BRYANT INSURANCE LOSS ADJUSTERS
YourRef Mr A Jones
Policy Deductible
RecommendedInterim Payments
SupplementaryReport
0090/482/91078
ZP/937/21298
Theakston Manufacturing (Pty) Ltd
Fire in Insureds warehouse 5 March 2021 14 Preston Road Industrial Sites Ravensview
One – 10 March 2021
Assets All risk PolicySection 1 – Material Damage
On all the Insureds assets Section 2 – Business Interruption On loss of gross profit Additional increase cost of working Nil R500 000
1. Material Damage
2. Business Interruption
Gross Estimate
Less: Interim Payment OUTSTANDINGESTIMATE
R125 973 500 R25 973 500 R 1 000 000 R26973500 R3 250 000 R4 750 000 R8 000 000 R 500 000 R7500000
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RevisedEstimates
Overview
Asummaryoftheclaimisprovided.Theintentionistonotrevisetheentirecontentofthe preliminaryreport,butrathertoprovideabriefsummary(whichshouldbenolongerthan halfapage),topreparethereaderofthereportforthecontentofthecommunication,all outstandingmatters,developmentsandfurtherrecommendationswhicharebeingdealt with.
ItisessentialthatthereportwriteradviseInsurersonthepurposeofthereport,whichisto:
motivateaninterimpayment
provideanupdateondevelopments;and
reviseclaimsestimates.
OutstandingIssues
Inthepreliminaryreport,theadjusterislikelytohaveraisedareaswhichrequirefurther investigation.Thissectionofthereportclearsawayanyoutstandingmatterswhichmayhave beenraisedinearlierreports,forexample,establishingthecauseofthefire,commentingon thestructuralintegrityofthebuildingetc.
Theinformationprovidedunderthissectionofthereportisgenerallynotdealtwithunder one,butrather,anumberofheadings.Examplesofpossibleheadingswhichcouldbeused aresetoutinFigure3.3.
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OverviewSection Asset’spolicy Summary FirePolicyetc Summary OutstandingIssues Developments CauseofLoss Police,FireBrigade Engineersreport Extentofdamage Furtherinvestigation Policyliability Claimsmanagement ClaimsSection Summary ValueatRisk Building,contents etc Revisedestimates Average Grandsummary Adjuster’s requirements Considerations Recovery/Salvage Figure3.3
Inthelargerandmore complicatedclaimit isnotfeasible,orevenpractical,todealwithevery issue at the same time. For this reason, a progressive, ongoing system of conveying information to Insurers is the most practical manner of dealing with the issue. It also makes sense to advise your Insurer of issues which have yet to be finalised must be dealt with in future communication.
Developments
Having dealt with all outstanding issues, the developments on the claim are now outlined. Figure 3.3, once again, provides a summary of some of the headings which might be found in some of the development sections of the report.
The heading Further Investigation is self-explanatory. The report writer uses this section of the report to chronologically list issues which have a bearing on the claim and ultimately Insurers’ interests. While Figure 3.3 provides some headings, one might find the type of information conveyed is usually the following: -
Issues which might raise questions as to the Insured’s integrity which became apparent after submission of the preliminary report;
Factorswhichmighthamperthereconstruction or financial recoveryprogramme,i.e., subsequent riots or security;
The Insured may choose to make improvements or alterations during the recovery period, after the claim, which would need Insurer’s approval
To conclude, after submission of information on the claim under the Developments section, Insurersaremadefullyawareofnewdevelopments.ThesituationofInsurersbeingpresented with a completely different picture of the claim in the final report than that which prevailed at the time of submission of the preliminary report is thus avoided.
Claim
It may well be that at the time of submitting the supplementary report, the adjuster is able to deal with and finalise certain sections of the claim. The intention is to handle any issues relating to the adjustment of the claim, which is the adequacy of the sums insured, builders’ quotations which may have been obtained, developments on the contents claim and any other issues which relate to estimates or cash flow.
It is usually at the interim report stage that the adjuster has more accurate figures available on which to base the estimate. Furthermore, if a request for an interim payment is being made, Insurers will most certainly require comment on the following: -
The extent of expenditure incurred by the Insured to justify an interim payment being made.
