Do you know how beneficial it is to an insured, in instances where there might be a shortcoming of property insurance coverage, to keep and have the option to salvage any damaged equipment that might still have value? Let’s look at a real-world claim to understand this advice.
A few years ago, in the middle of a scorching hot summer, a medical building in Derry, NH experienced a huge fire. Every single medical practice within this building suffered major damage. Because of our connections, we ended up representing several practice groups that leased space in the building.
Right away, the building owner expressed impatience to start demolition; they wanted the space cleared immediately and suggested two weeks as the appropriate timeline for demo. That’s just not realistic. But we mobilized as quickly as possible, and we worked with the building owner’s representatives on where to start and which areas of the building to prioritize.
Dr. Spindel is a leading ophthalmologist in the state of New Hampshire. When he reported the claim, his insurance company – without alerting or advising us – decided to send an out-of-state “inventory specialist” to evaluate the business personal property. This inventory specialist appeared unannounced on the first day we were mobilized, by which point we were already doing our inventory on site.
Typically, the SMW team would prefer to do a joint inventory in such cases. By working side-by-side with the insurance company inventory consultant, we can usually limit the otherwise unavoidable discrepancies between the two different inventories. But scheduling conflicts prevented us from starting on the same day. So, we let him commence – with his every assurance that he would immediately share his inventory list with us.
In our view, this was not an ideal scenario. We strongly doubted that this inventory specialist, hired by the carrier and flying in from out of state, would produce an inventory as detailed or as thorough as the inventories SMW reliably produces. At the same time, we wanted to be collaborative. Moreover, it’s tempting to think (hope) that a carrier’s inventory specialist might help save time by informing the final evaluation.
Unfortunately, our concerns were justified. The inventory specialist did a classic mail-it-in job. He was barely on site long enough to eyeball the place – maybe two days, at most. That in mind, the inventory subsequently conducted by SMW’s team – which consisted of four experienced inventory specialists – took a full three days.
The conditions were grueling – we worked in the dark, surrounded by wet debris and broken glass. The heat was overwhelming — it was 100 degrees in the building, with no power and no air conditioning. In this setting, the inventory specialist might have cut corners on a time-consuming job like an equipment inventory. Whatever the reason, we could tell it wasn’t getting done the right way.
It’s important to note that Dr. Spindel’s group had a VERY large eye care practice. They leased an enormous amount of space, with a seemingly endless number of treatment, procedure and supply rooms. All of these rooms were jam-packed with expensive, high-end medical equipment and supplies.
Concurrent with our work on the claim, Dr. Spindel and his team were busy setting up a temporary location and ordering new equipment. Occasionally, we would ask one of their team members for insight into our inventory work to ensure we properly documented every item in his practice.
As if all of that wasn’t enough, both SMW and Dr. Spindel were getting pointed pressure from the building owner to empty the fire-ravaged offices. From SMW’s perspective, this impatience posed some potential problems. In an insurance claim, before anything gets thrown away, we like to present a documented claim, do a walk-through with the adjuster, and then agree on the scope of damage to the items and their respective values. In this case, we were not afforded that luxury. Building management had their own game plan that we had to work around. We tried to explain that on large claims like this one, heedlessly rushing things only undermines the claims settlement process.
Proceeding carefully is critical, because after-the-fact disputes do arise. When we conducted our inventory, for example, we specifically listed three pieces of eye surgery equipment. They were very similar, but each came from different manufacturers. After inventory, the insurance company only made an offer on one of them, claiming they didn’t see the other two. Although the doctor lacked proofs of purchase for the other two pieces of equipment, we luckily had pictures to back it up.
The insurance company brought in an “equipment expert” who never went to the loss site to look at the damaged equipment. We were shocked by their low-ball offers for Dr. Spindel’s expensive equipment. We had to push for months to find out the basis for such low prices. When we finally got the information, we clicked on the equipment expert’s links and discovered the pricing came from third-party sites based overseas. These were sellers of refurbished eye laser equipment – totally inconsistent with the unique, high-end equipment Dr. Spindel used. It was wrong to suggest that a leading eye surgeon like Dr. Spindel – who was entitled to brand-new equipment and relies on leading manufacturers who sell and support their top-of-the-line equipment – should accept refurbished equipment from out of the country.
From the other front, the insurance company was pushing to take some of the equipment for salvage. As veteran public adjusters, we know that every commercial policy contains a limit of liability, and if the insured has a property claim that exceeds the insurance amount, then the insured is the party that is entitled to keep the salvage. Dr. Spindel was informed by several of his equipment representatives that they were interested in the salvage and would pay fair prices for the used equipment. They also indicated that they would give Dr. Spindel favorable deals on the new equipment.
So don’t give up your option to salvage until you’re certain about the extent of your coverage. If you might not get full payment for damaged equipment, salvage is an important way to recoup part of that loss. You must retain your option to keep those items and salvage them.
In this claim, SMW had to use our full experience to determine if the claim would exceed the limit of insurance. Should Dr. Spindel pull some equipment that his representatives would want or that was claimable? SMW discussed this issue at length with Dr. Spindel, and we all decided to pull the items that were of interest to his representatives.
If the property insurance claim does exceed the limit of liability, the additional coverage extensions in the policy kick in, AND the insured has rights to the salvage proceeds. These extensions include coverage for computers, cell phones, debris removal, fine arts, employees’ tools, and personal effects. In this case, SMW was able to explain the different options and it all paid off in the end.
