RHONDA DEMENO: Welcome to the WTW Senior Advisor podcast. My name is Rhonda DeMeno, and I'm thrilled to be your host for today's podcast. WTW Senior Advisor podcast series is intended to bring you firsthand information on trends and hot topics facing the senior living industry.
Today is episode 3, "Emergency Preparedness Disaster Recovery After the Storms." Our first podcast in emergency preparedness addressed preparation strategies before the storm. Our second episode addressed during-the-storm mitigation strategies. Now, today, we're going to be talking about after the storm, what to expect after the storm, and how to prepare and expedite any claims.
We'll provide insight into preparation, quantification, and resolution of large and complex insurance claims, including property damage, business interruption, extra expense, and contingent interruption, and third-party claims management. That's quite a bit, but I am so thrilled to introduce you to our panelists today.
Today, we have David Gluckman, who is the WTW risk control consultant. Welcome back, David. Happy to have you again.
DAVID GLUCKMAN: Thank you, Rhonda. Welcome, everyone. Glad to be back.
RHONDA DEMENO: And I'm also pleased to introduce everyone to Henry Daar. Henry is the WTW national property claims practice leader. Thank you, Henry, for your time today. We appreciate you attending our podcast.
HENRY DAAR: Thank you. Looking forward to the discussion.
RHONDA DEMENO: And we also have Wade Miller returning for our third episode. Wade, thank you so much for speaking to our group again today. We really appreciate your participation.
WADE MILLER: Of course, Rhonda. Thank you for having me back again.
RHONDA DEMENO: We're happy to have you, for sure.
So, we're going to start our first question with Wade. Wade, once the property is back in full operation, what becomes of all the documentation, and is it still needed?
WADE MILLER: It is for multiple reasons. So once the property is back up and running, you're still going through, as I think we mentioned before and what everybody knows, you still have to get through your insurance settlement claim if it's an insurance loss. If you have a lender on the building, you still have lender requirements, and they may be needing access to those documents. There are other internal needs you'd want to have.
So, we keep everything centralized, or encourage our clients to do this, where you have what we like to term a single source of truth, where it's all the current, latest documents so that nobody has an old version or a bad version. There's one place to go for whatever that final invoice was, or the final clearance report was, or any of the items that are necessary, that it's all in one place.
And you may need access to it for a period of time, as I'm sure will get brought up in different parts of this conversation, probably with Henry, that you could have subrogation or other things. There are other reasons why you may need to have access to this data. You want it ready to go. Store it and have it all in one place, and make sure it's the latest, current version of everything.
RHONDA DEMENO: I know, Wade, you had mentioned-- on a previous episode, you talked a little bit about mold and water damage. As a clinical risk manager, it always concerns me about the post-recovery and contagious disease outbreaks and concerns about mold outbreaks. Can you walk us through mold remediation, some key points for mold remediation?
WADE MILLER: Sure. It usually gets treated in a water loss situation as part of the loss. Let's say it's a hurricane, and so there's something going on. But if it's extenuating and it turns out to be, there's a separate mold issue that was also uncovered and the remediation process goes through, then the building owner needs to have an industrial hygienist working directly for them, with the contractor for those clearances.
Then, when they do a clearance, they give a clearance criteria. The contractor executes. The clearance reports and tests are taken. Then there's a documentation trail with somebody certified to make those claims that it's been cleared or it's in a healthy city. At that snapshot in time, obviously, anything like mold, that's a living organism, you only know at that moment in time. But at least, as it relates to that loss recovery, you can tell that the job was done correctly.
And so, residents or family members who may have a concern, you now have access to. That's where this documentation is important. It should be on a file, where people can respond to that and refer to it.
I've seen a similar thing with asbestos containment that had been present when a gentleman who knew about it just asked, hey, there was a demo on this building. Was I possibly exposed? And they were able to pull out a report saying, nope. Tests were done. Everything was clear. You were not exposed.
