Chapter 12 The Adjustment of the Commercial Property Loss

• Library: The Commercial Property Insurance Policy Deskbook (ABA) (2018 Ed.)

CHAPTER 12 The Adjustment of the Commercial Property Loss

After completing the claims investigation, the adjuster will complete a statement of loss at the close of every adjustment. This is the document the adjuster uses to clarify the agreement between the company and the insured. It should be part of the adjuster's final report and must be completed before the sworn proof of loss is accepted. A statement of loss is a summary, in numerical form, of the investigation and adjustment. The statement of loss always contains the following information set up in three columns and reflects the agreement between the insured and the adjuster:

• Insurance: a description of all insurance available to the insured from any source;
• Loss: a statement of the amount of the loss broken into as many categories of loss as are applicable to the particular claim; and
• Claim: a statement of the amount of claim, which is usually less than the amount of loss.

To reach the amount of claim, the adjuster usually deducts from the amount of loss the deductible, applicable depreciation or betterment, special limits of liability, and/or coinsurance penalties.

Sample Statement of Loss
Insurance	Loss	Claim
100,000
	25,000
		25,000 (250) ded. 24,750

The Commercial Property Loss

The adjustment of a commercial loss is performed by an adjuster who has knowledge of the business and the people who operate the business. Familiarity and a good working relationship over a period of months or years benefit both the insured and the insurer.

A fire can be devastating for a business if it is not rapidly put back to work after a loss. The adjuster must recognize this fact and act quickly to complete a fair and thorough investigation. To adjust the commercial property loss the adjuster must be familiar with the coverages. An adjuster must always be absolutely certain which endorsements apply to the insured. The adjuster reviews the loss notice and re-reviews the coverages to ascertain which coverages apply to the type of loss reported. He or she makes immediate contact with the insured so that he or she may inspect the loss.

If there is a potential loss of earnings, it is important to collect as much business documentation as possible so the history of the business can help to determine the amount of loss. Loss of earnings forms vary greatly. It is important that the terms and conditions are explained to the insured and that the adjuster should collect documents for analysis, possibly by a forensic accountant, including:

• four years of corporate tax returns;
• four years of profit and loss statements and balance sheets;
• bank account statements and canceled checks;
• one year of source documents on payroll, expenses, costs that continue, costs that do not continue, leases, contracts, and any other relevant business documents; and
• if business information is kept on computers, the software used and a back-up copy on a disk.

The adjuster must always conduct a thorough investigation of the scene of the loss. He or she must establish the cause and origin of the loss and obtain a general idea of the extent of the loss and what expert assistance will be required to complete the investigation and adjustment.

For example, if it is a fire loss, the adjuster must decide if a fire cause investigator is needed. If it is a theft loss, the adjuster must determine if the assistance of a forensic accountant and/or a private investigator is needed. The adjuster must determine whether the claim requires the adjuster to retain an attorney to provide advice and counsel before the adjustment could be completed.

Working with Public Adjusters

The contract the public adjuster (PA) has the insured sign appoints the PA as the agent of the insured for the purpose of making the claim and gives the PA a lien against the proceeds. This allows the commercial insured to take care of business and delegate most of the details regarding the proof of claim to the PA.

The basic common law of the United States allows an agent to act for a principal. The PA therefore acts as agent for the insured, the principal under the PA contract. Basic insurance law allows the insured, at his or her option, to assign away any portion or all of the proceeds of the policy. The PA, by the assignment, steps in the shoes of the insured. As the assignee of the insured, the PA is entitled to be treated with the same good faith the adjuster would give to the insured.

The adjuster will meet the PA at the loss location as soon as possible after the loss...