How to Beat a Fire

NEW YORK CITY—Guiding you through risks and potential underwriting perils, Lance J. Ewing of AIG provides his market-spanning insights. A recipient of the Risk Manager of the Year for Business Insurance and Risk Innovator of the Year awards, Ewing is an internationally recognized authority on insurance, risk management, crisis management and risk financing, among many other insurance and risk-related subjects. At AIG, he serves as the leader for Hospitality and Leisure, as well as the Real Estate Industry Practice Groups.

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Dear Insurance Leader,

I recently had a small commercial property loss due to fire. Is there anything I should know for the next time (which I hope never happens!)? 

—Keeping the Fire Loss Down (Next Time)

Dear Keeping, 

Most insurance policies contain requirements describing what the insured must do if a loss to property occurs. The specific requirements vary between different types of policies, depending upon whether the loss involves property only or perhaps liability exposures. Some insurance requirements apply to all types of policies.  Examples of some of these are:

• Provide prompt notification of the loss to the insurance company or broker/agency, specifying how, when and where the loss occurred;
• Take realistic efforts to protect the property from additional damage or loss.  In some cases make reasonable and necessary repairs to prevent further loss. If repairs are made by the insured then all receipts, invoices and records of the repair expenses must be given to the company;
• Provide a signed proof of loss within 60 days after requested by the insurer (some policies may have different proof of loss days). The insurance company will provide the proper forms;
• Permit the insurance company and their representatives to inspect the damaged property as required.

In addition, most property policies require the insured to provide a comprehensive inventory of the damaged property (photos are helpful), showing the description and quantity of the damaged items or property), the actual cash value (ACV) and the amount of loss. Invoices, receipts, cancelled checks, work orders and related documents that justify the figures must be provided. Many property policies grant the insurance company the right to examine the insured's books and records.

A common misconception is that the insurance company will gather the information related to the inventory of the damaged property.  This is not the case. The insurance company also is not responsible for providing estimates for repair. Although an adjuster may prepare an estimate of the damage for the loss, it is solely for the insurance company's use.  It is used to compare with estimates to be provided by the insured who filed the claim. Complete materials must be provided by the insured to the carrier for a truthful assessment of the loss. It is the claimant's responsibility to substantiate the degree and total of the loss.

Additional information may be required, depending upon the type of policy you have. You should refer to your policy and discuss this with your insurance agent/broker and/or your insurance company.