How to prepare a construction site for a storm and navigate the insurance claim

Hurricanes Harvey, Irma and Maria are good reminders that though a storm can be tracked, no one can predict its fury and ultimate impact. For construction companies, keeping their project sites secure in case of a storm and being prepared to recover quickly afterwards is critical to their business.  

The groundwork should be laid before a storm is ever on the way — with a preparation plan and post-disaster emergency plan. This can vary in terms of level of detail, but it should exist. That is all many companies will ever have to do. But for those with a storm heading towards a construction site, the management team should thoroughly document the current condition of the project and initiate their post-disaster emergency plan.

To ensure an insurance reimbursement is fair and accurate, follow these key steps before a storm:

• Photograph everything on the project site including the interior and exterior space
• Have the entire construction team, including owners, contractors, subcontractors and suppliers, estimate the progress of the work as of the date of the storm and submit a bill
• Read and understand the insurance policy. Understand what type of expenditures are reimbursable, what expenditures are limited (capped) under the policy, and what expenditures are not covered under the policy.   
• Secure the office and back-up computer files to a remote location, or remove the system completely, if possible.
• Review and execute the preparedness plan
• Review all defective work identified by the architect and document its current status. If it has been resolved, obtain the documents to prove that the defect was remedied as of the date of the storm.

Immediately after a storm, take inventory of the property damage, personnel and equipment that could be salvaged. The construction management team should then work directly with insurance adjusters to secure payment commitments, repair life threatening damage and remove debris so a physical assessment of the damage can be performed. This assessment is one of the most critical tasks performed because it will establish the initial estimate of the magnitude of damage. It should be performed alongside the insurance adjuster to help mitigate disagreements that could occur in the settlement/reimbursement phase.

Be sure to document the remediation of damage with photographs. An insurance company is only responsible for putting a project back in the exact same condition it was at the time of the storm. It is the construction management team’s job to prove to the insurance company the exact status of the project at the time of the event and the extent of the actual damage.

To secure reimbursement under and insurance policy, here are five key tasks to perform:

• Accurately document the exact amount of the loss and provide adequate documentation to the insurance company. Estimates and assumptions could lead to an insurance company completely removing that item from the claim or reimbursing much less than expected.
• Track all labor (hourly and salaried) in extreme detail as to what type of service was performed, how long it took and why it is disaster related.
• Understand how the company will get reimbursed by the insurance company and the method in which they want to see the invoices (completely documented). Other financing may be needed to get remediation work started.
• Document all meetings between the parties. Distribute meeting minutes and request any corrections to inaccurate statements in writing. This helps support decisions made about the project and may be useful if litigation is necessary to resolve the claim.
• Segregate all remediation costs and expenditures from any incomplete base contract costs or normal operating expenditures.
• Remember that insurance policies usually consider claim preparation done by a third party a reimbursable cost under the policy up to a capped amount.

Due to the potential magnitude of these types of claims and the complexity of the insurance policies, they can turn into arbitration with the insurance company. Time is money in the construction industry, so establish a plan and be prepared to execute it and thoroughly document any damage. This will help achieve accurate and expeditious reimbursement while minimizing delay to project completion.

For more information on this topic, or to learn how Baker Tilly real estate specialists can help, contact our team.