And it just puts people at ease, if they know that you've done it right, you can show that it was done right with a professional, and you're able to do that quickly. It saves a lot of, I think, stress and concern that other people might have.
RHONDA DEMENO: I'm sure that provides a lot of security to the residents and family members, for sure.
David, we hear the term lessons learned quite a bit. What have you found to be an effective way for building owners to learn from their experiences and the experiences of others to mitigate future disasters, related costs in both time and money?
DAVID GLUCKMAN: Absolutely. I just want to make one point referencing what you talked about on documentation. Unfortunately, if there's a major catastrophic event where there's significant structural damage or you need to replace major equipment in order to get back up and running, you're absolutely, definitely going to want to keep blueprints, spec sheets, product specifications, all the documentation that's going to come with that equipment and design documents.
Because down the road, maybe three or 5 years, 10 years, it's going to become critically important when somebody asks you about-- well, how was this building built 10 years ago or repaired 10 years ago? Or how old is this piece of equipment, or what's the model number and the serial number? From an engineering standpoint, you absolutely want to try to keep as much documentation as possible, because you're definitely going to need it for reference down the road.
And as far as lessons learned, one thing I mentioned in the previous session was, you definitely want to do a post-incident critique or an after-action report, where everybody gets together and talks about what went well, what didn't work so well. How can we improve upon preparing for or mitigating the particular event or recovering from it?
And not only that, but if you're part of an industry group or a trade group, there's a lot of, usually, information available in publications and periodicals and trade magazines and that type of stuff, where-- how did other organizations that are doing the same type of work or in the same line of business-- what did they learn? What was their experience?
So, there's no doubt that, unfortunately, these events seem to be happening so often that there's really a lot of information available out there now on what organizations did well and maybe not so well. And that's all part of the lessons learned process.
RHONDA DEMENO: Yeah. I mean, think it's critical to always go back and do a gap analysis to see if your policies are being followed, what you could have improved upon. And then, to your point, there's a ton of literature out there.
So, I'm going to now talk to Henry. Henry, thank you so much again for joining us this afternoon. My question for you is, what are the top three property insurance coverage issues for senior living communities that arise from severe weather losses such as hurricanes and floods?
HENRY DAAR: The coverage issues we see that generally involve cat losses in this space are, one, concept of pre-loss condition of the property, that they're somehow concerned by the insurance companies of what-- what was the direct physical loss or damage that was caused by the covered event?
Just a quick example. After Hurricane Irma, we had a senior facility. And Irma, 4, 5, 8 hours of 140-mile-per-hour winds, shook the buildings for that entire time. And after the loss, when it rained, the windows started to leak. And the insurance company wanted to say, well, that was all pre-existing damage, that those windows were old and that was a pre-existing condition. So, we're not going to pay for new windows.
That always seems to pop up, whether they're windows, whether there's roofs, whether there's some equipment and machinery. And the point we always make is, everything was working fine prior to the building being shake, rattled, and rolled for six hours. And what else could have caused those failures of the property, especially, as I say, when they were working fine before.
The other coverage issue that we get into-- and I'll talk in a moment about how we can address some of these issues. The other issue that we'll get to are these post-loss costs that are incurred.
Unfortunately, when the bad thing happens and you get somebody like Wade involved, a lot of things are done, and they're done to prevent further damage. And then, six, eight months later, when the costs are being assessed by the insurance adjuster, they want to take the position of, well, you paid too much, or the hourly rate was too high, or the scope of work was too expensive.
And it's very difficult and frustrating to have to do what is right for the insured and the insurance company and then, eight months later, have somebody who wasn't there come in as a Monday morning quarterback and tell us that you spent too much money. So that's the second issue.
And, probably, the third-- and it's an issue that is really becoming prevalent-- is valuations, the issues of some of the senior facilities being a little older at times and ensuring that the valuation, for purposes of reporting to the insurance company are appropriate. Because there are some provisions in policies over the last couple of years that tend to try and limit your recovery based upon the values that are submitted.
