The very first question I’m usually asked by a potential client regarding their business interruption claim is, “Are your fees covered?” The answer to this question is “maybe.”
First, I look at the policy to see if there is an endorsement for professional fees or loss adjustment expenses. Second, I make sure there are no exclusions that would exempt my services. Third, I look for the words that say these fees are only covered if they are incurred at the insurer’s request. Finally, I have the insured sign the service agreement and forward a copy to the adjuster for approval before starting work. This ensures that there are no surprises for the client, the adjuster, or me.
The follow up question is, “Will you guarantee that your professional fees won’t exceed the policy limit?” The answer to this question is “no.”
Unfortunately, the amount of expert work that needs to be done to fully document, support, calculate, present, and defend a loss valuation is not dictated by the amount of coverage for these services. It is dictated by the documentation available, the complexity of the loss, and the issues that arise during the settlement process. Additionally, I may not be the only expert involved in the claim process. There may be a need for engineers, arborists, economists, industry experts, and various other experts. These expenses are often necessary to ensure the best possible settlement and can get expensive fairly quickly. Insured’s should discuss their potential needs with their broker and work with them to place appropriate professional fee coverage limits.
What To Do When Fees Exceed Professional Fee Coverage Limits?
On a final note, I think it is a mistake to make a decision whether or not to hire an expert based upon whether or not there is enough fee coverage to make the services “free” to the insured. Here’s a story to illustrate the point: I recently finished a file where the insured had to pay over $125,000 in professional fees, when they only had $25,000 in professional fee coverage. At the beginning of the project, the client was in a real dilemma, because they knew that the project would exceed their professional fee coverage of $25,000. Should they move forward and hire their own experts, or simply rely on the experts provided by the insurance company? You be the judge. The insurance company’s experts valued the business interruption / extra expense loss at $0 for almost two years. After incurring the $125,000 in expert fees, the claim was finally resolved for slightly over $2,000,000.