Why Brokers Should Advocate for Claim Preparation Expense Coverage
By Chris von Eljaszewicz
In the aftermath of a loss—especially a large or complex one—clients face the daunting task of documenting and substantiating claims, typically under considerable scrutiny. Without proper coverage for claim preparation expenses, insureds may be forced to fund the expert support required to recover efficiently and fairly. Brokers play a critical role in ensuring their clients are protected by recommending claim preparation expense coverage as part of a comprehensive risk management strategy.
What is Claim Preparation Expense Coverage?
This provision reimburses policyholders for the reasonable and necessary costs incurred in preparing, documenting, and in some cases, negotiating insurance claims. This typically includes fees paid to accountants, consultants, engineers and other professionals who assist in accurately calculating losses such as business interruption, extra expense and property damage. Claim preparation consultants do not make coverage determinations. Instead, they help the insured present its loss so available coverage can be applied by the insurer.
Why Claim Preparation Coverage Matters to Businesses
The process of documenting and presenting an insurance claim can be arduous, costly and time-consuming, introducing the following challenges that claim preparation expense coverage addresses:
- Claims Are Complex: Insurers bring in specialized teams to investigate and scrutinize claims. Without equal footing, businesses risk under-recovery.
- Expertise Gaps: Most policyholders lack the time and expertise to manage the claim process during and after a crisis. Professionals can identify costs for coverages the insured may not even realize apply.
- Time: Documenting and successfully closing out a claim can take months or even years. The insured's team of operational, financial risk management and other professionals may spend hundreds of hours in the process. Expert claim preparation support can help shorten the time and reduce the burden on the insured’s personnel.
- Uncovered Costs Add Up: Without this clause, fees for professional claim preparation are out-of-pocket and can be substantial.
Many carriers now include limiting language that excludes these uncovered costs or restricts who can provide support. Examples of restrictive clauses to watch for include:
- Coverage only if professionals are “requested by the carrier.”
- Limits scope to “taking inventories.”
- Strict sublimits or vague definitions that lead to denied reimbursements.
- Exclusions for attorneys, consultants or firms associated with the broker.
Brokers should proactively review and negotiate coverage terms, ensuring that claim preparation expense coverage is comprehensive and tailored to the client’s needs.
Recommended Language for Broader Claim Preparation Protection
Brokers and coverage experts should discuss with the insured what types of skill sets are likely necessary to quantify a claim in the event of a loss. If the claim preparation language requires modification, brokers and coverage experts should then explain the need to the carrier. An example of this language includes:
“Expenses incurred by the Insured or by the Insured’s representative, including Auditors, Accountants, Appraisers, Lawyers, Consultants, Architects, Engineers or other such professionals to arrive at the loss payable under this policy in the event of a claim. This provision does not cover expenses incurred for the services of any public adjuster.”
The Broker’s Role in Managing the Claims Process
The broker plays an invaluable role in helping clients navigate the complex claims process by securing the right insurance coverage. A trusted brokerage will help to:
- Proactively review claim preparation language in every renewal.
- Push for broader coverage and eliminate unnecessary restrictions.
- Advocate for fair sublimits that reflect the scale of the insured’s operations and potential loss events.
When a catastrophe strikes, claim preparation expense coverage provides the policyholder with the necessary financial support to cover the costs of claim preparation and other related services needed to document, support and expedite a complex insurance claim. This ensures accurate, timely recovery while allowing the policyholder to focus on restoring operations rather than navigating claim intricacies.
Claim Preparation Expense Coverage: A Value-Add That Builds Trust
Helping clients secure this critical coverage protects their financial interests and reflects the broker’s commitment to comprehensive, thoughtful risk management. It also reduces disputes post-loss, strengthens the insurer-insured relationship and helps clients recover more quickly.
Reach out to a member of the Imperium team today for more information on how our services can help businesses mitigate the economic impact of claims.
