Loss Adjusting 101 from the Trainee Adjuster

By Tulay Tuzun

In this article we’ve decided to move slightly away from the title ‘Technically Speaking’ to ‘Trainee Adjuster Speaking’!

The aim of this piece is to provide readers with an overview of my educational/professional background and how I ended up becoming a Loss Adjuster, along with my understanding to date of Loss Adjusting.

So you’ve completed your Bachelor of Civil Engineering and decided to move overseas for a year or two… You have all these big dreams about becoming a famous Project Manager but you’ve moved to Turkey where there aren’t as many women in the Engineering industry as there are now, then what? This is the exact question that I was pondering, when I stumbled across a position in Reinsurance Broking. It sounded quite interesting but what on earth is “reinsurance”?

I am sure all those working in the Insurance industry know that many people associate the term insurance with domestic and motor vehicle insurance ONLY, let alone have an understanding of reinsurance! Over a year and a half I gained a thorough understanding of insurance and reinsurance and it did prove to be very interesting role. I had the opportunity to get involved in the reinsurance placements for a fleet of ferries, large airport construction projects, a personal accident program for pilots and political risks’ to name a few.

It was then time for me to move back home and having enjoyed my time in the insurance industry, I decided to continue down this path and create a career for myself in insurance. I worked for several years in the corporate areas of two large broking firms and then became curious about what things were like on the client’s side of the fence. I was able to secure a position at one of the Universities, looking after their insurance program but still didn’t feel it was the right fit.

I found myself back at square one and asking myself, now what? I had approximately eight years experience in the insurance industry, a degree in Civil Engineering and wanted what everybody else wants, a job where I can utilise all of my skills, a job that I enjoy, a job that is constantly challenging and a work place that I actually and want to go to when I wake up in the morning. Most thought that I was dreaming too big and my “wants” were not overly realistic. Well they were after all because they appear to have been fulfilled.  Following several discussions with mentors in the industry, various recruitment consultants and hours of research I found where I thought I may finally fit in – LOSS ADJUSTING!

So what on earth is Loss Adjusting?! By definition a Loss Adjuster is “an insurance agent who assesses the amount of compensation that should be paid after a person has claimed on their insurance policy”. It was also described to me as an investigative type role. I have learnt that it is all of this and so much more.

A Loss Adjuster is a CSI Agent, a shoulder to cry on, an insurer’s eyes and ears, the broker’s informant and an impartial party when dealing with all parties!

I thought I possessed all the skills I would require to become a Loss Adjuster but even continue to improve in this regard. A successful Loss Adjuster needs to have a wide skill set;

• Excellent communication skills, both written and verbal – I thought I possessed good written communication skills but have found out otherwise after having to work with a mentor of English descent (their English language skills are honestly much better than us Aussies!). On a more serious note, a Loss Adjuster is in constant communication with insurers, insureds, brokers, repairers, third parties etc and therefore need to possess excellent communication skills to ensure all parties clearly understand how the claim is progressing

• Ability to think critically – It is “critical” that a Loss Adjuster has this ability in order to achieve the outcome most appropriate for the claim in question. Each and every claim is different; therefore a Loss Adjuster needs to have the ability to improve their own process of thinking

• Problem solving skills – a claim is obviously a “problem” which requires “solving”. A claim may also appear simple on first glance but problems can arise throughout the course of the claim,  and without problem solving skills is not likely to be settled efficiently and effectively

• Organisational skills - A Loss Adjuster will usually manage a large number of claims at the one time, which would have all been lodged at different times and therefore at different stages. It is therefore essential to have excellent organisational skills in order to effectively manage each of the claims and ensure that they are all attended to within a reasonable timeframe

• Excellent time management - This ties in very closely with organisational skills. Again, with numerous claim files open at the one time, a Loss Adjuster needs to be able to effectively manage their time at all times

• People skills – I believe this skill set is the most critical to not only Loss Adjusting but almost all professions. A Loss Adjuster is constantly dealing with ‘people’ and these ‘people’ can sometimes be very frustrated as a result of what has caused them to lodge a claim. It is therefore extremely important to possess these skills and be tactful, sympathetic and patient, especially when dealing with insured’s

Almost two years on and dissimilar to most other roles, I am still constantly learning. In fact it looks like I will continue learning until the day I retire. Every day is a different challenge, I have not come across any claims that are the “same” and don’t think I ever will. There is no set process, each and every claim unfolds differently, one can’t simply follow a Step 1 – 10 approach.

Calling out to all potential Loss Adjusters!!

DE3 vs LEG 2 exclusions

By Gareth Barnes
 

It is common that in the majority of policy wordings that anything defective, whether it be related to design, workmanship or materials is likely to be excluded. The extent to which an exclusion will apply will depend on the type of exclusion used.

There are two types of exclusion which are most common on contract works policies. The first we will look at is the DE3. A common example of this is as follows:

“This Policy excludes loss of or damage to and cost necessary to replace repair or rectify:

1. Property insured which is in a defective condition due to a defect in design plan specification materials or workmanship of such property insured or any part thereof;
2. Property insured lost or damaged to enable the replacement repair or rectification of Property insured excluded by (1) above.

Exclusion (i) above shall not apply to other Property insured which is free of the defective condition but is damaged in consequence thereof.

For the purpose of the Policy and not merely this Exclusion the Property Insured shall not be regarded as lost or damaged solely by virtue of the existence of any defect in design plan specification materials or workmanship in the Property Insured or any part thereof.”

Basically what this says is that the insurer will not cover the repairing or rectifying a defective part (or any property lost or damaged in rectifying the defective part, but will cover the damage to other parts of insured property which is damaged as a result of the said defect.

The second exclusion we will look at is the LEG 2, an example of which is as follows:

“The Insurer(s) shall not be liable for:

All costs rendered necessary by defects of material workmanship design plan or specification and should damage occur to any portion of the Insured Property containing

any of the said defects the cost of replacement or rectification which is hereby excluded is that cost which would have been incurred if replacement or rectification of the Insured Property had been put in hand immediately prior to the said damage.

For the purpose of this policy and not merely this exclusion it is understood and agreed that any portion of the Insured Property shall not be regarded as damaged solely by virtue of the existence of any defect of material workmanship design plan or specification.”

In general terms, what this is saying is that the total cost of rectification is covered however the cost to rectify or repair the defect immediately prior to the loss occurring is the cost that is excluded.

Although both exclusions appear similar they can give very different results when put into practice. It will be noted that the DE exclusion talks about the “part” which is defective and the “parts” damaged, and the LEG exclusion talks about the “cost” and “costs” of the rectification of damage and defect.

It must also be noted that the LEG exclusion also imports a further factor, being time of the damage.

Take for example a defect relating to a chemical bond breaker used in constructing a building out of precast “tilt-up” concrete panels. The common method used involves constructing formwork to the shape of the desired panel, installation of reinforcements and then pouring of concrete into the form work to create the desired panel. Once the process is complete it is repeated, one panel on top of the other, until a number of concrete panels are poured in layers. In this scenario, the lower panel effectively acts as the bottom formwork of the panel poured above.

A chemical “bond breaker” is applied to the upper side of each panel before the pouring of the next to ensure the panels separate with no damage when the upper panel is lifted of the one below.

In this example the concrete panels have not separated properly and as a result they have cracked and broken beyond use. It is later found that the bond breaker chemical used was defective causing the concrete panels to break when separated.

If we are to apply a DE3 exclusion then it is likely that the exclusion would extend only to sourcing and re applying a new non-defective chemical. The cost to rectify the resultant damage (reconstruction of the panels) is likely to be covered.

However if we are to apply the LEG 2 exclusion we need to establish what could have been done to rectify the defect immediately prior to the loss occurring as it is this cost that is excluded. Just because there is a defect in the system, being the defective bond breaker, does not mean that the policy will respond (as clarified in the proviso to the exclusion). Clearly when the panel is lifted, the damage occurs, being the cracking. In this case the Insured would need to apply a non-defective chemical to the concrete prior the panels being separated, however this would be impossible as the panels would first need to be separated to do this. The only way to replace the defective chemical would be to demolish both panels, rebuild the first panel, apply the non-defective chemical, then reconstruct the second panel. Therefore it is likely that it is these costs of rebuilding the panels and reapplying the chemical which is excluded (i.e. the whole claim).

It is clear that when applying the DE3 and LEG 2 exclusions the extent to which a claim is covered can differ considerably. The DE3 is more based on the “parts” of the loss whereas the LEG 2 is more based on the method and “costs” of repair. The above example however is based on applying both exclusions to the same incident.

In the next example we will apply the exclusions to 2 separate claims where the extent of damage and cause of loss are identical but applying the LEG 2 policy can have different results.
It is noticed that a number of tiles have cracked on a newly installed 1^st floor veranda and the whole veranda floor will need to be ripped up and retiled. On closer inspection there appears to be a faulty joist below the floor which has slipped causing the floor to sag and crack the tiles. Immediately prior to the defective joist slipping what would have needed to be done to prevent it or “put it in hand”? As the veranda is on the 1^st floor, the Insured could have obtained access under the veranda, located the faulty joist and replaced it. This is the cost that is to be excluded and the cost to rectify resultant damage (removal and replacement of the tiles, etc) would be covered. It should be noted that in this particular instance if a DE3 exclusion is applied it is likely similar same costs would excluded as with a LEG 2.

However let’s assume that the veranda is on the ground floor. Exactly the same thing happens, however the joist is not accessible from underneath as the veranda is on the ground floor. Therefore in applying a LEG 2 exclusion, immediately prior to the loss the only way to rectify the problem is to rip up the floor to access the defective joist, repair it, then relay the floor. This is the cost that is excluded and as this is what is being claimed then all of the repairs are likely to be excluded. If a DE3 were applied then the cost excluded would just be the cost to rectify the damaged joist once the floor was ripped up and all the other costs to repair and retile the floor are likely to be covered as they are a consequence of the defect.

So based on the repair method required the LEG 2 exclusion can operate in very different ways even when the cause of loss and the extent of damage are similar.