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May 2, 2013

Is your insurance broker a claims advocate?

  • Representing the contractor in a claim against the insurance company should be part of the broker’s insurance package.
    HUB Northwest


    Every construction company owner or executive has more than enough to do every day — and worrying about their insurance shouldn’t be on that list. But, as often happens, a construction company’s insurance policy can turn into a major headache when an incident occurs and the company’s insurer denies their claim or pays significantly less than expected.

    That’s when it pays, literally, for the construction company to have a business relationship with an insurance brokerage that is not just an order taker but also can serve as a claims advocate when the need arises.

    Unfortunately, here’s a scenario that may sound familiar to many construction company executives: a loss occurs (property, equipment, injury, etc.), the construction company submits what it feels is a legitimate claim to its broker or directly to the insurance company, and the insurer — for reasons that make sense to the insurance company but perhaps not to the contractor — denies the claim or agrees to settle for a reduced amount.

    What to do?

    For construction companies that work with brokers who also serve as claims advocates, the answer is to get the broker involved. Ideally, the contractor would have shared the claim initially with the broker before it was sent to the insurer.

    An experienced broker will go to bat for the contractor, presenting the insurance company with legitimate reasons — based on experience, legal rationale and other factors — to honor the claim.

    Like every business, insurance companies exist to make money. Thus, it’s no surprise that they’ll closely analyze every claim and honor only those that they believe meet their standards.

    What advocates can do

    Construction companies should not view their insurance broker’s claims department simply as an administrative function that takes information about the claim, submits it to the insurance carrier and then backs away and lets the insurance company handle it. They should understand that a broker’s claims department should be able to:

    • Work with the insurer to reinstate coverage if it was previously denied.

    A claims advocate can explain to the insurer why the claim should be honored, for legal and other reasons. He or she will use terms and arguments that perhaps the broker has learned while on the insurance carrier side of the business and which, understandably, would not be familiar to the contractor. An example: A local construction company was awarded $260,000 by its insurance carrier — due largely to the persuasive efforts of the broker — for a loss after the carrier had initially denied the claim.

    • Maximize the benefits owed and paid by the insurance company.

    If the insurance company identifies a certain dollar amount for a claim following its assessment and evaluation of the loss, the broker can present an alternative, higher amount to the insurance adjuster based on its separate evaluation. The adjuster will often choose the broker’s higher amount.

    • Apply knowledge of jurisdictional case law and legislative statutes that can positively affect a claim’s outcome.

    Often, insurance adjusters that work on claims made by construction companies in Washington are based out of state and use the approach that works in their state to settle claims here. Washington, however, is very friendly to insurance-policy holders. An experienced broker can work with the out-of-state adjuster to review Washington case law to help them determine that, for example, their denial of coverage is off-base here.

    • Have industry contacts and resources that can be used for the contractor’s benefit.

    When a dispute arises with the insurance company, it’s in the contractor’s best interest to be represented by a broker who knows and has worked with the insurance company’s local representatives (attorneys, insurance adjusters and the like). An insurance broker with a sterling reputation, who maintains cordial relationships with attorneys and insurance adjusters that are sometimes on the other side of the negotiating table, is the contractor’s friend. Plus, an insurance broker who previously was employed on the insurance-company side of the business can offer the contractor valuable perspective on the insurer’s point of view.

    • Use its influence with the insurance company, based on the size of the insurance brokerage and its volume of business with the insurer.

    In this case, bigger really is better.

    No magic bullet

    Insurance brokers who serve as claims advocates understandably can’t guarantee that their efforts will help contractors obtain a higher claim from an insurance company or reverse a claim denial. In fact, one duty of a reputable insurance broker is to tell the client when an insurance company’s offer is reasonable and thus should be accepted. There’s no magic bullet.

    But having an insurance-broker-as-claims-advocate in a contractor’s corner is like using a doctor or lawyer for your personal health or legal needs: The possible outcome for your claim will probably be much better than if you go it alone! And, the good news: Unlike a doctor or lawyer, the insurance broker won’t charge extra for his services. Representing the contractor in a claim against the insurance company is part of the package when the contractor purchases insurance through the brokerage.

    RFP process

    There are a lot of insurance brokers out there. How does a contractor identify the ones that will be claims advocates, rather than simply info-gatherers, when the need arises?

    It starts with the RFP process when the contractor is seeking an insurance broker. Ask about the broker’s claims department, including the experience of the individuals in the department, and whether they have experience working on the insurer’s side prior to moving to the broker side. Ask how they’d handle hypothetical situations or real situations that the contractor may have experienced.

    The puzzle view

    Brokers who are claims advocates view insurance claims as somewhat of a puzzle. Helping a client with a claim is akin to laying out the pieces of a jigsaw puzzle and ultimately putting them together to obtain the picture (or settlement) that matches the customer’s goal. Every claim is a new puzzle, it’s a matter of navigating through the disparate pieces and placing them in the right order to reach a just settlement.

    Another way to look at it is claims are the insurance “product” and when the need arises, the contractor should be reasonably confident that his or her claim will be treated fairly. Otherwise, the contractor’s insurance policy is little more than a piece of paper.

    Both of those views call for an insurance broker that will serve as a claims advocate with the contractor’s best interests top-of-mind.

    Trent Schultz, CPCU, LPCS, AIC, is claims manager at Bothell-based HUB Northwest, which provides general commercial insurance, group benefits insurance, surety bonds and risk management products to construction companies.

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