COULD WORK OUT Example No. 1 (Underinsurance): When: Value of Property is$ 250,000 Coinsurance is 80% Purchased Limit is$ 100,000 The Deductible is 250 The amount of loss is$ 40,000 Step (1): $250,000 x 80% = $200,000 (this is the minimum amount of insurance limit required by contract to meet your Coinsurance requirements) Step (2): $100,000 / $200,000 =.50 Step (3): $ 40,000 x.50 = $ 20,000 Step (4): $ 20,000 - $250 = $ 19,750 We will pay no more than $ 19,750. The remaining $ 20,250 is not covered. Example No. 2 (Adequate Insurance): When: Value of Property is$ 250,000 Coinsurance is 80% Purchased Limit is$ 200,000 The Deductible is 250 The amount of loss is $ 40,000 The minimum amount of insurance to meet your Coinsurance requirement is $200,000 ($250,000 x 80%). Therefore, the Limit of Insurance in this Example is adequate and no penalty applies. We will pay no more than $ 39,750 ($40,000 amount of loss minus the deductible of $250). Copyright, Insurance Services Office, Inc.

The Coconut Twist Insured was not prepared – and perished Insured’s documents not ready for claims Insured’s directors & officers not in control Inadequate building records and histories Fiduciary exposure is expanded Insured had no idea of what resources and strategies the carrier would bring to the loss investigation – but they had warning!

The Coconut Twist Family Directors & Officers Directors & Officers Maintenance Records? Maintenance Records? Financial Records? Financial Records? What Assets Used for Claim? What Assets Used for Claim? Who and What were they? Who and What were they? Inadequate experience for this event and its demands – you bet! Inadequate experience for this event and its demands – you bet! Insurance Agent is tainted. Insurance Agent is tainted. With each “issue” there may be corresponding liability exposures that increase with each error or omission. With each “attempt” to react to the large loss claim – a fiduciary event no one was prepared for - a successful claims settlement derails. Uncertainty swells! Liabilities expand and peak.

Duties of the Insured: Three Big Killers 1.Examination Under Oath (EUO) 1.Proof of Loss 1.Appraisal Who among association management is prepared or skilled for these potential demands of the claim process and investigation?

A Snapshot of How They Prepare P I L R “Property Insurance Loss Register” What is it? How is it used? How does the carrier use this against your claim?

Plan for Recovery This Policy May be Your Biggest Asset. This Policy May be Your Biggest Asset. A large loss claim event may be the biggest corporate viability challenge you have faced. A large loss claim event may be the biggest corporate viability challenge you have faced. Know the strategies and tools of the carrier’s claims adjusting process – know how they come to play. Know the strategies and tools of the carrier’s claims adjusting process – know how they come to play. Equip your professional advisors ahead of time – no reactive magic has been found. Equip your professional advisors ahead of time – no reactive magic has been found. Court’s Response – Your failure to plan does not make for their emergency! Court’s Response – Your failure to plan does not make for their emergency!

The other half of the sunshine The Coconut Twist hard times and disappointments do not have to be yours. The Coconut Twist hard times and disappointments do not have to be yours. Ms. Sally does not have to repeated. Ms. Sally does not have to repeated. But, without a plan and inducement to change your behavior and preparation... But, without a plan and inducement to change your behavior and preparation... You will repeat history!! You will repeat history!! And this is just another version of insanity. And this is just another version of insanity.

Preparation and Consulting Independent Claims Guidance with the professional services of: Mark Phillips Tampa Bay, Florida Phone: