Type of policy: Business Policy
City: Chino Hills, CA.
Description of loss: Customer’s sushi restaurant sustained water damaged result of sudden and abrupt discharge of water from outside main sprinkler pipe.
Insurance Adjustment Summary:
- Initial offer from insurance carrier at $25,000.00 (Before deductible).
- Total insurance settlement after JPark Public Adjusters (PA Jae Park), Inc., involvement of adjustment of the claim $79,798.26(Before deductible, and as of October 27, 2012, claim is still open and pending reconciliation of the claim with insurance carrier). Differences in settlement amount of $54,798.26 as of October 27, 2012.
In mid-August 2012, a Japanese restaurant located near Los Angeles, where two males in early forties were in partnership, was flooded. The water pipe buried under the garden outside the restaurant had ruptured, and as a result the water flowed into the restaurant and caused severe damage to the kitchen, hall, bathroom and tile floor.
Ever since they purchased this restaurant, which had poor sales results in winter 2010, the partners had worked hard to return the establishment to normal operation. As they were just entering the normalization phase, they were unexpectedly doused with water. The operation of the restaurant was halted. In order to reopen the business as quickly as possible, they filed a claim with the insurance company, doing so with the help of an insurance broker on the day the flood occurred. The insurance company has stated that early compensation would be difficult because they were only insured for 30% of the actual appraised value and consequently needed to have a detailed inspection again. In other words, it implied that the payment of claim could be delayed significantly. The restaurant owners were extremely confused by the unexpected attitude of the insurance company.
They heard news that a restaurant located in the San Fernando Valley had suffered fire damage and it took nearly a year to receive compensation. If a similar situation were to occur, their efforts up to that point would come to nothing and they would go bankrupt. There were no additional funds for them at their disposal due to the large investment needed to normalize the operation, so they were unable to repair the damage at their own expense until they received claim settlement from insurance company. If they couldn’t continue to open the business, what could they do with the monthly rent of $10,000 and living expenses for both families?
Most of all, they would lose the solid customers whose loyalty they had worked so hard to obtain. A constructor, who had observed their situation, gave the following advice. “Find a PA with extensive work experienced in the major insurance company’s large loss claim department. The only person who can expedite the claim process against the insurance company is a PA. If the PA has past experience as claim adjuster at major insurance company, he can handle the job swiftly.”
Thus the partners searched for a PA, and on September 12 they had an initial contact with me. As soon as I was commissioned to do this case, I negotiated with the insurance company. On September 19, after just one week, emergency settlement for the first amount of $25,000 was received without any condition. This settlement amount was used to pay for emergency repairs to the flood damage so that the business could reopen.
For this, the restaurant started the business again at the end of September, and on October 19 they received an additional compensation of $35,000 for the discarded food inventory. Based on this, the restaurant was able to recover from the flooding crisis and succeeded in opening again. The first and second compensations received from the insurance company by this PA were the result of pressuring the insurance company to protect the business operations of the insured. The insurance company mentioned the co-insurance to this PA(Jae Park Public Insurance Adjuster), but I reminded the insurance company that if the compensation was delayed, the client’s business and family finances would go bankrupt. So, we agreed to calculate the co-insurance part later. This case was terminated at the end of December after the final compensation was received.
The compensations were as follows:
1) Loss of business revenue: 36% of estimated damage assessment cost by the insurance company ($11,800).
2) Property loss including food materials: 86% of estimated damage assessment value of the insurance company ($83,000).
Readers should pay attention to two aspects:
1) Co-insurance: People have less insurance coverage that what they have need, simply in order to save on the insurance premiums. If large-scale damage occurs, it is impossible to restore a property or business to the original state unless you have large chunk of personal funds ready to be deployed to fill the gap created by co-insurance penalty. We should think again about why land lord and business owner purchase insurance to protect their investment.
2) Payment delay by the insurance company: If the business is closed for a long time due to a disaster, the business may become unrecoverable. There are many cases where the insurance company may take additional time to investigate the claim due to the complexity of the claim and applicable policy language and prior claim history and internal claim handling guide line including process of receiving authority from upper management of insurance company to issue settlement draft, regardless of the insured’s earnest desire that the case be expedited. If the claim adjustment is delayed and settlement amount is far less than what a normal person would expect, and who is in an urgent situation, will have significantly reduced negotiation power due to lack of insurance claim adjustment knowledge. In such cases, you need a PA. A PA has negotiation power against the insurance company, which is granted by the state to adjust the claim behalf of the insured.
Photos after the loss:
After the repair: