A case study on claims management
Editor's note: The following is sponsored content from Crawford & Company
In the Southeast, a high-rise student housing building featured all the amenities one would expect in a luxury hotel. But during a recent holiday season, while students were away on winter break, temperatures dropped and a cold spell set in. On Christmas Eve, with the building essentially vacant, pipes froze and a leak occurred on the building’s upper levels.
“The building management team was off on holiday, and so this water was able to run for a considerable amount of time before the leak detection systems picked it up,” says Chris Wilkie, Crawford Global Technical Services. Time passed, water traveled, and while teams were mobilized to diagnose the problem and turn the building’s water off within a reasonable amount of time under the circumstances, the building sustained significant damage and 150 student residents were about to have their post-holiday living situations disrupted.
There was no avoiding the fact that this would be a sizable loss. While it could have easily spiraled out of control given the type of damage, number of people involved, and the timing with the holiday complicating the response; the combination of prompt action, competent expertise, a knowledgeable building owner, and superb communication led to a speedy, favorable resolution.
This unfortunate event, and especially the effective response to it, offers tips and lessons for dealing with freeze claims, especially in areas where such losses are increasing in frequency but have not been historically common.
The positive steps in this case began with a prepared insured, highlighting the importance of prioritizing risk management before a loss occurs. “They had a preferred vendor already,” notes Wilkie, “so they were able to leverage that preexisting service agreement they had to get the vendor out there relatively quickly.” The insured also had a solid facilities team on-site that knew the building well and was able to get the mitigation vendor set up and mobilized quickly.
After getting the appropriate teams on-site, the biggest challenge was coordinating the many moving parts involved in a claim like this. There were numerous parties to communicate with, including multiple vendors, insurers on the risk, the insured, and the 150 students who no longer had housing to return to after the winter break. Dealing with this challenge highlights the need for experienced, proactive claims professionals who know how to handle complex claims. Vendors must stay on task, insurers must be kept in the loop, and the claimant’s considerations must be taken into account to prevent a large claim from becoming a catastrophic one.
In this case, the task fell to Wilkie and Casey Williams, also with Crawford Global Technical Services. While Wilkie handled communications with the vendors and consultants, and oversaw outreach to the students; Williams handled conversations with the carriers and with the insured’s portfolio manager.
On finding alternative accommodations for 150 students, Wilkie says, “We only had a limited window of time to figure out a solution: We could either break leases, find hotels, or find out if there was any other capacity to temporarily house people. And then, of course, it’s ultimately up to the students what they want to do.” In the end, prompt action led to nearly all of the students having a plan in place before they returned from break.
For Williams, meanwhile, dealing with the insurers involved a different kind of communication. “For the most part, it’s really just level-setting their expectations,” Williams says. “Insurance carriers expect regular, responsible reporting to keep them apprised of the process.”
Ultimately, mitigation and dry out wrapped up by the end of January, and two months later, by April 1, the building was back online. It took multiple crews, a lot of work, and, most importantly, effective coordination and oversight of everyone involved to ensure the work got done promptly and costs did not spin out of control. Because of the prompt communication with the students, there was very little fallout as far as negative social media posts and publicity. Because dam- age was assessed early, the right vendors were brought in, and adequate oversight was in place to make sure the work was done properly and according to plan, the building was able to carry on with minimal disruption to leasing.
Lessons Learned and Top Tips for Handling Freeze Claims
As mentioned, this particular claim teaches valuable lessons when it comes to freeze claims.
Location. First and foremost is where this loss occurred. Freeze losses are migrating deep into the Sun Belt—from Arizona, to New Mexico, to parts of Florida as well. Risk managers in these regions need to be made aware of this new reality so they can adequately prepare. Older buildings in the Sun Belt in particular may not be designed for colder temperatures. Claims professionals and risk managers should be in communication with each other long before cold weather sets in to evaluate properties.
Preparation. Another key preventative step is knowing beforehand which vendors will be brought on-site and establishing good relationships with them. Commercial insurers should build those relationships to get the right teams to the multiple risks they insure. Risk managers should also reach out and con- tract ahead of time with mitigation vendors. After a freeze event, there may be widespread damage across an entire region, stretching resources thin. Which properties get prioritized may well come down to the relationships established long before the event. In the claim analyzed above, the building owner’s relation- ships and contracts with a preferred vendor played a crucial role in getting the right people on-site during a major holiday.
Prompt notice. In this claim, prompt notice was complicated by the fact that residents had departed for winter break and the building staff was home for the holiday. Still, notice was given as soon as the damage was discovered, which helped limit the size of the claim. With prompt notice, the right experts and vendors can be brought onto the scene and perhaps address an initial problem before it spreads. “It really does reduce the amount of the claim because you might not have an entire building you need to replace pipes in,” notes Williams. “You might just have a garage, for instance.”
Expertise. Experienced claims professionals can make all the difference during a freeze claim and can prevent a water loss from becoming a complex claim. If the insurer or adjuster simply hands the process over to vendors, costs could rise quickly. Adjusters must understand the damage and causes, and also how to man- age the complicated process of mitigation and recovery. Knowledgeable adjusters can anticipate and quickly resolve most concerns that will be raised by the numerous stakeholders involved in a freeze claim.
Independent investigation. Experienced adjusters must assess freeze claims independently so they can form their own opinions of the damage and how to remediate and repair it. “Sometimes when you get on-site, you’re met in the parking lot by the insured and their team and their broker.” says Wilkie. “It’s good for the adjuster to take the time, step back, and evaluate it on their own independently.”
Setting expectations. Claims adjusters need to set expectations up front with mitigation vendors and the insured. These expectations should include milestones, deliverables, equipment sufficiency, resourcing, and processes. The adjuster must have a project management mentality to make sure timelines are met and costs are controlled.
Communication and coordination. Hand-in-hand with setting expectations, adjusters must communicate clearly and stay involved throughout the claims process to coordinate remediation and recovery and ensure the expectations set early on are being met.
An adjuster who touches a claim at the outset and then never looks at it again will likely be surprised to find out that an expected cost of $50,000 has spiraled to $300,000. By contrast, an adjuster who has followed all of the steps above—who has established relationships with the vendors, set expectations, and stayed involved throughout the claims process—will likely experience a much more predictable and favorable resolution.
Chris Wilkie is international executive general adjuster and cyber incident manager at Crawford Global Technical Services. chris_wilkie@us.crawco.com
Casey Williams is executive general adjuster at Crawford Global Technical Services. casey_williams@us.crawco.com
