Insurance: A risky business

When disaster strikes making an insurance claim can be a complicated and time consuming job. Expert Phil Morgan offers his invaluable advice.

One in five businesses suffers a major disruption every year. A fire, flood, burglary or other major incident will have a catastrophic impact, especially if your insurance claim is not prepared thoroughly and then handled effectively.

If you don't get the most out of your claim it can even cause the business to fail. Department of Trade and Industry statistics show that a staggering 70 per cent of businesses fail within 18 months of a major loss.

Insuring your business is relatively easy but making a justifiable claim when you experience a disaster is time consuming and increasingly complex.

Not only will the upheaval caused by the incident have a significant impact on day-to-day operations, but the way you calculate a claim for business interruption and loss of profit can have a long-term influence on your pub's survival.

You may feel confident that you possess adequate cover but up to 80 per cent of businesses are thought to be underinsured.

Only when it's too late do businesses discover their recovery prospects have been dealt a serious blow or even wiped out altogether.

When faced with a crisis fast, expert advice is essential. What you say or do in the early stages of a claim can prejudice the outcome. Under pressure to get things organised it is understandable to believe your insurer's loss adjuster is an ally but this is far from the case. Employed by the insurer, the loss adjuster will be working to minimise your claim.

You might consider getting an expert on your side. Although it's hard not to view claims consultants as just another cost, there are professionals that work on a no-win, no-fee basis and are highly unlikely to cost you any additional money.

Typically, fees are a fraction of the increase they can secure in the value of your claim. And you only pay when settlement is received.

The Financial Mail has reported: "It's common for a claim consultant to secure a 20 per cent to 30 per cent increase on an insurer's original settlement offer - and it is not unknown for original offers to be more than doubled."

Whether you own or manage the pub you will need to concentrate on getting the business back to normal rather than dealing with a complex insurance claim.

How quickly and painlessly your pub manages to get back to "business as usual" following a major incident is crucial to your future success.

Phil Morgan is managing director of insurance claims consultant Morgan Clark. Freephone 0800 0975156 or go to www.morganclark.co.uk for more information.​

When disaster strikes...​

• Minimise the loss:​ It is your duty to take action to mitigate loss. Undertake emergency repairs (using reputable contractors) and secure and board up damaged doors or windows as quickly as possible or you could end up paying for part of the claim.
• Don't delay:​ Notify your insurer or broker as soon as possible. Most policies have time limits and your claim could be rejected if you're late. Burglary or theft should be reported to the police immediately or you could prejudice your claim.
• Protect your property:​ Keep everything until the insurer has inspected it. Take photographs. Cut a six-inch square sample from your carpet, curtains or tableware to prove the quality. Write down everything that happened. Collate receipts and list what is missing or damaged beyond repair. If you don't have receipts, instruction manuals or original packaging can help prove you owned an item. Photos can prove your stolen or damaged equipment was state-of-the-art technology.

Who can help?​

• Insurance broker:​ Should be able to help if the claim is small (under £5,000) and straightforward.
• Loss adjuster:​ Looks after the insurer's interests. Even the best ones are so overworked that they have little time to help, even if they wanted to.
• Claims consultant/loss assessor:​ Professionals who work exclusively for policy-holders. Fees charged are a small percentage of the settlement achieved so they have an incentive to ensure you get everything you are entitled to.
  In most cases they would expect to get 20 per cent to 30 more than if you handle the claim yourself. They know your legal entitlements and won't be pushed around by the insurer. They aim to take away the hassle and let you get on with restoring your business.

Special requirements​

Insurance policies for pubs and restaurants have special requirements and it has been known for claims to be rejected because the licensee has not adhered to them. Here are some typical examples:

• Frying ranges must be regularly serviced by a recognised specialist. The service record is an important document and must be kept up to date and produced as evidence of compliance with this clause
• Kitchen extraction systems must be cleaned regularly and records kept
• Waste should be removed each day to reduce fire risk
• Electrical certification should be kept up to date.

Case Study: the Swan, Chiddingford, Surrey​

The Swan, a large Grade II-listed building, was flooded with two feet of contaminated water when a river burst its banks in November 2000, threatening to disrupt the many functions booked through Christmas and New Year.

The insurance company sent a flood restoration contractor who installed two dehumidifiers, leaving the staff to deal with what was a major problem that needed specialist treatment.

The insurer's loss adjuster suggested the business could be back up and running in a few weeks and should be able to keep most of its Christmas trade.

Then claims consultant Morgan Clark was called in to take control of the claim. It appointed a professional flood restoration company to deal with the health hazard caused by the contaminated water and strip out saturated flooring, plaster and furnishings. Only when this work had been completed could the dehumidifiers begin to draw water from the structure of the building.

To prevent problems with wet and dry rot some walls and ceilings were removed to expose contaminated timbers to ensure they were thoroughly dried out and then treated with an anti-fungicide.

The pub wanted its own builder to undertake emergency work to the bar area to enable some trade to recommence but Morgan Clark insisted the carpets could not be cleaned satisfactorily and needed to be removed in order to allow the floor below to dry out.

It was finally agreed that the building had to be properly cleaned and restored before it could open and the work was not completed until January 2001. The Swan had lost its Christmas and New Year business but avoided the longer-term problems caused by the flooding.

The claim took six months to finalise and included interruption to trade in addition to the building works, loss of stock and contents and damage to fixtures and fittings.

The business interruption element of the claim covered loss of profits for Christmas trade and projected loss of profits for the following months.

The loss adjuster's reserve of £30,000 on the claim was based on getting the business back up and running in a matter of weeks. That didn't happen, but Morgan Clark finalised the claim at £186,500.