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After an Insurance Loss Minimize Damage, then Document

A frantic phone call is received at 2 o'clock in the morning from a condominium. Water is cascading through three floors of Building 12, a 30-unit building. At least six units (two per floor) have experienced extensive damage, and the common hallways on all three floors are also a mess.

The alarm system is blaring (or it’s inoperative), and the occupants of the 24 apartments that were not directly in the path of the inundation are without power, as the water has knocked out the main electrical service panel in the basement. What’s your “game plan” at this time? It’s obvious that a contingency plan to grapple with this scenario should have been developed beforehand.

This short article will list four steps that can be employed to help bring some relief and order to this chaotic and confusing time. Many of these steps are self evident, and require only a little common sense, but during times of crisis, rational thought may be in short supply.

Locate the Cause

First, it is necessary to locate the cause of the problem, and take steps to rectify it. Locate the broken pipe or overflowing toilet, and find the closest shut-off valve. An electrician should be brought in immediately to locate the problems associated with the alarm system and electrical panel, and restore service to both those components. This should enable the residents of the other 24 units to remain in their apartments.

Second, your own maintenance crew, or an outside disaster restoration vendor should be contacted and assembled. The advantages of engaging the services of loss mitigation companies include trained personnel, appropriate commercial grade equipment (for water extraction, drying, generators, etc.), and experience with interacting with insurers. Also, an independent entity may have more credibility with an insurance company when it is time to justify the work you did to remediate the loss.

Third, under the provisions of the insurance policy, it is a requirement that the insured take all reasonable steps to prevent further damage, like tearing out the wet carpeting, sheetrock, suspended ceilings, etc. It is also prudent to substantiate the necessity of these activities. In other words, prior to the commencement of demolition activities, you should take steps to prepare for the eventual insurance company inquiry, “Why did you tear out the plaster and carpeting in these six units?”

Documenting the extent of water damage can be accomplished with as little as a camera and a moisture meter. Place the moisture meter on the wet surfaces and it will likely register 100% saturation level. Take extensive photographs that depict both the affected areas and the corresponding moisture meter readings.

Fourth, contact your insurance agent or the insurer directly, to report the loss. If the broken pipe in this hypothetical loss occurred at 2:00 in the afternoon, rather than at 2:00 in the morning, this should be step #2 (after addressing the cause of the loss). If you will be using the services of a public adjusting firm, they should also be contacted.

Document your activities in writing, as your notes will be helpful in proving your claim.

Also, special circumstances can alter your approach. Many condo associations now have large deductibles. If the loss is likely to be less than the deductible, you may want each unit owner to get his/her own remediation company to be paid by the unit owners policy. However, if one unit owner doesn’t follow through, and allows the property to remain wet and mold results, this could have an adverse effect on the other units as well.

Stakes Are High

Failure to mitigate and document the damage properly can result in great difficulties to everyone involved in the loss. When the steps outlined above are not followed, the results are lower settlements, much aggravation, and a much longer time period to settle the loss than should have occurred.

There are still many activities that need to occur before pre-loss conditions are restored (i.e. estimation of repair costs, negotiations and claim settlement with insurer, possible loss assessment to unit owners, selection of general contractor to effectuate repairs, etc.). After completing these four steps, however, you should have progressed from “crisis mode” to one where calm, clear and rational decisions can be made.

Jonathan F. Sadick, SPPA, is vice president of the Massachusetts Association of Public Insurance Adjusters.

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