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Accurate financial management of Insurers’ funds is the adjuster’s most important function. Regular revisions and detailed estimates go some way to instilling confidence.
An overview of the claim and the likely effects of under-insurance are reported on, giving Insurers the comfort that they are not paying more than they should.
Once again, Figure 3.3 provides a summary of some of the headings used. It must be appreciated that the headings provided are not an exhaustive list of what is available to the report writer.
Summary
Under this section of the report, an overview of the estimate is provided, interim payments are brought to account and the adjuster may conclude the report by setting out what he requires of Insurers in the future management of the claim.
To conclude, a well-presented interim report will instil confidence in the adjuster’s handling of the claim, serves as a record as to how the claim is being managed and, finally, gives the Insurer the opportunity of intervening in the claims handling process if issues arise which are not to their satisfaction.
Annexures
Quite often, report writers find themselves in the position of being unable to decide how much of a consultant’sreportto include in their submissionto Insurers, or how much to leave out. The “rule” of effective use of annexures to a report is as follows: -
When referring to a consultant’s report, introduce the submission as follows:“Annexures A contains a report submitted by Dr Jones dealing with the ignition of the electrical system”
In the body of the adjusters report, extracts from the report can be submitted as follows: -
“In his report (refer to Annexure A – Page 4), Dr Jones states the following: -“
“In my view, ignition of the electrical system was caused by…etc…etc”
Always acknowledge the source of information which is being included in the report verbatim. Failure to do so results in plagiarism and most certainly would leave the reader of the report questioning the report writer’s integrity.
When providing information involving numerous figures, try the following:
o Treat the schedules of figures provided as an annexure.
o Summarise the information for purposes of adjustment referring back to the annexure.
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To facilitate easy referral to annexures, it is advisable to ensure that each annexure is clearly marked and indexed.
Photographs
Photographs are possibly the most effective descriptive tool available to the report writer. One photograph often proves to be worth more than a thousand words. It is often amazing to note how this medium of communication is either neglected or abused. The “do’s and don’ts” of effectively using photographs in the reporting process are as follows: -
Do Don’t
Provide only as many photographs as required.
Arrangethepresentationina logical sequence.
Provide a narrative next to each photograph
Simply paste as many photographs to the report as possible.
Provide no meaningful narrative with the photograph.
Over-use the narrative, leaving the reader to decide whether to read the report or the photograph narrative.
Usually, photographs are positioned immediately after the report in the presentation to the Insurers.
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Overview
On the evening of 5 March 2021, there was a severe thunder and lightning storm in the Industrial Sites, Ravensview area. There is evidence that the Insured’s finished goods warehouse in Preston Road, Industrial Sites suffered a direct lightning strike. At 22h50 that evening, after the storm abated, Theakston’s security guard on duty, Samuel Jonas, discovered a fire burning strongly in the insured finished goods warehouse. It is believed that the fire was caused by electrical short circuiting, precipitated by the lightning strike.
The gross loss is estimated at a figure of R8 000 000. Apart from reporting to Insurers on developments on the claim, a recommendation for an interim payment to the insured of R500 000 is made.
CauseoftheFire
Further discussions were held with Mr. Gooding, the provincial fire prevention officer, based in Ravensview and Mr Taylor of Dow, Cockburn and Taylor who are consulting electrical and civil engineers.
The evidence available is summarized hereunder: -
1. Thereisevidenceofadirect lightning strikeonanelectricaldistributionboardonthe northern side of the warehouse. It is believed that the lightning strike caused a power surge in the warehouse’s electrical system.
2. The seat of the fire in the northwestern section of the building, in close proximity to wiring which had served a distribution board but had been temporarily joined after the removal of the distribution board by the previous tenants.
3. The stock of heaters and off cuts of paper used in the wrapping of the heaters, were stored in the area where the seat of the fire was located.
Discussions with the insured’s electrician, Mr Kruger, have revealed that he was in the process of rewiring the factory atthe timeoftheloss. However, due to the warehouse being full, Kruger’sprogress was slow as he had to move stock to gain access to various sections of the factory. The seat of the fire was in the area that Kruger had not been able to access.
