Proving an Insured Loss: Policyholders Need Experts Too


...additional amount of insurance beyond the limit of liability. When a loss exceeds 91 percent of the policy limits, recovery of loss preparation costs, even if not exceeding 10 percent of the loss, could be reduced. If the loss equals or exceeds the limit of liability, no coverage is available for loss preparation costs. Note that any expenses relative to inventory or appraisals prior to the loss are not covered, nor are legal and court costs. Policies using this formmay include a deductible that limits coverage.

Below is one of the more comprehensive endorsements reviewed from an excess policy developed by a surplus lines broker and it provided specific coverage for public adjusters fees.

4. “ Pays the named insured for any reasonable expenses incurred after a loss for the preparation of inventory of damaged and undamaged goods.” (The insurance policy requires this of the insured, but expenses are not always covered.) “Reimburses the named insured for expenses incurred as a result of ‘going’ to appraisal.” (Under normal practices, the insured is expected to pay his own appraiser and 50 percent of the expenses of the umpire. These expenses are usually not recoverable under the insurance policy.) “Pays up to 10 percent of the adjusted loss for the services of a public adjuster.” (Normally the insured should pay the public adjuster, but this coverage recognizes that the public adjuster performs many of the services the policy requires of the insured.)


This form is very unusual with respect to its explanation of the coverage. It points out the inherent advantage of the coverage, which is extended specifically to cover public adjuster fees up to 10 percent of the amount of the loss, and to cover costs of any appraisal process which are not covered under conventional property insurance.

In contrast to thedepthand clarity of theprevious examples, the following “Loss Adjustment Expense” endorsement included in a policy issued through a national insurance broker may not serve business clients who require the services of a public adjuster very well.

5. “This policy is extended to include expenses incurred by the insured, or by the insured’s representatives, for preparing and certifying details of a claim resulting from a loss which would be payable under this policy. However, this company shall not be liable under this clause for expenses incurred by the insured in utilizing the services of a public adjuster.”


While this clause has no limits, it is not clear whether these costs are subject to or apply in excess of the policy’s limits. The intentional exclusion of coverage for public adjuster’s fees prevents the insured from recovering a claim cost whichmay be required in a complex loss situation.

Basic Considerations

Here are some questions to consider when researching loss adjustment expense coverage: