Water damage and claims adjustment: key actions to successfully manage the initial phase of the claims process

Publication date: September 9, 2024

A real-life case: A water leak that turns into a nightmare

The story starts on a Saturday with a simple leaky toilet that results in water damage. ^[2]. The insured mops up the water that evening and contacts her insurance company on Monday morning. The claims adjuster assigned to the claim visits the premises with the evaluator two days later.

Unfortunately, the claims adjuster fails to take emergency measures to dry the site (opening the walls and ceilings, installing an industrial fan) and thus avoid any mould developing. Only two teams are dispatched to the home: one to collect the wet clothing and the other to assess the water damaged furniture.

While the evaluator prepares his report, which will be delivered three weeks later, the insured continues to worry: her residence is still damp. The claims adjuster reassures her, falsely stating that since the walls are made of plaster, water will not accumulate, and no mould will develop.

However, 16 days after the loss, traces of mould start appearing on the insured’s furniture and on the ceiling tiles in the basement. At the insured’s insistence, a cleaning team is dispatched to her residence three days later.

Efforts to dry out the affected areas do not prevent mould spores from spreading throughout the residence. In the end, the entire house requires decontamination, and the insured is forced to live in a hotel for almost a year. The bill for repairs ends up totalling $280,000 instead of the $30,000 it would have cost had the file been dealt with diligently and competently.

Lessons to be learned and key actions

As stipulated in section 10 of their Code of Ethics, “Claims adjusters must not neglect professional duties relating to their professional activities and must carry out such duties with integrity.” “With integrity” means that every measure is taken to protect [the insured’s] property.

The Code also says that “Claims adjusters must act promptly, honestly and fairly in providing their professional services under the mandates entrusted to them.”

But what does this mean in practice? This article looks at the best practices a claims adjuster assigned to a water damage claim must implement during the first crucial hours and days following the loss.

Quickly review all available information

As soon as he is assigned the file, the claims adjuster must read the available documentation, in particular the notice of claim, which is a key document, and immediately start following the steps of the claims adjustment process. “In principle, the notice of claim—whether it was written by the broker or the insurer—should describe the insured’s experience in detail,” explains Linda Collin, Technical Team Leader and claims adjuster with IndemniPro. “What is the source of the leak: the fridge, the kitchen sink, the toilet, the roof, the drain? Is the water clean, dirty, contaminated? Which rooms in the house have been damaged? Are the premises habitable? What has the client done to protect her property and avoid further damage? This valuable information will give the claims adjuster a strong foundation to begin the claims adjustment process.”

And what should the claims adjuster do if the notice of claim seems incomplete? “It is up to the adjuster to obtain any missing information in order to do his job properly and effectively support the insured,” Linda Collin adds.

The adjuster may, for example:

Call the broker who wrote the notice of claim, and also;
Contact the suppliers who carried out the emergency work, where applicable.

Make initial contact with the insured

Suffering water damage is a stressful and often difficult experience for a claimant, not to mention the fact that it can be hard for a layperson to understand the often complex issues related to his own responsibilities (including limiting further damage) and the scope and limits of insurance policies.

One of the claims adjuster’s roles is to support the claimant and explain to her/him in detail the initial steps in the settlement process (in the very short-term, and over the upcoming hours and days. The adjuster must also give the claimant the usual advice, including the importance of limiting damages, keeping any evidence, and closely following the stages of the claim in order to be able to make informed decisions throughout the claims process.

This is the time to ask the insured in-depth questions on the circumstances of the loss, the state of the premises, the property that was damaged and any special circumstances (is it a heritage home?) in order to properly identify the emergency measures that should be taken. The claims adjuster should not hesitate to visit the site of the loss to gather further information. In particular, he must build a well-documented file that includes photos, videos, supplier reports, etc.

“When a claims adjuster is assigned to a claim file, he must always ask himself ‘if my file were to be presented in court tomorrow morning, would it be considered to have been done according to the highest professional standards?’,” says Linda Collin.

Coordinate the execution of priority and emergency work

In the story we saw at the beginning of this article, the claims adjuster breached section 58(1) of her code of ethics by carrying out her professional activities negligently, in particular by not immediately opening up the walls and ceilings and ensuring the site was properly ventilated.

If the insurer mandates a company before the claims adjuster is assigned to the file, the adjuster must ask the service provider for a report on their work so that he can familiarize himself with the file and take over its management.

Moreover, it is up to the claims adjuster to mandate the appropriate suppliers and ensure that they provide him with all the details, reports, evaluations and information he needs to make a decision on the cause of the incident, the amount of damages and depreciation, property loss and replacement.

Determine the cause of the loss as soon as possible

The claims adjuster is responsible for determining the cause of the loss, based on the written or verbal statements of the insureds’ and the parties involved in the claim. This responsibility flows from section 10 of the Act respecting the distribution of financial products and services, which stipulates that it is the claims adjuster who investigates insured losses.

Determine whether the contract covers the loss and the damages, and whether there are any limits or exclusions

When a claims adjuster is assigned to a claim file after the emergency work has begun, he must quickly ask the claimant or the suppliers for a report in order to find out, among other things, whether the limits will be reached or exceeded. He must evaluate the situation and be frank with the claimant: will the costs incurred be repaid? If the answer is “no,” or if the claim is inadmissible, who will have to pay?

Give a clear mandate to service suppliers

The claims adjuster is also responsible for overseeing the suppliers’ work, how the work is progressing and the work schedule. In order to do so, the claims adjuster must team up with the appropriate parties without, however, delegating his responsibilities. If the adjuster has trouble understanding certain issues, he must ask relevant questions and seek clarification.

Even if the damage restoration specialist arrives within hours of the water damage occurring, the claims adjuster still orchestrates the process as a whole; it is the adjuster who mandates the suppliers who, in turn, help him to fulfill his responsibilities. He is the orchestra conductor.

Always be transparent

There may be delays in claim processing that are out of your control, or difficulties establishing the cause of the loss, or contract limits that have major repercussions on compensation. Despite it all, you must be transparent with the insured—this is the added value of your work and what makes you a professional.

Make sure the information you give the insured is clear. For example, explain:

the cause and the estimated length of any delay that may occur along the way;
the reason why the insured has received a notice or a non-waiver agreement, if applicable;
issues that will affect your responsibilities, be it during the investigation, or while estimating damages or negotiating the settlement.

Do not forget that understanding a claim settlement may be a complex process for the insured. The more transparent you are, the more confident the insured will feel and the better he will understand the steps in the process and the decisions he needs to make.

Note everything in the client’s file

It is impossible to overemphasize how important it is that the claims adjuster make a note in the client-file recording every action he takes and every discussion he has.

In conclusion, remember that discussions with the insured concerning the roles played by all the parties involved in the process, and the choices the insured will have to make are an integral part of the claims settlement process.