We attach copies of reports prepared by the regional fire prevention officer (Annexure A) and the document submitted by Mr Taylor of Dow, Cockburn & Taylor (refer Annexure B)
ExtentofDamage
Debris removal operations have now been completed and we provide further comment on the extent of damage to the Insureds assets hereunder: =
Building
Dow, Cockburn & Taylor were commissioned to provide a report on the structural integrity of the finished goods warehouse. We attach a copy of this document (Annexure C). We summarise the contents of the report submitted by Mr Dow, a civil engineer.
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1. Superstructure
The building’s steel portal frame has been severely distorted and there is no doubt that the entire frame requires replacement. Brick panelling will have to be demolished with the exception of the factory office area.
2. Cladding
It will be necessary to replace all the IBR roof and side cladding on the building.
3. Fixtures and Fittings
The electrical installation has been extensively damaged and requires replacement. Plumbing, particularly in the change rooms, has been damaged and the entire system requires replacement.
PlantandMachinery
It has been determined that the damage caused by severe heat and hydrochloric corrosion, precipitated by burning rubber components, is extensive and all the Insured’s plant and machinery in the warehouse requires replacement.
Stock
There are no stocks which could be salvaged from the extensively damaged building. The Insured is in the process of completing a full stock reconciliation to determine the extent of their loss.
We attach further photographs which will clearly illustrate the extent of damage to the structure and the plant and machinery therein.
PolicyResponse
We confirm our original view that the Insured has a claim which is indemnifiable in terms of their Assets All Risk policy.
Developments
In our preliminary report we mentioned that a task group has been created to manage the crisis, by Theakston’s management. Considerable progress has been made in the past two weeks and we summarise developments hereunder: -
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1. Building Repairs
Darlin & Associates, Quantity Surveyors, were instructed to prepare a Bill of Quantities on which contractors could prepare quotations. Tenders for repairs have now been submitted and will be dealt with later.
2. Plant & Machinery
A full inventory of the plant and machinery destroyed in the fire has been completed. We have been able to complete visual verification of approximately 70% of the items on the schedule. As regards the balance, the Insured has produced an updated assets register for our consideration.
3. Stock
A full stock reconciliation is being completed and we expect to settle this aspect of the claim in the next two weeks.
4. Business Interruption
A brief summary of the steps being taken by the Insured to avoid losses in turnover is provided hereunder:-
1. A second shift at the Insured’s Isipingo factory has been initiated to replace components destroyed in the fire.
2. Night shift for the assembly plant has been implemented to replace the destroyed finished goods.
3. Alternative storage space has been obtained for the stock of finished goods.
The Insured is reasonably confident that steps taken to avoid a possible loss of turnover will substantially reduce the impact of the fire.
CLAIM
We deal with developments on each section of the claim hereunder:-
DebrisRemoval
Dirt Busters provided a quote for the removal of all the contents of the destroyed warehouse. It was agreed that the quote submitted was reasonable and contractors were instructed to proceed by Theakston’s.
BuildingRepairs
Tenders were submitted on the Bill of Quantities prepared by Mr B Darlin of Darlin & Associates, summarised hereunder:-
1. ALT Construction R895 000.00
2. Bravo Builders R911 375.00
3. Builder Boys R938 025.00
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Prior to the Insured instructing ALT Construction to proceed with the repairs, discussions were held with Mr. Jones of the Insurers office who agreed in principle to the contractors being instructed to proceed by Theakston Manufacturing.
We provide hereunder a revised estimate of the Insureds likely claim under the Material Damage section of the policy:
1. 2. 3.
Building Repairs
a. Debris Removal
b. Building repair
c. Professional Fees: Dow Cockburn & Taylor Darlin & Associates
Plant & Machinery Stock
TOTAL
R 19 000.00 16 250.00
R 22 750. 895 000.00 35 250.00
R 953 000.00 897 000. 1 400 000.00 R3250000.00
As we have yet to complete our investigation into the adequacy of the sum insured under the various sections of the policy, the figures brought to account have not been adjusted for any possible underinsurance.
Business Interruption Claim
We have provided a brief overview of steps taken by Theakston Manufacturing to avoid losses of turnover. We confirm that the economic viability of the exercise has been tested and the steps taken by the Insured are in all parties’ best interests.
We provide hereunder, an overview of the likely loss in turn over and the increase in cost of working expenditure incurred
1. 2.
