8 Claims Practices That Risk Managers Should Absolutely Stop Doing Now

By: and | May 20, 2019

Allen Melton is a partner and the Americas Leader for EY’s Insurance & Federal Claims Services practice. Over the past 20+ years, Allen has assisted clients in the attainment and resolution of over $10 billion in insured claims and federal disaster grants resulting from various loss events around the globe. He can be reached at [email protected] Jeffrey M. Phillips is a Managing Director in EY’s Insurance & Federal Claims Services practice. He is a licensed professional engineer experienced in underwriting, loss prevention, and property and business interruption claims. He assists clients achieve financial recovery from disasters through insurance claims, FEMA’s Public Assistance program and other grants. Jeff can be reached at [email protected]

If you are a lucky risk manager, you may never have to manage a property damage or business interruption claim. But we buy insurance for protection from that unknown loss.


The following article gives you an opportunity to learn from some common mistakes. The overall theme is to stop presuming you will never have a loss and instead assume it will happen and prepare appropriately.

Here are eight pitfalls to avoid when managing your property insurance program:

1) Circumventing the preparation of accurate values.

Property and business interruption values need to be reported every year at renewal, but many companies put little effort into developing accurate values.

If a large loss hits, inaccurate values can create many problems. Understanding values helps to determine policy sub-limits and deductibles. Inaccurate values make negotiating and settling claims difficult, particularly business interruption losses, if the claim is for a significantly larger amount than reported in the value worksheets.

2) Guessing how coverage might apply.

Read your policy now, in detail, and understand it. Run through some tabletop exercises to see how the policy responds to some hypothetical events, preferably with your trusted advisors.

We list a few areas below for example, but this is certainly not a complete list of everything that should be considered.

  • Limits  are the policy sub-limits appropriate? Are you comfortable with how they are applied? Are there limits that apply per location instead of per occurrence, and do you understand the difference? Do you understand the difference between extra expense and business interruption, and are the limits appropriate for your type of business and potential loss situation?
  • Deductibles  deductibles can be one of the biggest surprises when a loss occurs. One policy can have many different deductibles depending on the type of loss. There may be one standard policy deductible that applies for a fire but different deductibles for flood, wind or earthquake. These deductibles may apply per occurrence or per location. The deductibles may be a fixed amount or a percentage. Are you confident you know what value the percentage is applied against? A flood deductible may vary depending on the level of flood hazard for the area your buildings are located.
  • Service interruption what does this mean for your locations? What services are included? Data and telecommunications? What about transmission and distribution lines? How far away can the damage occur?

3) Procrastinating in building out your loss recovery team.

When a loss happens, it may be too late to develop relationships with all the different organizations you may need to help your business recover.

Business interruption and property damage losses are significant financial transactions that require expert advice and assistance. In addition, a large loss requires significant time and a level of documentation for which most companies don’t have the resources or the in-house expertise.


Having a trusted advisor you are comfortable working with and who is committed to helping immediately will pay dividends in the claim process. This goes for both claim consultants and law firms.

Developing these relationships pre-loss allows you to spend time interviewing different firms and selecting one that fits best with your organization. These firms can also help you with preparing accurate values (see #1 above) and help you run through potential loss scenarios.

4) Following the path of least resistance when it comes to building your loss recovery team.

In tandem with suggestion #3 above, there may be companies that you have good day-to-day working relationships with but that may not be appropriate or have other conflicts of interest when working on a loss recovery.

Whether you are having pre-loss discussions or are in a post-loss situation, you need to consider the potential conflicts of interest.

Consider the capacity, resources and interest of the organization that you may put on your recovery team.

A contractor that previously did excellent work for you building a warehouse may not have the skills and resources to repair a fire damaged manufacturing facility. Just because your insurance broker did a great job on your renewal does not mean they are the best firm to assist you with a loss. A regional restoration company may not have the ability to respond nationally or internationally.

5) Disregarding the need to provide a timely preliminary estimate of your claim after a loss event.

Adjusters and insurers need information to appropriately set reserves as well as evaluate and measure a loss.

Jeffrey Phillips, managing director, EY’s Insurance & Federal Claims Services

Due to lack of resources or other reasons, many companies delay or hold back information which leads to misunderstandings of the loss and delays responses from insurers. This can also lead to delays on advance payments and loss settlement.

6) Relying solely on the adjuster in a claims scenario.

Many large claims are handled by an independent insurance adjuster who is hired by the insurance company or market if there is more than one insurance company.

There is a benefit to having meetings directly with the insurance market to make sure information is being communicated to them clearly. Letting all communication be filtered through the adjuster can lead to misunderstandings.

7) Missing opportunities.

While a large loss is difficult for any company to deal with, it can also create opportunities.

Rebuilding after a loss is seldom done exactly like it was before. Many times, changes and improvements can be made at no additional cost, or the additional cost may be offset by a reduction in business interruption.

Spending additional money to save your market share or increasing efficiency of a manufacturing operation are opportunities that need consideration.

8) Over-promising and underachieving.

Insurance claims are large financial transactions that can impact companies in many ways. There are many stakeholders in addition to the insurance company, including executives with the organization, investors, banks, customers, suppliers and employees.


All are interested to know what is happening and how it is impacting the company. Be sure all communication is accurate and consider how discussions with one organization might impact another; you don’t want to promise the CEO a $20 million claim settlement if insurers only agree to $10 million.

Preparation Matters

Risk managers spend their careers identifying risk and looking for means to mitigate those hazards.

Experiencing a large and complex property damage and business interruption loss is both a stressful and challenging time for a risk manager and their organization. It’s certainly not the time to find out you are unprepared to handle every aspect of the loss and claim submission.

The items mentioned are important steps to take now, in advance of a loss situation, to confirm that you have taken the appropriate measures so the process is handled in the most efficient and effective manner possible for your company. &

The views expressed by the authors are not necessarily those of Ernst & Young LLP or other members of the global EY organization. 

More from Risk & Insurance

More from Risk & Insurance

Risk Scenario

The Betrayal of Elizabeth

In this Risk Scenario, Risk & Insurance explores what might happen in the event a telemedicine or similar home health visit violates a patient's privacy. What consequences await when a young girl's tele visit goes viral?
By: | October 12, 2020
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.


Elizabeth Cunningham seemingly had it all. The daughter of two well-established professionals — her father was a personal injury attorney, her mother, also an attorney, had her own estate planning practice — she grew up in a house in Maryland horse country with lots of love and the financial security that can iron out at least some of life’s problems.

Tall, good-looking and talented, Elizabeth was moving through her junior year at the University of Pennsylvania in seemingly good order; check that, very good order, by all appearances.

Her pre-med grades were outstanding. Despite the heavy load of her course work, she’d even managed to place in the Penn Relays in the mile, in the spring of her sophomore season, in May of 2019.

But the winter of 2019/2020 brought challenges, challenges that festered below the surface, known only to her and a couple of close friends.

First came betrayal at the hands of her boyfriend, Tom, right around Thanksgiving. She saw a message pop up on his phone from Rebecca, a young woman she thought was their friend. As it turned out, Rebecca and Tom had been intimate together, and both seemed game to do it again.

Reeling, her holiday mood shattered and her relationship with Tom fractured, Elizabeth was beset by deep feelings of anxiety. As the winter gray became more dense and forbidding, the anxiety grew.

Fed up, she broke up with Tom just after Christmas. What looked like a promising start to 2020 now didn’t feel as joyous.

Right around the end of the year, she plucked a copy of her father’s New York Times from the table in his study. A budding physician, her eyes were drawn to a piece about an outbreak of a highly contagious virus in Wuhan, China.

“Sounds dreadful,” she said to herself.

Within three months, anxiety gnawed at Elizabeth daily as she sat cloistered in her family’s house in Bel Air, Maryland.

It didn’t help matters that her brother, Billy, a high school senior and a constant thorn in her side, was cloistered with her.

She felt like she was suffocating.

One night in early May, feeling shutdown and unable to bring herself to tell her parents about her true condition, Elizabeth reached out to her family physician for help.

