...written, questions may still exist as to the exact intent and meaning of the language. To avoid potential conflicts, not to mention disappointment after a loss, before a loss occurs ask the insurer to express the precise intent of the coverage. If possible, negotiate changes and clarifications to fit the insured’s particular needs.
As will be seen from the examples discussed in the next pages, a wide variety of clauses is available to cover the claim preparation costs needed to prove or support a property or business income loss. Some are included in the basic policy form or language; others must be added by endorsement.
In covering claim preparation expenses, think first about the specific exposures being protected against and the exact provisions that may be needed. Equally important, consider the limitations or exclusions that should be avoided. Knowing precisely what to anticipate is key to negotiating and securing the appropriate provisions.
The insured who has suffered a serious loss previously will have strong ideas as to the need for the coverage and the type of sources that should be insured for adequate protection— including dollar amounts of insurance. One who has never experienced a devastating loss, however, may face a far different challenge. A good starting point for this insured is to construct a “what if ” scenario—projecting the maximum claim preparation expenses that might occur in the event of a loss. Answer such important questions as:
To this end, we have collected and compared the loss adjustment fees coverage by discussing how carriers take different approaches to this important protection. We also offer recommendations to the prudent insurance buyer who wants to make sure the coverage he or she is arranging will best respond to the needs of the business.
Analyzed below are examples of several representative endorsements along with comments noting some advantages and disadvantages of each. We’ll start with some of the briefer versions.