Documenting Complex Claims After a Natural Disaster

Global natural disasters continue to rise year over year, with 2020 totaling $210 billion of losses.

As the frequency of these events rises, it is critical to have a sound plan for managing through the cost recovery phase of a significant impact on your organization. Public entity insurance/risk managers have the unique challenge of clearly documenting, segregating then correctly assigning the claim costs to potential areas of recovery existing in both insurance and FEMA for the same event.

An essential item to remember in any complex claim submission is to be proactive from the start. Keep in mind, it is the organizations’ responsibility to present the claim and the receiving party’s responsibility to review and adjust it.

Also, even though FEMA may be “the payee of last resort” following the conclusion of an insurance claim submission, it is critical to start with a holistic claim submission that includes all of your insurance policy “buckets” or assumed areas of collectability as well as potential eligible FEMA categories that may apply.

Three additional items for consideration include:

1. Prepare a Rough Order of Magnitude of your loss within the first two weeks:

To have the full view of the potential loss put into context, be sure to prepare a summary identifying all areas of your loss with associated estimated or expected costs. For example, if there is building damage, obtain contractor estimates for repair to demonstrate the ultimate costs as you choose the vendor to commence. Or, if claim items are too early to quantify, such as business interruption, include the item as “to be determined” or “TBD.” This will help the adjuster and examiner consider the worst-case scenario, including potential future claim items as they set the insurance reserve.

2. Be sure to tell the claim story in narrative form:

Another critical component of the claim submission, aside from detailed costs submissions, is the inclusion of a narrative or summary explaining the timeline and reasons for each decision made and where/how they are connected to an area of coverage in the insurance policy and/or FEMA grant.  Often an organization misses the need to put a “story behind the numbers” in a claim submission, leading to confusion on what occurred.  Keep in mind a complicated insurance claim can take between 6-18 months to settle, so a detailed narrative recounting all pertinent facts is crucial to memorialize actions and context when the time approaches for a settlement.

3. Remember how cash-flow is key to fund your recovery:

Lastly, an effective claim presentation with proper insurance coverage can become a tool for cash-flow during a loss. Remember that the insurance claim doesn’t have to be paid only at the end of the process. The adjuster can release funds as items are agreed to and supported. As the organization proves damages through the adjustment process, ask for partial payments, always work to minimize the “undisputed amounts,”: and then ask for the money. This will help the organization maintain cash flow during the recovery process and ultimately speed up the phase for FEMA to reimburse eligible remaining cost items not paid through your insurance policy.

*The views and opinions expressed in the Public Risk Management Association (PRIMA) blogs are those of each respective author. The views and opinions do not necessarily reflect the official policy or position of PRIMA.*