Dr. Johnson had been Elizabeth’s doctor for a number of years and, being from a small town, Elizabeth had grown up and gone to school with Dr. Johnson’s son Evan. In fact, back in high school, Evan had asked Elizabeth out once. Not interested, Elizabeth had declined Evan’s advances and did not give this a second thought.

Dr. Johnson’s practice had recently been acquired by a Virginia-based hospital system, Medwell, so when Elizabeth called the office, she was first patched through to Medwell’s receptionist/scheduling service. Within 30 minutes, an online Telehealth consult had been arranged for her to speak directly with Dr. Johnson.

Due to the pandemic, Dr. Johnson called from the office in her home. The doctor was kind. She was practiced.

“So can you tell me what’s going on?” she said.

Elizabeth took a deep breath. She tried to fight what was happening. But she could not. Tears started streaming down her face.

“It’s just… It’s just…” she managed to stammer.

The doctor waited patiently. “It’s okay,” she said. “Just take your time.”

Elizabeth took a deep breath. “It’s like I can’t manage my own mind anymore. It’s nonstop. It won’t turn off…”

More tears streamed down her face.

Patiently, with compassion, the doctor walked Elizabeth through what she might be experiencing. The doctor recommended a follow-up with Medwell’s psychology department.

“Okay,” Elizabeth said, some semblance of relief passing through her.

Unbeknownst to Dr. Johnson, her office door had not been completely closed. During the telehealth call, Evan stopped by his mother’s office to ask her a question. Before knocking he overheard Elizabeth talking and decided to listen in.


As Elizabeth was finding the courage to open up to Dr. Johnson about her psychological condition, Evan was recording her with his smartphone through a crack in the doorway.

Spurred by who knows what — his attraction to her, his irritation at being rejected, the idleness of the COVID quarantine — it really didn’t matter. Evan posted his recording of Elizabeth to his Instagram feed.

#CantManageMyMind, #CrazyGirl, #HelpMeDoctorImBeautiful is just some of what followed.

Elizabeth and Evan were both well-liked and very well connected on social media. The posts, shares and reactions that followed Evan’s digital betrayal numbered in the hundreds. Each one of them a knife into the already troubled soul of Elizabeth Cunningham.

By noon of the following day, her well-connected father unleashed the dogs of war.

Rand Davis, the risk manager for the Medwell Health System, a 15-hospital health care company based in Alexandria, Virginia was just finishing lunch when he got a call from the company’s general counsel, Emily Vittorio.

“Yes?” Rand said. He and Emily were accustomed to being quick and blunt with each other. They didn’t have time for much else.

“I just picked up a notice of intent to sue from a personal injury attorney in Bel Air, Maryland. It seems his daughter was in a teleconference with one of our docs. She was experiencing anxiety, the daughter that is. The doctor’s son recorded the call and posted it to social media.”

“Great. Thanks, kid,” Rand said.

“His attorneys want to initiate a discovery dialogue on Monday,” Emily said.

It was Thursday. Rand’s dreams of slipping onto his fishing boat over the weekend evaporated, just like that. He closed his eyes and tilted his face up to the heavens.

Wasn’t it enough that he and the other members of the C-suite fought tooth and nail to keep thousands of people safe and treat them during the COVID-crisis?

He’d watched the explosion in the use of telemedicine with a mixture of awe and alarm. On the one hand, they were saving lives. On the other hand, they were opening themselves to exposures under the Health Insurance Portability and Accountability Act. He just knew it.

He and his colleagues tried to do the right thing. But what they were doing, overwhelmed as they were, was simply not enough.


Within the space of two weeks, the torture suffered by Elizabeth Cunningham grew into a class action against Medwell.

In addition to the violation of her privacy, the investigation by Mr. Cunningham’s attorneys revealed the following:

Medwell’s telemedicine component, as needed and well-intended as it was, lacked a viable informed consent protocol.

The consultation with Elizabeth, and as it turned out, hundreds of additional patients in Maryland, Pennsylvania and West Virginia, violated telemedicine regulations in all three states.

