Property Loss Professionals: Who Are They and How Can They Help You?

Although their roles can sometimes overlap, the types of professionals an insured might encounter during the recovery phase of their property loss claim are likely to fall within one or more of six general categories — which is how we have organized our discussion. Adjusters — Staff Adjusters, Independent Adjusters, Public Adjusters When disaster strikes, one of the first calls a policyholder makes is to their insurance company. Although emergency responders such as firefighters and police are the first professionals to be on site, for most claims insurance companies will send out an adjuster within 24 hours to begin inspecting the damaged property. In this early stage the carrier is trying to confirm that it is, in fact, a covered loss. They may also want to see if there is an opportunity to subrogate1 or recover the loss costs related to your claim from another responsible party. Although you are not responsible for the subrogation process, you may be called upon to support and/or at least not hinder your insurance company’s efforts. ADJUSTINGTODAY® Property Loss Professionals: Who Are They and How Can They Help You? Adjusters International Disaster Recovery Consulting Losing a home or business to a fire or storm can be a traumatic experience for any property owner. With such a loss comes the need to file a claimunder your insurance policy. The burden of proving the loss rests with you, the policyholder (or insured) —not your insurance company. Many professionals, however, will be involved as you navigate through the claims process, prompting questions like—Who are these professionals? What roles do they play? How are they compensated? Are they licensed? How are they trained? Howwill they helpme as the policyholder? When do they enter the process? This special edition of Adjusting Today® helps answer these and other questions about the various professionals you could encounter during the recovery phase of your property loss claim. Sheila E. Salvatore Editor FROM THE EDITOR SPECIAL EDITION

2 ADJUSTINGTODAY.COM There are generally three different types of adjusters that could be involved in the handling of your property loss claim: staff adjusters, independent adjusters and public adjusters. • Staff Adjusters Who are they? Staff adjusters are employees of the insurance company. They may be referred to as an in-house adjuster or the carrier’s adjuster. They are almost always a full-time employee of one insurance company. Their job is to manage and adjudicate claims for their employer, the insurance company. What role do they play? The staff adjuster will prepare, present and put forth their opinions relative to the scope of damage and the value of the policyholder’s claim. Although they represent the carrier and act as a liaison between the policyholder and the insurance company, their work is being directed by the insurance company. There are many different levels of staff adjusters, with varying levels of authority usually based on their experience. Their ability to authorize payments or adjust losses may be limited due to the projected value of the loss. It is common for a loss to be reassigned to another adjuster if it is determined that the amount of damage will go above a certain threshold. There are some staff adjusters who work from the insurer’s office —who may be considered a desk adjuster — and they handle very small claims, processing them through email and telephone conversations. Some staff adjusters might focus on residential losses and others on commercial claims. While there can be different levels and types of adjusters, they all determine coverage issues, scope and repair methodologies — and most are involved in preparing estimates for the values of the various portions of the policyholder’s loss. Because personnel can change during the process, policyholders should keep a claim journal to record any decisions or agreements made as the claim progresses. ADJUSTERS • Staff • Independent • Public INSURANCE • Agents & Brokers PRODUCERS RISK MANAGEMENT/INSURANCE CONSULTANTS RESTORATION CONTRACTORS APPRAISERS OTHER PROFESSIONALS • Building Consultants • Engineers • Forensic Accountants • Inventory Specialists • Attorneys/Lawyers PROPERTY LOSS PROFESSIONALS

