Leadership, Knowledge, Solutions…Worldwide. CLR Underwriting / Claims Management Meeting Deb Gallagher, CPA, CFF, FCPA Jeb McPherson, CPA, CFF, FCPA November 15, 2011 Disaster Preparedness and Recovery: Pre and Post Loss Claims Management of Insurance and FEMA Claims
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Leadership, Knowledge, Solutions…Worldwide. CLR Underwriting / Claims Management Meeting Deb Gallagher, CPA, CFF, FCPA Jeb McPherson, CPA, CFF, FCPA November.
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Leadership, Knowledge, Solutions…Worldwide.
CLR Underwriting / Claims Management Meeting
Deb Gallagher, CPA, CFF, FCPAJeb McPherson, CPA, CFF, FCPA
November 15, 2011
Disaster Preparedness and Recovery: Pre and Post Loss Claims Management of Insurance and FEMA Claims
Phase 2: Pre-Disaster Scope of DamagesEstablish a Pre-Loss Checklist
Pre-loss checklist used to identify: Site/facility number and location Name of individual(s) performing inspection Date of inspection List of contact names responsible for facility Are there any trees in the power lines? Is there a generator on-site? Is the tank full? Is this facility a designated shelter location? Are there any special needs? Have photographs been taken for use as a baseline? Are roof drains/gutters free of clutter and debris? Are the window and door waterproofing (caulking/insulation) intact? Are sump pumps functioning properly? Are elevators inspected annually? Are there any outstanding maintenance items that have not been addressed?
Phase 2: Pre-Disaster Scope of DamagesBuilding Claim Considerations
Establish a threshold to determine if work should be performed in house or by contractors
Contractors will reference buildings using the building number rather than the name of the building on all documents, proposals, and invoices going forward
All proposals, contracts, purchase orders, and invoices must be tracked by building
All proposals, contracts, purchase orders, and invoices must reference disaster name/event
All proposals and invoices require a breakdown to include the following:– Debris removal-related expenses– Emergency measure-related expenses– Permanent repairs – structure-related expenses– Breakdown between wind and flood damage, when possible
Time and material (T&M) contracts for emergency repairs must include a “not to exceed” amount in order to be considered by FEMA
All proposals and/or invoices will require RS Means-type pricing details – Support documents should include material pricing, labor (time card details), equipment
usage, etc. allocated to each building or common area
Photographs tracking damages and repairs are critical to support claims being made
Phase 3: Pre-Disaster Prove Up and SupportSuggested Recordkeeping
1. Create a separate general ledger account or sub-accounts for each damaged building affected by the loss event. Track loss-related disbursements by building and use specific building loss accounts to capture loss related activity.
2. Maintain a voucher package for each claim disbursement. The voucher package should include copies of purchase orders, invoices, and cancelled check copies.
3. For all in-house, force account labor charges, provide: a. Claimed labor hours, by employee, by building location (if allocable), including a
breakdown for straight time and overtime;b. Employee time cards indicating straight time and overtime;c. Overtime payment policy per the employee handbook;d. Labor rates, by employee; ande. A breakdown of related fringe benefits including historical ratios to labor for all
4. To the extent possible, identify/code all labor, clean-up expenses, debris removal, property damage repairs, property damage replacement, and extra expenses separately by the category of repair or construction (i.e. roof, boiler, electrical, plumbing, etc.).
Phase 3: Pre-Disaster Prove Up and SupportSuggested Recordkeeping (cont’d)
5. For in-house equipment and vehicle usage, provide:a. Claimed hours, by building location (if allocable);b. Detailed description of asset type, make, model, size, etc;c. Detailed explanation of loss-related work by category (clean-up, debris removal, repairs, and
extra expenses); andd. Employee responsible for operating in-house equipment or vehicle. FEMA will apply hourly rental rates based on the type of internal asset used
6. Record a description of all other claim costs on the related invoice if not already within the body of the invoice, noting how the claim item is loss-related, and allocate the cost to a facility.
7. Be prepared to provide copies of vendor contracts, as well as invoices from any subcontractors that may have been used by a general contractor for property damage repairs.
8. Be prepared to provide copies of invoices or receipts for all employee expenses.9. Employees should be instructed to file “separate” expense reports for all costs incurred relating to the
loss event.10. We suggest that one person be responsible for accumulating purchases orders or invoices as they
are received and marking the document as loss-related. In large property damage scenarios, knowledge of the construction repairs may be necessary.
11. Department heads should create and maintain a chronology of events related to the loss and the impact that the loss has on their operations.
Phase 3: Pre-Disaster Prove Up and SupportFEMA’s Insurance Requirement
As a condition for receiving public assistance, applicant is required to “obtain and maintain” insurance coverage (for the hazard that caused the damage)
Coverage commitment will be based on the total eligible costs associated with permanent work only
Insurance commitments are based on the peril – Recent North Carolina:– DR# 4019 – Hurricane Irene (August 2011)– DR # 1969 – Severe Storms, Tornados and Flooding (April 2011)– DR # 1942 – Severe Storms, Flooding and Straight Line Winds/Tropical Storm Nicole (October 2010)– DR #1871 – Severe Storms and Flooding (February 2010)– Other Impacts: Hurricane Earl, Tropical Storm Hannah, Hurricane Ophelia, Hurricane Katrina…
Permanent work project worksheets totaling less than $5,000 do not require future insurance commitments
Technically, insurance commitments are required to cover the expected “extended life” of the repaired asset (the further you get from the date of loss, the lower the insurance commitment requirement)
Insurance requirements may be waived if the State Insurance Commissioner certifies that the type and extent of insurance required by FEMA is not reasonably available
A deductible from a previous disaster is not eligible for the same facility in a subsequent disaster of the same type (peril)
Phase 3: Pre-Disaster Prove Up and SupportPublic Assistance Planning and Considerations
Future public assistance will be jeopardized if adequate insurance coverage is not “obtained and maintained”
Phase 3: Pre-Disaster Prove Up and SupportSpecial Flood Hazard Area and FEMA’s National Flood Insurance Program Reduction Penalty
Only pre-disaster insurance requirement is for facilities located in a Special Flood Hazard Area (SFHA)– SFHA can be found on the flood hazard boundary map
Maximum amount of coverage available through the National Flood Insurance Program (NFIP) is $500,000 per building and $500,000 for contents located within a building
If adequate flood insurance is not available, FEMA funding will not occur unless damages exceed the $500,000 threshold for building and contents
FACS has been successful in minimizing the NFIP reduction penalty by strategically allocating flood coverage and recognizing uninsured losses under a hypothetical NFIP scenario
Phase 1: Post-Disaster Emergency Response Initial Inspections and Mitigation Efforts
Protect property from further damage– Utilize reputable/experienced disaster response service company – Remove water or debris as soon as possible– Board up windows and secure contents– Utilize security services to protect property
Perform initial damage assessments – Take photographs to capture “picture” of damages (label them!)– Take videos, if available– Inspect roofs, basements, windows, and other water penetration
sites to determine vulnerable areas (identifying such sites is difficult later in the process)
– Meet with vendors/contractors to establish protocols for tracking employee time, materials, etc.
Phase 2: Post-Disaster Scope of Damages Equipment and Contents Claims
Identify and inventory equipment and/or contents damaged– Serial numbers, make/model numbers, detailed descriptions– Information needed includes items cleaned, repaired, or replaced
Identify classification of contents– Furniture– Office equipment– Supplies– Machinery used in operations
Determine if experts are necessary to confirm extent of damage to key pieces of machinery and equipment
Obtain fixed asset list, a helpful resource, which provides:– Original purchase date (used to determine age and calculate depreciation)– Baseline for original purchase price (for information purposes only)– Possible missing information (i.e. manufacturer name, serial number) that
could not be identified/obtained during the field inspection
Phase 3: Post-Disaster Prove Up and SupportClaim Preparation
Protocols established during Phase 1 (Emergency Response) will help expedite claim preparation process– Advance payment requests
All data and documentation gathered in Phase 2 (Scope of Damages) will be utilized to prepare claim packages– Includes building, equipment, contents, business income, and extra
expenses
Important to update claim packages and expenditure data on a frequent basis
Detailed claim package documentation to include:– Invoices– Purchase orders– Vendor reports– Photographs– Proof of payments
Phase 3: Post-Disaster Prove Up and SupportFEMA Project Worksheets
Provides:– Damage description list with actual or estimated costs, prepared on
a location basis– Scope of work necessary to repair eligible disaster damages– Breakdown of eligible materials, labor, equipment, and contract
work– Reduction for applicable insurance proceeds to identify net FEMA
recovery
Used to:– Combine associated work into projects (small projects)– Develop scopes of work and cost estimates– Identify special considerations– Prepare documentation– Facilitate reimbursement for eligible damages
Phase 3: Post-Disaster Prove Up and SupportWhy Documentation Is Important
Accurate documentation will help:– Recover eligible costs– Collect the information necessary to develop your disaster projects– Validate the accuracy of small projects– Prepare for audits or financial reviews– Assist in responding to requirement of both the insurance claim
process and the FEMA recovery process– Avoid duplication of efforts when streamlining both processes at the
same time– Possible expediting of eligible FEMA damage review if insurance pays
Insurance claims– Settlement phase based on negotiations reached among all parties
Work together with property broker, claim advocate, and insurer
FEMA claims– Settlement and closeout phase based on work completed and
funds expended– Time consuming and tedious process– Coordination of all funding sources needed– Records must be maintained for at least three years after closeout– Undocumented eligible expenses will not be reimbursed
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