LossofGrossprofit
Anticipated turnover loss x rate of Gross Profit IncreaseinCostofWorking
a. Overtime costs – Isipingo factory
b. Overtime cos at assembly plant
c. Alternative storage charges
TOTAL
R5 392 300 x 65% 675 000.00 395 000.00 175 000.00
R 3 505 000.00 1 245 000.00 4750000.00
Indications are that the sum insured under the Business Interruption section of the policy was inadequate at the time of the loss. However, the above estimate does not take into account any under-insurance which we believe will be in order of 30%.
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Bryant Insurance Loss Adjusters
YourRef: Mr A Jones
STATUSREPORT
ClaimNo: 0090/482/91078
PolicyNo: ZP/937/21298
Insured: Theakston Manufacturing (Pty) Limited
CauseandDateofLoss: Fire in Insured warehouse –5 March 2021
SituationofLoss: 14 Preston Road Industrial sites Ravensview
PreviousReports: Two – 10 March 2021 and 20 March 2021
Assets All Risk Policy
Material Damage
Business Interruption
Profit
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PO
InsuranceCover PolicyDeductible Interim Payment RevisedEstimate
Section1 –
On all the Insureds assets Section 2 –
On loss of Gross
Additional increase cost of working Nil R1 500 000 1. Material Damage 2. Business Interruption Gross estimate Less: Recommended 20 March Recommended 27 March OUTSTANDINGESTIMATE 125 973 500 25 973 500 1 000 000 26973500 3 250 000 4 750 000 8 000 000 500.000 1 500 000 6500000
Overview
On the evening of 5 March 2021, there was a severe thunder and lightning storm in the Industrial Sites, Ravensview area. There is evidence that the Insured’s finished goods warehouse in Preston Road, Industrial Sites, suffered a direct lightning strike. The fire was discovered burning strongly in the finished good warehouse by Samuel Jonas, who is employed by Theakstons as a security guard.
The status report makes recommendations for a second interim payment of R1 500 000.00 and provides revised estimates for the Material Damage and Business Interruption claims.
RevisedEstimates
Adjustments brought to account further investigation into the likely claims under the policy, require changes to estimates currently being held by Insurers as follows: -
1 Material Damage
1.1 Building Repairs
1.2 Plant & Machinery 1.3 Stocks
2. BusinessInterruption
2.1 Loss of Gross Profit 2.2 Increase in cost of working
GrossEstimate
R 953 000 785 000 1 175 000
R 2 750 000 1 100 000
R 2913000
R 2 850 000 6763000
Due to unforeseen difficulties encountered in valuing the Insured assets, the value at risk exercise has yet to be finalised. As such, the revised estimates set out above are not adjusted for under-insurance
Interim Payment
In our supplementary report dated 20 March 2021, Insurers were requested to expect a cash call from Theakstons to meet expenditure incurred to date. We provide hereunder our reconciliation of extraneous expenditure and losses incurred by the insured as a result of the fire: -
1 Material Damage
1.1 Building Repairs
1.2 Plant & Machinery 1.3 Stock (preliminary adjustment)
2 BusinessInterruption
2.1 Increase in cost of working
a. Overtime Isipingo factory
b. Assembly plant overtime
c. Storage charges
Total Expenditure/loss to date Less 1st Interim payment (20 March)
R 325 000 613 000 1 175 000
R 225 000 100 000 25000
R 2 113 000
R 350 000 2 463 000 500 000 1 963 000
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The Insured has accepted, that until their stock claim has been finally adjusted, Insurers cannot be expected to settle the claim in full. Accordingly, it is our recommendation that a second interim payment of R1 500 000.00 be made. We provide a revised summary:
1 Gross Estimate
1.1 Material Damage claim
1.2 Business Interruption claim
2 Less: InterimPayments
2.1 Payment recommended 20/2/90
2.2 This Payment
NetEstimate
R 2913 000 3850 000
R 6763000
500 000 1 500 000 2000000 4763000
It is anticipated that the Insured’s Material Damage claim will be finalised within the next ten weeks. Our statusreportissubmittedforInsurer’sconsideration,andweawaitanyfurthercommentsandinstructions they may have.
Yours faithfully
Bryant Insurance Loss Adjusters
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DBBRYANT for
