Claim Advocates: The Unsung Super Heroes of Disaster Recovery

October 22, 2019 Maureen Andersen

When disaster strikes – and an enterprise sustains substantial property damage and disruption of its operations – there may be millions of dollars in losses involved. In these situations, timely insurance recoveries are essential for affected businesses to repair or replace damaged facilities, maintain income, and restore critical operations to full capacity.

In these instances, experienced claims advocates can play a significant role in your ability to obtain a timely insurance recovery and minimize the delays and denials that threaten your business recovery. 

Around the world, natural disaster events have continued into 2019, already causing tens of billions of dollars of loss.  The numbers will only increase as the year progresses with the Eastern Pacific Hurricane Season and the Atlantic Basin Hurricane Season both under way, with Western U.S. wildfire season looming.  

Losses related to natural catastrophes have skyrocketed in recent years

Claim Advocates: The Unsung Super Heroes of Disaster Recovery

Unfortunately, losses related to natural catastrophes have skyrocketed in recent years. Consider the  $653 billion of incurred weather and other natural catastrophe related losses in 2017 and 2018. There were 42 catastrophic loss events in 2018, each resulting in more than $1 billion in economic losses.

In the aftermath of such catastrophes, claims recoveries can be challenging – even for organizations with large legal and risk management departments. Notably, despite their understanding of legal matters and contractual issues, corporate counsel and other legal advisers often are not equipped to navigate complex and specialized insurance policy wording, terms and restrictions.

A recent review of disputed property claims by Aon found that 73 percent of claims requiring escalation due to denials or underpayments involved policy-related issues. 

During the past several years, complex property insurance policies and program structures, restrictive clauses, narrow loss definitions, peril-specific sub-limits and their subjective interpretation by carriers, and related controversies surrounding loss causation – all have become significant obstacles to fair and timely disaster-related insurance recoveries.

Any one of these issues can result in arduous and prolonged negotiations, outright coverage denials, inadequate financial recoveries and, as a consequence, substantial and costly delays in restoring operations and performance.

Furthermore, in the context of large-scale loss events, such as those caused by natural catastrophes, including hurricanes, floods, tsunami and earthquakes, insurance company claims adjusters have the technical expertise to analyze the claim in a way that may unfairly minimize the available coverage.  

As risk managers anticipate the possibility a potentially large and complex claim, they need to consider adding professionals to their claims management teams who have the expertise to analyze the claim in a way that fairly maximizes their available coverage.

 

Delivering Results

With experience in resolving these matters effectively on behalf of insureds, property claims advocates can help businesses navigate these issues and often achieve accelerated insurance recoveries. For example, when claims advocates at Aon have been involved in large losses of $5 million or more, insurers on average have paid 55 percent more than the initial insurer offer. This results in tens of millions of dollars of additional property claims recoveries for policyholders every year. 

Property claims advocates typically work directly with clients and their brokers to help them achieve the recoveries they anticipated when their insurance program was designed and placed. In many instances, claims advocates, such as those at Aon, can even be brought in after a property claim has been declined or a coverage offer has been made that is less than anticipated. 

In these situations, Aon’s claims advocates will review the policy coverages and terms against the insurance company decisions and often can help a client resubmit its claim and obtain an increased recovery. In fact, the numbers bear this out.

For example, based on Aon’s experience, among full or partial property insurance coverage declinations, the firm’s claims advocates have successfully overturned 76 percent, delivering approximately $266 million in recoveries to clients. Equally significant, the Aon claims advocacy team has been able to work fast: 71 percent of claims the team was asked to address closed within one year of escalation with an average of 240 days from escalation to resolution and closure.

The following examples illustrate how experienced claim advocates deliver results.

 

Phone call helps client reverse a partial coverage denial
One business with a large property claim was under the impression the claim had been proceeding well for the first 15 months. That was until the client received a 12-page letter from its insurer indicating one-third of the claim wasn’t going to be paid. In making the determination, the insurer’s letter cited a web of technical coverage issues. The client turned to its inhouse, corporate counsel who reviewed the letter and the policy wording but wasn’t able to help with the key coverage issues in dispute.

The client contacted Aon and a claims advocate participated in 45-minute phone call to discuss the situation. During the call, the claims advocate provided a coverage analysis informed by his technical  background and a full understanding of the coverage issues. Following the discussion, the client was well prepared to make its case  and was able to negotiate a significantly increased recovery from its insurer.

 

Chemical Company: $20 million frozen pipe claim

Another disputed claim situation involve a chemical company. Extremely cold winter weather caused piping in its chemical manufacturing plants to freeze and fail. The company’s insurers observed corrosion in the piping and questioned whether the corrosion was a cause of the loss. The company’s insurers retained legal counsel to assess whether the insurers should consider denying all coverage for the company’s $20 million loss under the policy’s corrosion exclusion.

In response, Aon’s property claims advocates contacted all 12 insurance companies involved in the loss and made the case that the loss resulted from the frozen pipes and not corrosion and consequently was covered under the policy. The claims advocates worked with each insurer in the U.S. and U.K. to obtain their agreements to pay the loss, and the chemical company collected on its $20 million claim.

 

Resolving a major Superstorm Sandy flood claim. This claim involved significant flooding of a large industrial construction project during  Superstorm Sandy. The insurers argued that under the applicable policy terms the flood hadn’t caused any physical loss or damage to the project’s newly-constructed concrete walls and other structures.  Aon’s property claims advocates assisted the client in achieving a settlement in the tens of millions of dollars for the disputed items.

Among the lessons learned from Superstorm Sandy and subsequent catastrophic events is that the nature of insured risk is changing.  Today, businesses in all industries face an increased risk of all kinds of natural catastrophes. And when a large loss happens, the fast pace of business and the global nature of competition and supply chains drive a need for a fair and timely claim result.

When large and complex claims arise, coverage and other issues can arise with insurance companies that can significantly delay or impede the insured’s ability to obtain full and timely recoveries. So, when large claims occur, policyholders need access to quality expertise and effective claims advocacy. Against this backdrop, the ability of experienced claims advocates, such as those at Aon, to analyze the issues and advise clients on the merits is a critical resource.

Furthermore, when there are coverage arguments to be made, many risk managers and financial executives have come to recognize that Aon’s expertise and ability to directly access key insurance company decision-makers on behalf of clients are second to none.

 

Tapping Into Pre-Loss Services To Flag Potential Controversies

To avoid coverage issues when disaster strikes, many clients now engage Aon’s claims advocates to work with their brokers during their property renewals to review their programs and flag potential coverage issues before the policy is renewed.

It’s not unusual for property policies to be more than 100 pages with numerous complex and technical provisions. Because of their experience in negotiating post-loss claim recoveries, Aon’s claim advocates are well-positioned to help clients and their brokers anticipate claim issues and develop strategies to deal with them during the renewal process.

 

Aon’s CPAV: Proven Methodology Backed by Unparalleled Technical Expertise

With technical expertise that includes loss adjusters, forensic accountants, engineers, project managers, and investigators, Aon’s Claims Preparation, Advocacy & Valuation (CPAV) practice manages property and business interruption claims using proven and proprietary methodologies fashioned from 40 years of industry experience. Our work touches virtually every industry, in every geographic locale, and every form of first-party insurance. Over the years, we’ve helped clients recover more than $20 billion in loss proceeds.


Engaging Aon Property Claims Advocacy

Risk managers, financial executives and corporate counsel may want to engage Aon Property Claims Advocates for assistance with any of the following:

  • Property Coverage Reviews. Claims advocates can review property policies and coverages during renewal to spot potential controversies before coverage is placed. They also can assist during the policy year to check these issues prior to a major loss event.
  • Catastrophe Loss Response. When a major loss event occurs, claims advocates can be engaged to collaborate with the insured’s claims prep team and coordinate with the insurance company adjusters to match coverages to specific losses and causes. This can help avoid potential disputes and speed recoveries.
  • Complex Loss Scenarios. When catastrophic events occur and there are potential issues over causation or other policy issues, claims advocates can work with client’s claims team to identify coverages applicable to physical damages or operational disruption and help develop the claim narrative to present to insurers.
  • Full or Partial Coverage Denials. Claims advocates can review insurance company reasons for denials, examine losses, identify relevant coverages and escalate the claims with the insurer. Aon’s claims advocacy team has a track record of resolving a large percentage of these matters in favor of the client in an average of 240 days.

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