Those are the three key issues, and they are the key sticking points that prevent a proper resolution of the claim.
RHONDA DEMENO: Very good. So, given those three significant coverage issues, how can our clients prepare for the ramifications of these events that you're mentioning?
HENRY DAAR: We talked in the earlier podcast about pre-loss issues, but I can't emphasize enough, when it comes to the first issue that I talked about, which is with the pre-loss condition, when the insurance company says, hey, that was all wear, tear, deterioration. The loss didn't cause that.
As difficult and painful as it is, the pre-loss maintenance that we talked about, pre-loss surveys of your building, it is really a good idea, once a year, to go and do videos of the structure so that you have evidence of what it was like before a loss. It's good to have the residents allow you to get into their rooms and ensure that the windows aren't leaking, that you don't see water tracks on the inside, that you don't see condensation buildup.
Because you know, after a loss, especially a hurricane, you lose power. You have high humidity. You have water coming in. You're going to now see post-loss evidence of water damage. And what you want to be able to do is say, well, this is what the property looked like before, and this is what it looked like after to prevent that argument about, this was all preexisting damage.
WADE MILLER: When Henry brought that up about the windows, it reminded me of a couple of incidents where we were involved, one to the good one not so. We're going back to what we talked about, pre-season documentation to be going on not just in your loss, but along the way, where we had a couple of different cases where windows were being denied by an adjuster, saying it's all pre-loss. These are just battered, old windows.
And we were able to go back through maintenance records and find out that there was no water damage in this one particular case from windows that they could find for the last five years. And through the disaster recovery, the photos were done well enough in such that you could say there was no oxidation of the metal framing. There was no staining on the backside of the paper in the drywall to say that the water was getting in previously.
And through all of that, we're able to then conduct some other tests. And the insurance company had to reverse their decision.
When we had no documentation, there was nothing to back that up. That was the other case. But the one where we did, they were able-- they were saying it was significant. So, it can be good. But I think the documentation's critical to line everything up and be able to make that case and then work with Henry and his team. And what does the policy actually cover, and what do you need to be doing? But I think those things go in hand in hand. It could be a big benefit.
RHONDA DEMENO: I really like the video. Would you recommend doing that annually?
HENRY DAAR: Absolutely. I think annually. And look, I know that seems like a lot, but the time that it takes to do a video-- maybe it takes a full day. The cost benefit to doing so, it can reap significant dollars after a loss. It can put aside arguments that adjusters and consultants for the insurance companies raise, because you have proof. And we talk about maintenance records, how important it is.
A side note. My dad was in a very well-known senior living community. And God love my dad. But if there was a leak coming through the window, he let the maintenance people know, and rightly so. And the maintenance people came and fixed it.
So those records are really critical, to be able to say, yes, there may have been an issue, but it was taken care of. And Mr. Daar said it was taken care of. So, if Mr. Daar said it was taken care of, the loss caused the continued leaking. All of these records are just so important to memorialize prior to the bad thing happening.
RHONDA DEMENO: Very helpful. Did they ever look at residents' statements? Like, to get a statement from the resident that their windows were not leaking. Do they ever-- is there anything that can be documented based on resident feedback?
HENRY DAAR: I'm not certain that the adjusters would want to burden residents with that. But if it was important enough, I certainly could see our clients going to the residents and asking them to prepare a statement to that effect. Yeah.
RHONDA DEMENO: My next question, Henry, is, once a building is back in full operation, what remains to collect full funds from the insurance company?
HENRY DAAR: A lot of patience.
The claim process for our clients in occupancy like this-- it's not like the adjuster comes to your house, looks at the fire that happened in your kitchen and writes you a check right there. I wish that it was that easy.
Because our clients have large deductibles, the claim process is a little detailed and complex. And basically, what transpires is, the insurers have an adjuster that comes out and works with our clients, not only for the physical damage, but the business interruption. They hire consultants. They hire accountants.
One of the critical pre-loss issues that we need to reference quickly is making sure that you have an insurance adjuster that is well seasoned, well respected, well respected by the insurance market, because a good independent adjuster can get a claim resolved much faster than somebody who is not experienced. That's my one.
And two, making sure that when you have these master service agreements with restoration companies, that not only do they reach agreements with you on rates and costs, but that they confirm with our clients that those rate structures have been agreed to by the insurance company, so that we don't get into those fights after about X, Y, Z restoration company charged Y, but that's too much.
If they can assure us that they have an agreement for that rate with the insurance companies and then, all of a sudden, the rate is higher, then it's on them, not on us, not on our clients if they didn't bless-- have those blessed, then that's their issue.
So, what happens? The process is you have to get estimates. You have to do the repair work. You get paid what's called the actual cash value of a loss first. In other words, that's the replacement cost, less depreciation, not book depreciation but physical depreciation.
So, if you have a 10-year-old structure that gets destroyed and it's a $10 million repair replacement number, that you might have 20% physical depreciation over those 10 years. So, you get a check for $8 million. And then the process is, once you spend that money to start to repair and replace your property and spend more than the $8 million you receive for the actual cash value, you start to get that depreciation, $2 million back. It's a process.
The good news is, we are consistently in contact with the adjuster to ensure that the process is moving forward. And squeaky wheels get the grease, as they say.
And the problem is, when you have these large cat losses, these adjusters are pretty thin. They have a lot of claims to deal with. There's a lot of insurance company people that are busy, but we need to ensure that we don't get lost in the shuffle.
So, it's a combination of having some patience, but also having somebody there to push your claim along and ensure that you are getting advance payments, ensure that the reports by the adjusters and their consultants are getting done promptly.
RHONDA DEMENO: So, is there anything else that's needed if there are mortgage lenders involved?
HENRY DAAR: At times, yes. It's a good question but not one that is easily answered. Some mortgagees, some banks are a little more difficult than others. Most of the time-- I'll say 95% of the time, the bank wants their asset repaired and replaced. Because for them, the security for the loan is the asset.
Sometimes they want the asset. Sometimes they want to take the money, but usually they're in it for the long run for their customer. And therefore, they want to see the insurance claim paid promptly. So, the mortgagee can be a problem at times, but they're usually not. They just want the asset returned to its pre-loss condition.
RHONDA DEMENO: Pre-loss. Yeah, I could see that.
So, given your experience, Henry, with property insurance claim, what would be your number one suggestion to our clients and to senior living operators as it relates to insurance coverage for severe weather events?
HENRY DAAR: The bad thing is going to happen. We know it's going to happen. We don't know when it's going to happen. So, knowing that something bad is going to happen, being ready in advance, as we've talked about, is key. Again, making sure that your values for your property are appropriate so that you don't have any shortfalls in recovery, even if the adjustment goes perfectly.
Making sure that you have somebody on speed dial, as Wade talked about, the restoration company that is available.
And by the way, you can have more than one master service agreement. It's not an exclusive. You can have three of them. You can have-- I won't name the names of the companies, but you can have a master service agreement with three restoration companies. And then the one that's closest to you, who responds first, they get the job for that loss.
It doesn't mean you don't like the other ones, but it's all about getting somebody out there and getting somebody out there that can do the job and get your property back up and protected and back up so that restoration and reconstruction can occur as properly as possible.
RHONDA DEMENO: Wade, did you want to add anything to that?
WADE MILLER: I agree completely. You should have more than one, because-- look at your building portfolio size and where you're geographically located. And we like to tell people that they can match up to your physical locations with theirs. And you may need multiple vendors, and you should have a backup, and you should probably use two or three if you have a large portfolio, just to make sure people are engaged with the way you work, the way you want them to work for you. No reason to limit it to one person.
If you have a small portfolio, you may have different considerations. But a large one-- I think it behooves you to do that.
RHONDA DEMENO: That makes perfect sense. So, we've covered quite a bit on this topic, as far as after the storm and recovery. Any final comments?
WADE MILLER: When David was talking about lessons learned, something popped into my mind. As I would say, just act quickly when you learn the lesson. Don't wait and assume you have another year or so to act. We had a client who had a pretty substantial loss after a hurricane, and there were two items they identified that needed to be changed.
One was the slab on a large patio. And the gutters, they were not sized properly for the roof dimensions, and that created a lot of the backflow of water into a building. And a few months later, they had a distant large rainstorm. It caused the same problem. All these same areas flooded again because nobody acted quickly. It had a several hundred-thousand-dollar recurrences of a loss that could have been avoided.
So, when you learn a lesson, act on it quickly. You never know when the next event is going to happen. It could be next month. It could be 10 years. But since you don't know, take the lessons learned and act on them.
RHONDA DEMENO: Very, very good points. David, anything else?
DAVID GLUCKMAN: Absolutely. I think the common theme has been preparation, which is really the key to getting through any type of event that may happen. Having plans in place that are thorough but not too overwhelming. I mean, a plan that's 300 pages may not necessarily be as effective as a plan that's three pages. And it doesn't matter. There's no right or wrong answer as to how lengthy or how thorough or thick a document has to be. Whatever's going to work for the organization is important.
But having something that's in place, that's practiced, people have an idea as to what they need to do when something goes wrong--
Like Henry said, as far as the claims-handling process, you need to be patient. It's not going to be done overnight. It's going to evolve over a lengthy period of time. But making sure that at least that's available is certainly going to put you light years ahead of any organization that is trying to do it by the seat of their pants as the event unfolds.
RHONDA DEMENO: And Henry, to turning it back over to you, any final parting message?
HENRY DAAR: Partner with a strong broker who can help you both on the underwriting brokerage side to get you the best policy that you can, so that when the loss happens you have the maximum coverage that your risk would allow. And then, have again a broker with a strong claims group that will walk you through the process. And although I will tell you, there's no secret that the claims process can be a bit painful at times, but it is always good to have an ally holding your hand and walking with you.
RHONDA DEMENO: You need to have a good partner is what you're saying. And that certainly is so true, especially during these disaster events. So a very timely topic. We also put together a emergency preparedness white paper that will be published soon. So I would urge all the folks that are listening in to get a copy of that. And if you have any questions, please feel free. You'll be able to access our speakers today, their bios and their emails on our podcast page. So I would urge all of you, if you have any questions, please feel free to fill them to our experts. And I personally want to thank David for being on all three of our calls. Thank you, David, very much for all the valuable information that you shared with us.
DAVID GLUCKMAN: My pleasure any time.
RHONDA DEMENO: And Wade, thank you very much. You've always been such a great partner, and we really appreciate your participation and all the good information you shared with our audience today. Thanks for attending, Wade.
WADE MILLER: Yeah. Thank you, Rhonda. I appreciate it.
RHONDA DEMENO: And Henry, thank you very much for being available and talking to our listeners today. We really appreciate your valuable insights.
HENRY DAAR: Thank you, Rhonda. Have a good day, everybody. I appreciate being involved.
RHONDA DEMENO: This concludes our three part Senior Advisor Series on emergency preparedness and disaster recovery. We hope you found the information to be informative. And again, many thanks to our attendees. Thank you.
WADE MILLER: Thank you for joining us for this WTW Podcast featuring the latest perspectives on the intersection of people, capital, and risk. For more information, visit the Insights Section of wtwco.com. WTW hopes you found the general information provided in this podcast informative and helpful.
The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, incorporated in the United States and Willis Canada, incorporated in Canada.