ADJUSTERSINTERNATIONAL.COM 3 How are they compensated? Most staff adjusters are salaried employees of the insurance company. Are they licensed? Some states require that staff adjusters be licensed. Depending on their level of coursework, there are different certifications an adjuster can obtain. Some examples are Associate in Claims (AIC), Property Claim Law Specialist (PCLS), Senior Claim Law Associate (SCLA), Chartered Property Casualty Underwriter (CPCU) and Certified Risk Manager (CIC). How are they trained? Most insurance companies provide in-house training to their staff. Industry organizations such as The International Association of Insurance Professionals, The Institutes and the American Educational Institute also provide insurance education programs for staff adjusters. In recent years there have been more formal university-level classes offered for those who choose a career in this field. However, the majority of staff adjusters learn their trade while working and being supervised by those with greater experience. What do they do? A staff adjuster represents the insurance company to adjust the property damage claim with the policyholder. They are providing a service the insured paid for in their insurance premiums, enabling the insurance company to adhere to the terms of the policy —which is a legal contract. When do they enter the process? Most staff adjusters will be assigned to the policyholder’s claim between 24 and 48 hours of the reported loss and will try to get to the loss site as soon as possible. Staff adjusters are frequently reassigned, so a policyholder may interact with several different individuals from the time the claim is started to its settlement. • Independent Adjusters Who are they? Independent adjusters work as vendors to the carrier and can be thought of as independent contractors or consultants to the insurance company. Similar to staff adjusters, their job is to manage policyholder claims for their client, the insurance company. There are several reasons why insurance companies routinely employ or outsource their claims to independent adjusters, among them: the company can’t always be adequately staffed due to the large volume of claims that arise from a major catastrophe, so they need to hire additional help; the carrier does not have an office near the loss site and it is more cost-effective and timely to assign the claim to a nearby independent adjuster. Most insurance companies have independent adjusters on call or companies that provide them with independent adjusters. They are really an extension of the insurance company. While staff adjusters are captive to the specific

4 ADJUSTINGTODAY.COM insurance company by which they are employed, independent adjusters might work for multiple insurance companies at the same time. What role do they play? For purposes of the policyholder’s claim, independent adjusters are representing only the insurance company — and therefore are helping the company adjust the claim. However, although the independent adjuster is employed by the carrier, he or she also serves as a liaison in the process between the policyholder and the insurance company. The independent adjuster is often able to be on site before the insurance company representative can arrive, so during that time he or she is the eyes and ears of the insurance company. They might be there only initially, but there are situations in which the independent adjuster stays involved throughout the process until the claim is resolved. They might have limited authority, but generally report back to someone at the carrier’s office who has been empowered to make final settlement decisions. How are they compensated? Depending on the state in which they are working and the company they are working for, independent adjusters are most often paid a specific hourly rate by the insurance company. Are they licensed? Over a dozen states currently require independent adjusters to be licensed and that number is increasing due to a recent licensing model act created by the National Association of Insurance Commissioners (NAIC). How are they trained? Many insurance companies train the independent adjusters who represent them on their particular processes and procedures. Independent adjusters also receive training through an outside entity that specializes in training adjusters; from their independent adjuster employer; or simply by being mentored in the field. Organizations such as the Insurance Information Institute also offer educational programs for independent adjusters. What do they do? As independent contractors who work for the insurance company, they are the eyes and ears of the property insurer they represent. Often an independent adjuster will initiate the claim process on behalf of the insurer until the staff adjuster arrives and takes over. This means that they can help the policyholder by answering questions and interpreting coverage from the insurance company’s perspective. Policyholders should remember this when making urgent coveragerelated decisions in a very stressful situation. Independent adjusters, however, often don’t have the authority to make final decisions in the same manner that some staff adjusters can. When do they enter the process? Independent adjusters are often the first insurance company representative to arrive onsite and can be there from the beginning until the conclusion

ADJUSTERSINTERNATIONAL.COM 5 of the settlement, depending on the insurer’s procedures. Other times the independent adjuster will be replaced by a staff adjuster during the claim process. Note that it is always the insured’s responsibility to document their claim, not the insurance company’s. • Public Adjusters Who are they? A public insurance adjuster is an insurance loss professional who represents the interests of only the policyholder in settling a property insurance claim. A public adjuster works as an advocate for the policyholder. In most states (45 out of 50) public insurance adjusters must be licensed by the state in which they conduct business. By the nature of professional licensure, public adjusters only handle first-party property loss claims. They prepare, present and negotiate first-party claims for their clients. Their professional code of conduct requires that they work respectfully opposite the insurance company to ensure that the policyholder recovers an agreed upon settlement that returns them to their pre-loss condition. What role do they play? When a public adjuster works on a policyholder’s claim, one of the first things he or she does is inspect the damage and analyze the insurance policy — similar in function to what the insurance company’s adjuster does for the insurance company. For example, public adjusters prepare estimates and inventories to repair or replace damaged property just like the insurance company’s adjuster does. Another similarity would be that both the insurance company’s adjuster and a public adjuster might engage an inventory specialist to establish the contents portion of a claim, the difference being that the public adjuster is always looking at the claim through the eyes of the insured. How are they compensated? Most public adjusters are paid based on a small percentage of the total loss settlement of the claim(s) with which they have assisted the policyholder. Public adjusting fees are minimal in relation to the ultimate increase in the final claim settlement and are typically more than offset by the increase. In most states public adjusters are allowed to work on a percentage fee. In those states where contingency fees are not allowed, public adjusters will charge an hourly rate or a flat fee. Although there are restrictions in some states as to when a public adjuster can contact a policyholder, a public adjuster can be hired to represent you from day one. If you run into a problem with your claim and decide to hire a public adjuster after the process has started, you may be able to negotiate the fee with the public adjuster based on an overage fee — a percentage of all new dollars received above the insurance company’s original offer as a result of the public adjuster’s work.

6 ADJUSTINGTODAY.COM Are they licensed? Forty-four states and the District of Columbia have some form of statute or regulation in place that licenses public adjusters. The five states that do not are Alabama, Alaska, Arkansas, South Dakota andWisconsin. Most licensing states also require that public adjusters complete a certain amount of continuing education each year. How are they trained? Public adjusters have special training and expertise in appraising, preparing and negotiating property damage and business interruption losses. Types of disasters they help policyholders recover from include fire, windstorm, flood, hail, earthquake, structural collapse, business interruption and extra expense claims. Training is provided by several different organizations including state departments of insurance, insurance companies and local industry groups. Membership associations such as the National Association of Public Insurance Adjusters (NAPIA) also offer educational programs for public adjusters. Additionally, NAPIA has engaged The Institutes to administer their Senior Professional Public Adjuster (SPPA) designation exams. The American Educational Institute offers both the Senior Claims Law Associate and the Property Claim Law Associate educational and designation programs for all claims professionals, including public adjusters. From a regulatory standpoint, the NAIC adopted the Public Adjuster Licensing Model Act (MDL-228) which recommends a minimum of 24 hours of continuing education per year. What do they do? Following a disaster, filing a complicated property insurance claim is one of many monumental tasks a business or homeowner faces — and it is a process with which most are unfamiliar. On the other side sits the insurance company, with experts who adjust claims daily and who are always watching out for the company’s interests. A public insurance adjuster levels the playing field, placing a professional with similar knowledge, experience and expertise on the policyholder’s side. Public adjusters work exclusively on behalf of the policyholder throughout every aspect of the claims process, helping them achieve the most favorable settlement possible. The public adjuster’s main responsibilities are to: • Conduct a comprehensive review of the policy to identify all of the coverages that may be applicable to the claim; • Assist the policyholder in complying with the policy’s requirements, which may include mitigating further damage and complying within time limitations; • Undertake a thorough review of the loss, detailing and substantiating every aspect of the claim, including the proper valuation of building damage, contents, business interruption and extra expense claims; • Present and support an itemized claim package to the insurer;

ADJUSTERSINTERNATIONAL.COM 7 • Serve as the policyholder’s advocate at all inspections and meetings with the insurance company and their experts; • Work diligently not only to negotiate the best settlement possible, but to do so in the shortest possible time frame; and • Communicate with the policyholder every step of the way. When do they enter the process? The earlier a public adjuster is brought into the process, the better the opportunities are for helping the policyholder obtain a more favorable claim settlement. A public adjuster can be hired the day of the loss and is normally involved until all settlement monies are paid out on the claim. The public adjuster does not supervise construction or oversee rebuilding; however, he or she will remain involved in the claim process until full repairs are completed and final claimmonies are paid. Insurance Producers (Agents and Brokers) Who are they? Property and casualty insurance producers (agents and brokers) sell policies that guard individuals and businesses from financial loss stemming from events that cause property damage, such as floods, fires and storms. The duties of a property and casualty producer vary from state to state. Although they have a business relationship with the insurance company, they may have certain duties owed to the insured. Generally, agents represent insurance companies and brokers represent policyholders. What role do they play? Policyholders normally purchase property insurance policies through an agent or broker. These producers assist insureds in completing applications, selecting coverages, issuing certificates of insurance, making changes to policies, invoicing and filing claims with the insurance company. How are they compensated? Most producers are paid a commission by the insurance company based on the premium billed to the insured. Are they licensed? Yes, insurance brokers and agents are regulated, usually by state departments of insurance. How are they trained? Training varies from agency to agency. Larger firms have internal training programs. Smaller, local or regional firms use resources such as The Institutes or The National Alliance for Insurance Education and Research. Both of these organizations offer certification programs. Membership organizations such as the National Association of Professional Insurance Agents (PIA), and Chartered Property and Casualty Underwriters Society also offer educational programs for insurance producers. Public adjusters work exclusively on behalf of the policyholder throughout every aspect of the claims process, helping them achieve the most favorable settlement possible.

8 ADJUSTINGTODAY.COM What do they do? Most independent insurance producers play a minimal role in the actual claims process. They can, however, assist the insured in reporting the claim to the insurance company. They may introduce the adjuster to the policyholder, after which time the adjuster takes over. When do they enter the process? With the exception of a widespread major catastrophe or disaster, once the policyholder notifies their insurance producer of a loss, most agents and brokers will come out to survey the damage right away. Normally, however, they will only be involved in the process as long as the insured wants them involved. Although they can assist in reporting the claim, producers do not normally have extensive hands-on experience in settling claims. Risk Management/Insurance Consultants Who are they? Independent risk management consultants work for the insured and not for an insurance company. They do not sell insurance or financial products. Their professional association is the Society of Risk Management Consultants, an international organization of professionals engaged in risk management, insurance and employee benefits consulting.2 Members must meet a stringent set of requirements to belong. What role do they play? Risk management consultants provide a range of valuable pre- and post-loss services and expertise such as: • Designing an insurance program to meet the policyholder’s specific needs; • Insurance audits; • Broker selection; • Risk identification; • Loss control; • Expert witness and litigation support; • Insurance policy archaeology; and • Enterprise Risk Management (ERM). How are they compensated? Risk management consultants are either paid at an hourly rate or for an agreed upon per-project price. They are never compensated on a commission basis or by a percentage of loss. Are they licensed? Licensure for risk management consultants varies by state. For those states that do require licensing, it is either as a consultant, risk manager or producer. The licenses are typically issued and overseen by each state’s department of insurance. How are they trained? Training varies by the risk management consultant’s area of expertise. Most such professionals already have insurance backgrounds. More CPAs/ accountants, lawyers, engineers and actuaries are also becoming risk management consultants than ever before. Each of these professional areas has its own educational requirements. Organizations that offer training and certification for risk management consultants include the National Alliance for Insurance Education and Research, The Institutes, the Global Risk Management Institute, the Risk and Insurance Management Society, and the Global Academy of Financial Management. States that requires licensing are likely to require continuing educational as well. How will they help me as the policyholder after a loss? Risk management consultants can assist in claim reporting. They can also help policyholders choose the other professionals needed to prepare their claim, such as forensic accountants, engineers, public adjusters, etc. When do they enter the process? Risk management consultants often will have helped the insured design their insurance program initially. This means they are knowledgable about the coverage issues involved with the claim or loss. If they are also licensed as a public adjuster, risk management consultants can begin assisting the policyholder as soon as their property is damaged. The duration of their involvement will depend on what their role and contractual requirements with the policyholder are and how much experience they have with the type of claim involved.

ADJUSTERSINTERNATIONAL.COM 9 Restoration Contractors Who are they? As their name implies, restoration contractors are called to restore a damaged property to its pre-loss condition on behalf of the insurance company. It is most common for them to be involved in the damage mitigation efforts immediately following a loss. In most cases the policyholder is under no obligation to use the insurance company’s vendor. The insured can choose their own restoration and/ or construction vendor. What role do they play? Restoration contractors put together a scope of repair for the policyholder’s loss on behalf of the insurance company, along with a cost estimate to help the insurer understand what might be required monetarily to restore the property to its pre-loss condition. Some restoration contractors will also provide services such as removing contents and damaged property from the site, and cleaning and restoring damaged items. These might include emergency services to protect a property from suffering more damage; for example, drying out a building that has suffered water damage or boarding up a roof that has been compromised by fire. How are they compensated? Often, there is a contract or work authorization between the restoration contractor and the insured. Other times the contractor works as a consultant on behalf of the carrier. Some restoration contractors might also be assisting a public adjuster. Since every claim is unique, the policyholder should clarify for whom the restoration contractor is working before signing any agreements or contracts. Since the insurance company will ultimately pay for this work by issuing a check to the policyholder, the policyholder will in turn need to write a check to the restoration contractor. Because they may have a financial interest in the claim, these professionals will sometimes even be named as an additional payee on the check from the insurance company to the policyholder. Are they licensed? Most restoration contractors are licensed as general contractors by their county or state. How are they trained? Training for restoration contractors varies. Some have college or technical school degrees in their speciality area; many if not most learn on the job. If the licensing bodies in their locale require continuing education, then local contractor organizations Zakhar Mar/

10 ADJUSTINGTODAY.COM usually provide this training. Membership organizations such as the Restoration Industry Association also provide educational programs. What do they do? Most policyholders choose not to abandon their property after a loss and want it restored because it is one of their biggest assets. Restoration contractors give the insured the ability to have their building repaired or rebuilt so they can reopen their business and/or return to normal as soon as possible. These professionals have particular expertise in and understanding of how to deal with damage from fire, mold, water and asbestos, whereas most general contractors focused primarily on new construction are not familiar with these specialty restoration areas. This distinction makes a big difference in how quickly and effectively a property is repaired or rebuilt —making it important to choose a contractor with the appropriate restoration experience. When do they enter the process? Restoration companies are usually involved very early on and may even be on site immediately after the damage has occurred. Unfortunately, some insureds will start the rebuilding process prior to having their claim settled and as a result will end up having a lot of change orders along the way. This can also result in many open items that are negotiated and renegotiated throughout the adjustment and rebuilding processes. The better approach is when insureds choose to separate the adjustment part of the process from the rebuilding— and are firm in wanting an agreed upon settlement and therefore an established budget to work with before beginning the repair or rebuilding process. Appraisers (Appraisal Process) Who are they? Although coverage interpretation issues can arise during the claims process, appraisals come into play when there is a dispute over the value of a loss; the insured, for example, believes the value of the damages to be higher than the insurer does. Disputes between insurance companies and policyholders over the amount of loss or the extent of damages can bring the entire claims process to a frustrating halt. Most policyholders feel they have no choice but to accept the demands of the insurance company. They do, however, have alternatives — and the right to an appraisal is one of the most effective options available. In fact, either side can demand an appraisal at any time. The insured and insurer each identifies their appraiser, who can be any industry expert familiar with the type of damages in question. For example, if as the policyholder you are being challenged over the cost of replacing your damaged foundation, you will want to choose a general contractor as your appraiser. The role of an appraiser is to focus solely on resolving the dispute in value. What role do they play? When one side decides to demand appraisal, the other side has a certain number of days to respond with the name of their appraiser. Once each side has selected an appraiser, the next step is to agree on an umpire in the event that the two sides still do not agree. The umpire is approved by both parties and is intended to be an impartial mediator, similar to a judge. How are they compensated? Typically, the insured and insurer each pays for their own appraiser and spilt the cost of the umpire. Are they licensed? No, they don’t have to be licensed. However, it behooves both the insured and the insurer to select appraisers and an umpire who are knowledgeable about the items or structural matter being contested. How are they trained? Although no formal training is required, as noted above, appraisers and umpires are normally experts in their specific field. Many also have backgrounds in the restoration and insurance industries. What do they do? Appraisals are designed to bring binding resolution to claim disputes when the policyholder and

ADJUSTERSINTERNATIONAL.COM 11 insurance company fail to agree on the amount of loss or extent of damages. The appraisal provision, often referred to as the “Appraisal Clause” or “Statutory Appraisal,” is included in many insurance policies for residential or commercial buildings. If the insured’s policy includes an appraisal clause, then it can be found in the “Conditions” section of their policy. Other Professionals Other professionals insureds may encounter in the course of settling their insurance claim include Building Consultants, Engineers, Forensic Accountants and Inventory Specialists. • Building Consultants Building consultants can be retained by the insurance company, the insured or the public adjuster. They work either for the insured or the insurer and their role is to put together a proper repair estimate and proper scope of repair —and to determine the most costeffective way to restore the damaged property. They also assist inmaking the determination of whether a building can be repaired or should be rebuilt. • Engineers The most common type of engineer likely to be involved in a property damage claim is the structural engineer. An important part of their role is to determine the cause of the loss. For example, why did a roofing system fail and what helped cause the damage? These professionals will also determine how to repair or rebuild the building up to current construction and safety codes. They are responsible for ensuring that the structural integrity of the building is sound. With regard to equipment losses, often a mechanical engineer will be hired by the insured, the insurer or the public adjuster, since mechanical equipment requires very specialized expertise. • Forensic Accountants These professionals bring a unique perspective to property damage claims — very different from that of a CPA or general accountant. Forensic accountants are experts at understanding tedious policy language, especially involving business income loss claims. Many insureds don’t have detailed financial records either because they were not properly kept or were destroyed in the disaster that damaged the property. Forensic accountants can help recreate these records, which are required for property insurance claims. These professionals are hired regularly by insurance companies and can also be retained by policyholders to help them prove their claim. • Inventory Specialists These specialists are used by both the insurance company and the policyholder. Their job is to go to the loss site; examine the damaged equipment, stock, personal property and/or business property; and create a detailed inventory of what was damaged or destroyed, along with its value. They perform very By doing your own research and due diligence, you can make informed decisions regarding who the most qualified insurance experts are to best assist you through the claims process.

Adjusting Today Basis for Institutes CE Courses The Institutes, the leader in providing knowledge solutions for risk management and the property/casualty insurance industry, offers continuing education courses based on technical information compiled from issues of Adjusting Today. The courses —“Valuing a Property Insurance Claim” and “Natural Disasters: Coverage Issues”— include seven modules each and are approved for credit by insurance departments in most states. They are offered to property insurance producers, adjusters or both, depending on the state, for up to three continuing education credit hours per course. More information is available at CORPORATE OFFICE 126 Business Park Drive Utica, New York 13502 800.382.2468 Outside U.S. (315) 797.3035 FAX: (315) 272.2054 Copyright © 2020 Rising Phoenix Holdings Corporation. All Rights Reserved. Adjusters International and the AI logo are registered trademarks of Rising Phoenix Holdings Corporation. Follow Adjusting Today on Facebook & Twitter: ADJUSTING TODAY® is published as a public service by Adjusters International, Ltd. It is provided for general information and is not intended to replace professional insurance, legal or financial advice for specific cases. ADJUSTINGTODAY® Adjust ingToday. com View our entire catalog of back issues, download PDF versions, subscribe and contact the editor. WEB ADDRESSES PUBLISHER Ronald A. Cuccaro, SPPA EDITOR Sheila E. Salvatore AT20 3053 detailed work in a challenging environment. Their services are essential to getting a proper insurance payout for your claim. • Attorneys/Lawyers In the event that the insured cannot settle their claim with the insurance company — even after they have done everything they can to prove their claim— the policyholder may want to engage the services of an attorney to represent them. An insurance policy is a contract between the insured and the insurance company — and experienced insurance lawyers can be very effective in pursuing the policyholder’s rights under this contract. Insurance lawyers are licensed by each state. Furthermore, they have continuing education requirements governed and regulated by the state’s bar association. Lawyers charge either a contingency fee based on the insured’s recovery or an hourly rate, depending on the firm and type of litigation involved. Lawyers often hire their own experts to support the policyholder’s case. These often include a public adjuster, or risk management or insurance consultant. Helping You, the Policyholder When home or business owners experience a significant property loss and the resulting need to file an insurance claim, there are many qualified professionals who can assist with the process of obtaining a fair and accurate claim settlement. It is important to know who they are, what role they play, how they are compensated, how they are licensed and trained — and most of all, how their involvement can benefit you, the policyholder. By doing your own research and due diligence, you can make informed decisions regarding who the most qualified insurance experts are to best assist you through the claims process. 1 Subrogation is the right of an insurer, having paid a property loss for an insured, to take over the insured’s right of recovery against a negligent third party. 2 SPECIAL EDITION