Taking Control Of Your Insurance Claims -How one laundry bested catastrophic loss and the insurance industry
- Created on Tuesday, 03 April 2007 02:39
- Written by Susan Capparelle
GCLS in Gulfport, Mississippi was a highly successful $9 million dollar operation in 2005. In the 24 hours after Katrina hit business volume plummeted from 50,000 pounds of linen processing per day to zero after the facility lost 25 percent of its roof and sustained building, equipment and vehicle damage, business interruption and motor failures due to power surges.
Most devastating of all GCLS lost its entire customer base overnight. Hotels like the Monteleone, the Hyatt Regency and the Hotel Monaco in New Orleans were wiped out by the storm. The Hyatt alone was a 1,200-room hotel. That's when Gross discovered that he didn't really know the details of his insurance policy.
"We were underinsured for business interruption, our rented vehicles were not covered and we did not have flood insurance as we were not in a flood zone," he says. But ignorance was only part of the problem. Gross learned that his insurance companies would battle him every step of the way to fulfillment of his settlement claims.
Thus began David’s fight with Goliath.
"There's an unwritten understanding with insurance companies that they want to see their losses minimized," says Tom Pogue, president of Technology Loss Resources and the expert Gross hired to help him. "They want to see their restoration activities to be about 10 percent of their exposure." In plain English this means if your policy coverage totals $3.5 million, your insurer will probably offer you a $350.000 settlement.
"It's arbitrary, nothing logical," said Gross. "And if I hadn't had Tom Pogue I would have had the fight of my life to get the amount we finally settled for." Gross's own proactive and aggressive approach was another big factor in his successful outcome.
"We took the initiative and did a 3 month, 15,000 page "proof of loss" damage assessment with Tom Pogue," said Gross. In that report they accounted for each and every piece of equipment and provided extreme detail on what needed fixing because Pogue understood whom they were dealing with. Even so the insurance company's designated an "expert" engineering firm (who had no experience with laundry machinery), nitpicked and tried to discredit their report. They then came back with a 3-page report of their own which Pogue calls "laughable."
The tug of war continued for several months while Gross struggled to keep his business afloat. The insurance carrier argued there might have been flood damage but Gross had pictures proving otherwise. Since most of Gross’ damage was sustained from wind and not water, he avoided the predicament thousands of Katrina victims face now in court – being destroyed by flood and not having coverage for it.
"We encouraged them [the insurance company] to visit Atlantic City Linen which had similar equipment in use and gave them the numbers of our major manufacturers so they could get information on the industry," says Gross. However, the insurance company only approached Atlantic City Linen where the managers refused to agree with their assessment that GCLS's equipment would have been able to withstand the storm.
In March ’06 things came to a head. "We had a settlement conference and I tore the engineer apart," says Gross. "Within 45 minutes the adjuster was in my office and then it ended up being a negotiation between two men." GCLS received a settlement of 2.8 million for their equipment from a 3.4 million claim as well as the full claim amount for business interruption.
Gross also successfully filed a lawsuit against Lloyds of London in January '06 when they failed to provide a timely response to Gross's "proof of loss" under a separate policy. While half of their claims were met in full their claims for delivery carts was denied.
"We filed a claim for over $150,000 in poly trux delivery carts but the claim was denied since we could not prove that they were stolen," says Gross.
The lessons are simple. Examine your insurance contract in great detail, stresses Gross. Make sure that you have adequate coverage in all areas particularly with plant equipment (i.e. replacement value vs. book value.) It's critical that you have sufficient business interruption coverage, that you understand your "proof of loss" criteria and know what is excluded in your policy.
Keep lists and photographs (or videos) of all equipment and your building and get an insurance company rep to come to your office and explain specific procedures that will be followed to process claims in each major area (e.g. building, equipment, vehicles, or loss of income.) In the face of catastrophic loss Gross advises hiring your own expert independent counsel. But most of all be prepared. You may have a fight on your hands.
Currently, Gulf Coast Laundry is buzzing again with the re-opening of Beau Rivage and Grand Casinos Biloxi. They service eight accounts and process over 50,000 lbs a day at the plant with is at capacity on one shift running seven days a week with 100 staff members.
SIDEBAR: Thomas Pogue, Technology Loss Resources, PRESIDENT
Q: What is Proof of Loss?
A: I think it is very important for you to understand the following. And keep in mind this is all my opinion only. Typically, most insurance contracts place the burden on the insured to "prove their loss." Those words are the single most "plausible deniability" used by insurance companies to avoid paying insureds full value of loss.
"Proof of loss" is a very subjective statement in an insurance contract. This term is interpreted by each property adjuster differently. At the end of the day, the way for anyone to prevail on a property claim involving technology or machinery related equipment is to provide a proof of claim that is detailed, objective and defendable in case of litigation.
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