We are the BUILDING LOSS PEOPLEOUR MEMBERS

• INTEGRAL CONSULTANTS a division of Integral Enterprises Inc.

• DAVE LEMAY CONSULTING LTD.

• VALET CONTRACT SERVICES LTD. • LAMBERT CONSULTING

We Offer Peace Of Mind Through Knowledge And Expertise

PRESENTS

Property Insurance

&

the Players

PROPERTY INSURANCE

Insurance is a form of RISK MANAGEMENT primarily used toHEDGE against the RISK of a contingent, UNCERTAIN loss.Insurance is defined as the equitable transfer of the risk of aloss, from one entity to another, in exchange for payment.An insurer is a company selling the insurance; an insured, orpolicyholder, is the person or entity buying the insurancepolicy. The insurance rate is a factor used to determine theamount to be charged for a certain amount of insurancecoverage, called the premium. RISK MANAGEMENT, thepractice of APPRAISING and controlling risk, has evolved asa discrete field of study and practice.

The transaction involves the insured assuming a guaranteed and known

relatively small loss in the form of payment to the insurer in exchange for

the insurer's promise to compensate (INDEMNIFY) the insured in the case

of a financial (personal) loss. The insured receives a CONTRACT, called the

INSURANCE POLICY, which details the conditions and circumstances

under which the insured will be financially compensated.

Insurance involves POOLING funds from many insured entities (known as

exposures) to pay for the losses that some may incur. The insured entities

are therefore protected from risk for a fee, with the fee being dependent

upon the frequency and severity of the event occurring. In order to be

insurable, the risk insured against must meet certain characteristics in

order to be an INSURABLE RISK. Insurance is a commercial enterprise and

a major part of the financial services industry, but individual entities can

also SELF-INSURED through saving money for possible future losses.

Claims

Claims and loss handling is the materialized utility of insurance; it is the actual "product" paid

for. Claims may be filed by insured’s directly with the insurer or through BROKERS or AGENTS.

Insurance company claims departments employ a large number of CLAIMS ADJUSTERS

supported by a staff of RECORDS MANAGEMENT and DATA ENTRY CLERKS. Incoming claims

are classified based on severity and are assigned to adjusters whose settlement authority

varies with their knowledge and experience. The adjuster undertakes an investigation of

each claim, usually in close cooperation with the insured, determines if coverage is available

under the terms of the insurance contract, and if so, the reasonable monetary value of the

claim, and authorizes payment.

The policyholder may hire their own PUBLIC ADJUSTER to negotiate the settlement with

the insurance company on their behalf. For policies that are complicated, where

claims may be complex, the insured may take out a separate insurance policy add

on, called loss recovery insurance, which covers the cost of a public adjuster in the

case of a claim.

If a claims adjuster suspects underinsurance, the CONDITION of AVERAGE (co-

insurance) may come into play to limit the insurance company's exposure.

In managing the claims handling function, insurers seek to balance the elements of

customer satisfaction, administrative handling expenses, and claims overpayment

leakages. As part of this balancing act, FRAUDULENT INSURANCE PRACTICES are a

major business risk that must be managed and overcome. Disputes between insurers

and insured’s over the validity of claims or claims handling practices occasionally

escalate into litigation (see INSURANCE BAD FAITH).

HISTORY OF INSURANCE

In some sense we can say that insurance appears simultaneously with theappearance of human society. We know of two types of economies inhuman societies: money economies (with markets, money, financialinstruments and so on) and non-money or natural economies (using barterand trade without a centralized and/or standardized set of monetaryinstruments). The second type is a more ancient form than the first.

In such an economy and community, we can see insurance in the form ofpeople helping each other. For example, if a house burns down, themembers of the community help build a new one. Should the same thinghappen to one's neighbour, the other neighbours must help. Otherwise,neighbours will not receive help in the future. This type of insurance hassurvived to the present day in some countries where modern moneyeconomy with its financial instruments is not widespread.

Turning to insurance in the modern sense (i.e., insurance in a modern money economy,

in which insurance is part of the financial sphere), early methods of transferring or

distributing risk were practiced by CHINESE and BABYLONIAN traders as long ago as the

3RD and 2ND MILLENNIA BC, respectively. Chinese merchants travelling treacherous river

rapids would redistribute their wares across many vessels to limit the loss due to any

single vessel's capsizing. The Babylonians developed a system which was recorded in

the famous CODE OF HAMMURABI, c. 1750 BC, and practiced by early MEDITERRANEAN

sailing MERCHANTS. If a merchant received a loan to fund his shipment, he would pay

the lender an additional sum in exchange for the lender's guarantee to cancel the loan

should the shipment be stolen or lost at sea.

A thousand years later, the inhabitants of RHODES invented the concept of the

GENERAL AVERAGE. Merchants whose goods were being shipped together would pay

a proportionally divided premium which would be used to reimburse any merchant

whose goods were deliberately jettisoned in order to lighten the ship and save it from

total loss.

The first insurance company in the UNITED STATES underwrote fire insurance and was

formed in Charles Town (modern-day CHARLESTON), SOUTH CAROLINA, in 1732.

BENJAMIN FRANKLIN helped to popularize and make standard the practice of

insurance, particularly against FIRE in the form of PERPETUAL INSURANCE. In 1752, he

founded the PHILADELPHIA CONTRIBUTIONSHIP for the INSURANCE OF HOUSES from

LOSS by FIRE. Franklin's company was the first to make contributions toward fire

prevention. Not only did his company warn against certain FIRE HAZARDS, it refused

to insure certain buildings where the risk of fire was too great, such as all wooden

houses. In the United States, REGULATION of the insurance industry is highly

Balkanized, with primary responsibility assumed by individual STATE insurance

departments. Whereas insurance markets have become centralized nationally and

internationally, state insurance commissioners operate individually, though at times in

concert through a NATIONAL INSURANCE COMMISSIONERS’ ORGANIZATION. In

recent years, some have called for a dual state and federal regulatory system

(commonly referred to as the OPTIONAL FEDERAL CHARTER (OFC)) for insurance

similar to that which oversees state banks and national banks.

PROPERTY INSURANCE

This TORNADO damage to a home would be

considered an “ACT of GOD" for insurance purposes

originally but with advanced policy wordings today it

would be covered as Property insurance provides

protection against risks to property, such as FIRE,

THEFT or WEATHER damage. This may include

specialized forms of insurance such as fire insurance,

FLOOD INSURANCE, EARTHQUAKE INSURANCE, HOME

INSURANCE, inland marine insurance or BOILER

INSURANCE. The term property insurance may be

used as a broad category of various subtypes of

insurance, as shown in the following slides:

Home insurance

Home insurance provides coverage for damageor destruction of the policyholder's home. In somegeographical areas, the policy may excludecertain types of risks, such as flood or earthquakethat require additional coverage. Maintenance-related issues are typically the homeowner'sresponsibility. The policy may include inventory, orthis can be bought as a separate policy,especially for people who rent housing.

HURRICANE KATRINA caused over $80bn of storm and flood damage- FLOOD INSURANCE protects against property loss due to flooding. Many insurers in the U.S. or Canada do not provide flood insurance in some parts of the country. In response to this, the federal and or a state/provincial government created the NATIONAL FLOOD INSURANCE PROGRAM which serves as the insurer of last resort. - HOME INSURANCE, also commonly called homeowners insurance, is the type of property insurance that covers private homes. - LANDLORD INSURANCE covers residential and commercial properties which are rented to others. Most homeowners' insurance covers only owner-occupied homes.

THE PLAYERS

Claims adjusters investigate insurance claims byinterviewing the claimant and witnesses, consulting policeand hospital records, and inspecting property damage todetermine the extent of the company’s liability. Claimsadjusters have the knowledge to complete the preparationof a property damage claim which, to an unrepresentedhomeowner, may be unfamiliar territory. The documentscontain technical terms such as depreciation, replacementcosts, and actual cash value, that may be unknown to thepolicyholder and a trained claims adjuster can ensure acorrect completion.

There are several classes of claims adjusters:

• staff adjusters (employed by an insurance company or self-insured entity),

• independent (independent contractors; not insurance company employees)

• public adjusters (employed by the policyholder).

• Claim Service Representatives (employed by the Insurance Company, or

Independent Adjusting Company).

In the two first instances, and the fourth, the adjuster operates on behalf of the insurer.

Adjusters may handle "property claims" involving damage to buildings and structures, or

"liability claims" involving personal injuries or third-person property damage from liability

situations, such as motor vehicle accidents, slip and falls, dog bites, or alleged negligent

behavior. Some adjusters handle both types of claims and are known as "Multi-Line"

adjusters. Also "All Lines Adjusters" may handle "any" type of claim already identified

and also include Professional Liability, Hospital Professional Liability, Excess Liability,

Physicians and Surgeons Liability, Aircraft Liability/Hull, Inland Marine, Ocean Marine,

Boiler and Machinery, as well as various types of Bond Losses.

Claims Service Representatives employed by both independent adjusting firms andinsurers usually operate from behind a desk and do not go out into the field by rather

provide the basic paper work, and dispatch a field adjuster or restoration contractor to

the claim and have them report back to them. They are commonly called a telephone

adjuster and are becoming more common than ever before since Call Centers are nowstarting to become a common appearance. Their authority is usually very limited and

must report back to a claims examiner.

Public adjusters work exclusively for the policyholder. This means there should be no

inherent conflict of interest when it comes to advocating on the policyholders behalf to

the insurance company.

An independent adjuster could be working for multiple insurance companies or self-

insured entities.

An adjuster will frequently verify that coverage applies through an insurance policy,

investigate liability for the damages caused, and make compensation to the injured

person based on their emotional or physical property damages.

Many homeowners reach a fair settlement with the staff or independent adjuster they are

working with. In the event they are not, they can hire a public adjuster. Public adjusters

claim that many homeowners do not collect all the money to which they are entitled due

to a lack of familiarity with the claim process.

The use of a public adjuster may mitigate this risk and could help put the policyholder on

a more equal footing with the insurance companies, which increasingly use experts to

support their side of a claim settlement. Public adjusters charge for their services, the

standard rate is 10% of the claim settlement.

For example, If you suffer a $250,000.00 fire loss, the public adjuster fee for assisting you

would be $25,000.00 This $25,000.00 is taken out of your claim settlement.

The objective of a claims adjuster should be to protect the insured against not only

financial loss, but also the cost of recovering it.

Specific duties include:

• Responding to claims in a timely manner

• Filing paperwork

• Communicating with policy holders

• Investigate liability

• Assess damages

• Research, detail and substantiate each aspect of the claim, including building

damage, contents, and extra living expense claims.

• Negotiate with product/service providers on time and cost of repairs for the purpose

of making an offer of settlement to the insured.

• Ensuring accurate procedures

• Protect the interest of the insurance company the adjuster represents, when dealing

with claimants.

• Computer Skills with a high degree of proficiency.

Many claims adjusters may work long hours. Claims adjusters frequently work nights and weekendsbecause they have to make appointments to see their clients, so the adjuster must be able to adapt theirschedules in order to accommodate their clients.

The more experienced claims adjusters are able to work from home. They will receive their

work load for that day through their private fax machine or their email accounts. The most

common claim adjusters receive their assignments when they arrive at the office first thingin the morning. In the case of a severe natural disaster such as floods or tornadoes,

adjusters from another city or town are called in to support the local government. This

results in the adjuster being away from home for days at a time until all claims are

resolved.

Computer skills are essential, including keyboard skills. Most insurance companies store all

documentation digitally. Estimates, including auto and property losses, are prepared on

computers connected to a corporate network. Laptop computers, cell phones, and other

technology have made the process of claims adjusting easier and it consumes less time;however, there are positions that require physical strength as well as stamina. Property

adjusters, for example, many times are required to operate a 50-pound ladder, able to

stand, walk, kneel, crawl, and other physical demands as they investigate property that

has been damaged.

A Loss Consultant is considered as part of Financial Services in most states and provinces

therefore do not charge and provincial, state of federal tax such as PST, GST or HST. Their

duties are to be instrumental in determining value for an insurer. They will provide report

and advice on the following services.

Underwriting Reports (before the loss occurs) in the form of a Reproduction Appraisal Report is

based upon the Calculator Method of Costing which will be determined by square foot valuating

of the finished floor areas, along with square foot adjustments, and additional feature adjustments.

The rates are based upon design group, building design, class of construction, quality of

construction, exterior finish, interior finish, mechanical, electrical, size, age, condition, climate, and

site logistics (size of building, weather conditions, area, terrain, type of construction, location, etc.).

It will give values for Building Replacement Cost, Occupancy Design Fixture Costs, Bylaw Costs,

Demolition and Debris Removal Costs, Guaranteed Replacement Surcharge Cost, and the

Depreciation Percentage. It will also give photo overviews of the building, footprints, etc.

This appraisal provides the following recommended individual policy limits for the building in order

to evaluate coverage limits for an insurance policy. These limits include the following:

• Replacement Cost (RCV)

• Occupancy Design Fixtures (ODF)

• Bylaw Coverage (BC)

• Demolition & Debris Removal (DDR) [includes recycling charges, site security costs, abatement

costs, emergency service costs, structural drying costs, etc.]

• Catastrophic Cost Value (CCV) [in the event of a natural or manmade disaster labour and

materials will normally increase]

• Depreciation Applicable (ACV)

Loss Reports (after the loss occurs) in the form of a Reproduction Appraisal Report as mentioned

above.

Damage Assessment Reports - Once a large loss has occurred, limits on the insurance policy

may not be sufficient and co-insurance may come into play. Therefore when a building, be it

agriculture, commercial, industrial, institutional, or residential is damaged to this magnitude,

conserving every penny spent on the loss is crucial. The most cost effective method of

determining value is a Damage Assessment Report and scopes of damage and estimates by

restoration firms are really redundant and are not cost effective.

Since every loss is not a total loss, the Assessment of Restoration should reflect costs for cutting

and patching to existing construction; dust protection; material handling & storage; protection

of existing finishes; shift work requirements; temporary shoring & bracing; equipment usage

curtailment; and work inside secure premises, where applicable. All of these conditions are

associated with retrofitting replacement material for partial losses.

This report will include:

• a description of the construction of the property

• a footprint of the building

• extent of damage

• scope of damage for repairs

• assessment of restoration, and

• a general time frame for reconstruction

This report provides an Extent of Damage, Scope of Damage and a Damage Assessment for both

Replacement Cost Values (RCV) and Actual Cash Value Values (ACV).

Forensic Reconstruction is a specialty area whereas the consultant reconstructs with like, kind,

quality, Scopes of Damage or Repair and an Assessment of Restoration of losses which may or may

not result in an actual or anticipated dispute or litigation. It takes years of experience in

collaborating with adjusters, claims examiners, lawyers, engineers and other industry experts that so

that their reports are suitable for use in a court of law, and it is to that standard and potential

outcome that they generally have to work as forensic or investigative auditors when it comes to

insurance claims. These reports for use in court cases presentation include: reason for the report,

qualifications, problem identification if known, photographic documentation if available, scope of

damage or repair, breakdown of costs, and identify individual costs such as bylaws and code

upgrade, stabilizing and securing the building, catastrophic or conditions of risk increase in costs,

and actual cash value.

File Audits - So you think you have done everything right. There was an assigned

approved insurance contractor to complete the restoration and the project was put

out to bid. But why did the costs escalate and the insured is not happy with theresults? There are a number of reasons why. Outside influences such as government

bodies can directly impact the how the restoration process is going to take place.

There really is no control over these situations and inevitably the construction costs are

directly impacted by decisions a government body can make concerning the

restoration process.

A Loss Consultant can provide a simple audit after the job is complete or a more

complicated ongoing file audit while the job is in progress until it is finished to ensure

that proper sufficient documentation is in the file.

Large Loss Coordination - Often overlooked, after a loss has occurred, is who

coordinates the site? This is usually a more critical decision than who does the

restoration work.

Without competent supervision, restoration contractors and the inevitable construction

problems that arise during a project can quickly cause the loss to get out of control. Most

restoration projects are site managed by the restoration contractor. Letting thecontractor have a "free rein" to make decisions may seem harmless, until you consider

the consequences.

When a restoration contractor is placed in a bid situation, this usually means stripping

away restoration details that could be considered frivolous but are still part of the quality

of construction that the insured had before the loss occurred. Saving money on the

project costs is now the contractor's priority.

Restoration project site management requires extensive and diverse restorationexperience. Assessing the conditions, scoping the damage, and estimating the cost of

the restoration correctly, the site manager should be able to have the project

completed in an efficient and timely manner, staying within budget.

Although a competent restoration contractor can handle the daily site management,

who do you think he's going to protect? The coordinator provides a site management

service to protect the integrity of the loss and the restoration cost. By the time a

contractor has made the decisions to make changes in the scope of the damage to

the property, getting it back on track can be very expensive. If you don't challenge

these decisions, you imply acceptance. Trying to get the contractor to correct the

deficiencies after they have completed a phase and covered things up is nearlyimpossible. Preventing this is the role of the coordinator.

Outside influences such as government bodies can directly impact how the restoration

process is going to take place. If the insured is not confident that the contractor can

effectively manage this, then a large loss coordinator has the experience to negotiate

terms to a successful solution. We have many years of experience keeping a project on

course. We manager can speak their language, and effectively communicate

directions and concerns, to the contractor.

To know when to stop a project before costs and problems get out of control is often

the most cost effective decision to make and know when to make that call can save

money, legal costs and a restoration nightmare! Change orders in the rebuildingprocess should be issued by the coordinator and not at the request of the contractor.

It should always be the adjuster’s or the insured's decision to make changes, not the

contractor's!

A Loss Consultant will scope the damage, assess the conditions of the risk, estimate the

cost of repair, provide a schedule of the work to be performed, provide all necessary

loss reports and revisions, qualify the contractor, attend all site meetings with engineers,

inspectors, etc., provide site supervision, quality control inspections, etc. and provide

weekly status reports, until the completion certificate is signed and the deficiencies are

corrected to the satisfaction of the insured.

An independent broker's obligation to his insured is to assist him if he is having any

difficulty or concerns expediting his claim, especially if he is not pleased with the

insurance repair contractor appointed by the insurers or the general handling or

settlement of his claim. If the broker and insurer is the same (commonly called a direct

writer), or the broker is a managing general agent, then the insured cannot be duly

represented fairly and an independent party such as a coordinator can step in to

resolve the situation.

Claims adjuster and the claims examiners do have very heavy workloads; therefore it

would not be unreasonable for a file to be ignored or to fall between the cracks. Even

turning these duties over to an approved restoration contractor can have negative results

if the restoration contractor does not recognize that the extent of the claim needs moreattention than just simply putting back what was originally there before the loss occurred.

Then there is a Remedial Management sector that is a Consultant who has his own project

manager on staff that will handle a difficult loss which usually one that fall outside the box

of a normal property loss whereas your average approved restoration contractor cannot

handle due to volume of work and time restraints. Here the consultant can move the claim

along at the speed it needs to go in order to produce solutions and resolution to the loss

because of its complexity. These types of losses are handled a little differently in the fact

that they are managing the claim for the insurer and will be working on their advanced

draws. The Consultant would probably handle one or two of them a year and each would

be in the range of five figures or more.

There are three major kinds of engineers that property claims really need to address a loss.

They are structural, building envelope, and geotechnical types. The other categories such

as mechanical electrical etc. are specialized and maybe required at the say so of the

primary engineer.

Engineers should be brought in when the structure appears to be unsafe to enter the

building, and again after the emergency service has been performed and the demolition

and debris removal completed before any reconstruction takes place. This is the biggest

mistake adjusters, and restorers make, by bringing in the engineer in the beginning and not

following up with another site visit by the engineer to see the site after the demo and

debris removal.

IF THE ONLY THING YOU REMEMBER OF THIS SLIDE SHOW IS

THIS ON THE NEXT PAGE IS

INSURE TO VALUE!!!!!!!

WE HAVE DONE OUR JOB!

There once was an adjuster who liked to man the outback

of his firm’s locations so they sent him to Northern Alberta.

He was stationed in their Peace River office, and today you

can find him wandering the streets of Peace River.

Moral of the story is shown on the next slide.

Be careful of what you wish for.

Older buildings, and many newer buildings, were built during times when building codes

were less strict than they are today. If you are rebuilding or restoring a building, you may

need to meet the newer and more demanding building codes. Even undamaged parts

of the structure may have to be rewired or plumbed to meet current codes. Building

codes may also require you to replace windows with safety glass or replace roofs with fire-

retardant materials. Building code changes can add tens of thousands of dollars to the

cost of restoring a damaged building.

Obsolescence of material and labour practices can invoke the Principle of Substitution on

a regular basis in today’s marketplace; therefore quality of like kind must be monitored

closely. Dangerous materials can also lurk in these buildings which can render the

undamaged portion of the building obsolete.

If you have a building that you think falls within these parameters, call one of us for a free

consultation today.

Al Brown al.integral@shaw.ca (250) 681 – 3161

Dan Lambert dan.lambert2013@yahoo.ca (604) 657 – 2545

Dave Lemay dlemay@live.com (778) 347 – 0417

Ron Wilkes integral@shaw.ca (604) 614 - 8350

The Associated Restoration & Replacement Network (ARRN) is a consortium of Property

Loss Consulting Firms who's members have in excess of a quarter of a century of

experience in this field and have access to all faucets of services for remediation of

property.

On behalf of all of us at the ARRN, thank you for taking time out of your busy

schedule and attending this presentation.