Numerous practitioners in the system took part in teleconferences with patients in states in which they were not credentialed to provide that service.

Even if Evan hadn’t cracked open Dr. Johnson’s door and surreptitiously recorded her conversation with Elizabeth, the Medwell telehealth system was found to be insecure — yet another violation of HIPAA.

The amount sought in the class action was $100 million. In an era of social inflation, with jury awards that were once unthinkable becoming commonplace, Medwell was standing squarely in the crosshairs of a liability jury decision that was going to devour entire towers of its insurance program.

Adding another layer of certain pain to the equation was that the case would be heard in Baltimore, a jurisdiction where plaintiffs’ attorneys tended to dance out of courtrooms with millions in their pockets.

That fall, Rand sat with his broker on a call with a specialty insurer, talking about renewals of the group’s general liability, cyber and professional liability programs.

“Yeah, we were kind of hoping to keep the increases on all three at less than 25%,” the broker said breezily.

There was a long silence from the underwriters at the other end of the phone.

“To be honest, we’re borderline about being able to offer you any cover at all,” one of the lead underwriters said.

Rand just sat silently and waited for another shoe to drop.

“Well, what can you do?” the broker said, with hope draining from his voice.

The conversation that followed would propel Rand and his broker on the difficult, next to impossible path of trying to find coverage, with general liability underwriters in full retreat, professional liability underwriters looking for double digit increases and cyber underwriters asking very pointed questions about the health system’s risk management.

Elizabeth, a strong young woman with a good support network, would eventually recover from the damage done to her.

Medwell’s relationships with the insurance markets looked like it almost never would. &


Risk & Insurance® partnered with Allied World to produce this scenario. Below are Allied World’s recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance.®.

The use of telehealth has exponentially accelerated with the advent of COVID-19. Few health care providers were prepared for this shift. Health care organizations should confirm that Telehealth coverage is included in their Medical Professional, General Liability and Cyber policies, and to what extent. Concerns around Telehealth focus on HIPAA compliance and the internal policies in place to meet the federal and state standards and best practices for privacy and quality care. As states open businesses and the crisis abates, will pre-COVID-19 telehealth policies and regulations once again be enforced?

Risk Management Considerations:

The same ethical and standard of care issues around caring for patients face-to-face in an office apply in telehealth settings:

  • maintain a strong patient-physician relationship;
  • protect patient privacy; and
  • seek the best possible outcome.

Telehealth can create challenges around “informed consent.” It is critical to inform patients of the potential benefits and risks of telehealth (including privacy and security), ensure the use of HIPAA compliant platforms and make sure there is a good level of understanding of the scope of telehealth. Providers must be aware of the regulatory and licensure requirements in the state where the patient is located, as well as those of the state in which they are licensed.

A professional and private environment should be maintained for patient privacy and confidentiality. Best practices must be in place and followed. Medical professionals who engage in telehealth should be fully trained in operating the technology. Patients must also be instructed in its use and provided instructions on what to do if there are technical difficulties.

This case study is for illustrative purposes only and is not intended to be a summary of, and does not in any way vary, the actual coverage available to a policyholder under any insurance policy. Actual coverage for specific claims will be determined by the actual policy language and will be based on the specific facts and circumstances of the claim. Consult your insurance advisors or legal counsel for guidance on your organization’s policies and coverage matters and other issues specific to your organization.

This information is provided as a general overview for agents and brokers. Coverage will be underwritten by an insurance subsidiary of Allied World Assurance Company Holdings, Ltd, a Fairfax company (“Allied World”). Such subsidiaries currently carry an A.M. Best rating of “A” (Excellent), a Moody’s rating of “A3” (Good) and a Standard & Poor’s rating of “A-” (Strong), as applicable. Coverage is offered only through licensed agents and brokers. Actual coverage may vary and is subject to policy language as issued. Coverage may not be available in all jurisdictions. Risk management services are provided or arranged through AWAC Services Company, a member company of Allied World. © 2020 Allied World Assurance Company Holdings, Ltd. All rights reserved.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]