...business interruption worksheet. The insured must understand clearly that the information entered on the worksheet cannot be a guess, hope, wish, or projection! Rather, it must be based on substantial fact, with past performance and current forecasts the basis for the projected numbers. Significant variances from year to year must be reconciled, so that when an actual loss occurs the insurance company’s settlement will be based on both actual experience and projected business.
In the event of a loss, the insured will have to consider the disposition of hourly employees and associated ongoing expenses. This is best handled by including ordinary payroll in the business interruption application for the projected recovery period. By continuing to pay wages, the insured is less likely to lose valuable employees.
When different insurers are providing various coverages, such as boiler and machinery and property, a joint loss agreement must be added to both policies to take the insured out of any dispute between the carriers over what caused the loss.* * *
All of these points may seem rather fundamental to the experienced broker. However, they are not fundamental to the client. Just as important, there is an opportunity here that should not be missed, and its significance goes beyond the matter of resolving the “valuation gap” itself.
Whether broker, accountant, adjuster, or another type of consultant, every professional who advises in a financial capacity bears a responsibility to help his or her client address real or potential valuation problems. In so doing, he or she should always be on the lookout for opportunities to provide good management assistance, based on his or her background and experience.
Because insurance programs are inherently complex and each professional has a unique role to play, sometimes the most valuable assistance one can offer is to recommend another service provider whose area of expertise is even more closely associated with the special need at hand. With valuation cases, the professional loss adjuster has been through the process often. As a result, he or she is best positioned to help the client in areas such as establishing property values, calculating business interruption projections and understanding troublesome policy terms and conditions.
What’s more, the adjuster used by the client for a preloss program review can—and certainly should —be used following a loss as well. Having already gained familiarity with the client, their business and insurance programs, the adjuster will be well-prepared to handle negotiations with the insurance company from the outset of the loss.
The valuation gap. It can be an obstacle to a client’s stability and success. Or it can be an opportunity to be of even greater service to them!
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Ronald A. Cuccaro, SPPA
Sheila E. Salvatore
ADJUSTING TODAY is published as a public service by Adjusters International, Inc. It is provided for general information and is not intended to replace professional insurance, legal and/or financial advice for specific cases.
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