March 20, 2023

Extra Expense Coverage: Part II


In Part 1 of this blog, we told you about a private country club that had a building burn to the ground.  As a result, they had an uphill extra expense battle to fight with the insurer.

As the public adjusters for the club, SMW regularly – on an almost weekly basis – submitted interim Extra Expense claims with invoices for these items. These were very straightforward claims submissions. We expected to hear back quickly with payment, but we did not. Instead, we received…radio silence.

Finally, after weeks of trying, we made contact with a third-party administrator (TPA) working on behalf of the insurance carrier. TPAs are essentially claims consultants, often managing transatlantic issues, that provide outsourced claims processing services. This TPA requested a full Business Interruption claim submission from us, including a BI analysis to prove the Extra Expenses incurred actually mitigated a BI loss.

We were shocked. After all, the policy provides pure Extra Expense coverage, so it’s a no-brainer that if they didn’t incur these Extra Expenses to keep the golf club up and running, that the club would lose the revenue for golf dues, food and alcohol, etc. It’s common sense! Nonetheless, the TPA continued to insist that we provide a full BI claim and analysis. This would require us to ask our client (the country club) for detailed historical profit and loss statements – a significant burden to research and produce – as well as other financial statements and information.

From our view, this insistence placed an undue burden on the insured – not to mention our own forensic accountant. If that’s what the insurance company required in order to get our clients paid, we were willing to put together a condensed review which analyzed the potential BI loss if the club was closed. We submitted the documents and BI value to the TPA and carrier. When this didn’t work, we took the unusual step of demanding Reference. That is an extreme measure, but in this instance, it was warranted.

Although this prompted the carrier – in an attempt to avoid Reference proceedings – to assign a new outside forensic accountant, they finally agreed to process payment for the claim. Our client is still awaiting the check, but we were satisfied that we advocated on the club’s behalf to ensure it received everything it was entitled to receive in this claim.

Michelle Canniff

Michelle is head of Forensic Accounting at SMW, bringing more than 25 years of experience in the field of investigative and forensic accounting. Her expertise includes analyzing and measuring commercial insurance claims consisting of business interruption, extra expense, property damage, inventory, and fidelity losses from small to complex matters.
If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.