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By Chad Conley
commercial roof
Adobe Stock/ Tomasz Zajda

When a commercial roof is damaged, it can cost thousands of dollars to fix; and if you don’t know how to make a proper insurance claim or work with an insurance adjuster, complications in the process may occur. Understanding the insurance policy on your commercial roof and how to create a claim is critical to get the money needed to fix the roof in a timely manner. Here are seven tips to help facility executives prepare to make an insurance claim on a building’s roof.

1. The Insured Has To Prove The Loss, Not The Insurance Company

The insurance adjuster does not have a duty to find damage. Instead, the insurance adjuster is there to look at the damage you have found. If you’re taking the “let’s wait and see what the adjuster says” approach, you’re already negotiating against yourself. That thought process is the inverse of how the policy is written and goes directly against your duties and responsibilities under the terms of the policy.
It’s understandable that a facility manager or property owner might not be an expert in roofing- or storm-related damages. However, your insurance company will work with whom you appoint as your preferred expert. Find a trusted expert and lean on their expertise in roofing-related storm damage to assist you in proving the loss.
Document all applicable proof of damages, no matter how small or insignificant they may seem, and do so liberally. You can never have enough documented proof of damage(s) when proving a loss.
Do not assume the adjuster has the adequate proof of damages when they leave, or that they’ll remit all that they’ve documented to the insurance carrier. Remember, they are there to document what covered damages you (or your chosen expert) must show them. Do not assume that they’ve correctly cataloged these damages. It doesn’t matter if they photograph the very same damages, you or your expert did, ensure that your images and proof are submitted directly to the insurance carrier for record.
Let’s assume we’re dealing with a trip and fall claim. The claim hinges on whether each side of an expansion joint on a concrete sidewalk is level or elevated in a way that creates a tripping hazard. If an image is taken of the expansion joint at a 90-degree angle, or perpendicular to the sidewalk (straight down), there’s no way to perceive variances in height from one side of the expansion joint to the other. In contrast, if an image is taken on plane from the low side of the expansion joint while looking towards the high side of the expansion joint, it is instantly clear that the high side of the expansion joint steps up. Adding items to provide scale, like a quarter or better yet a measurement device, further enhances the data.
With this understanding, think about the roof damage you’ve reported. How is your adjuster photographing it? In the expansion joint example, one could say that each party “took a picture of the expansion joint,” straight down and straight across. However, when viewing the two different image compositions side-by-side, you get a completely different takeaway.

2. Know What’s Covered, And What Is Excluded

Your chosen expert may be the best of the best as it pertains to insurance covered damages on your roof. However, their expertise can’t know what your policy covers and what it does not without you providing that information. The good news is that most business owner policies are fairly ubiquitous in their coverage with the primary differences being in the total dollar amounts of coverage, deductibles, and depreciation.
There is one caveat in this that you’ll want to clarify with your insurance agent: the existence of any cosmetic damage exclusions. These exclusions aren’t as baked in as exclusions in flood coverage or earthquakes typically are. That said, cosmetic damage exclusions have moved from non-existent 20 years ago to becoming more and more common for commercial building coverage today. A cosmetic damage exclusion does not mean you don’t have coverage for storm related damages. If it does exist in your policy, though, you’ll need to make your roofing expert aware so that they know the level of proof they need to bring. When a cosmetic damage exclusion does not exist, the threshold for coverage being applied to a hail damage claim is relatively low. Basically, if you can see any damage it’s covered regardless of its severity. In contrast, a cosmetic damage exclusion requires that the roofing expert show the damages are functional in nature, versus aesthetic only.

3. Determining The Value Of The Loss Is Also The Insured’s Responsibility

So, you were successful in getting the insurance carrier to acknowledge and cover the loss. Great. Now the total value of the loss must be determined, and the duty to prove the loss lies with the insured. The insurance company will create an estimate of their own, but that is for their purposes internally—they need a starting point so they can earmark funds within their reporting system. But, the actual cost of repair must come from the insured.
Lean on your hired expert to provide the total value of your loss while taking into account what they can prove is damaged. If you’re electing to add upgrades while getting the insured work performed, have your roofing expert clearly delineate between costs associated with the same replacement and those that constitute upgrades. This will assist with recouping the full reimbursement from the insurance company.

4. Understanding Your Claim Payment: RCV, ACV, And Depreciation

Almost all building-related claims are first valued at their replacement cost value (RCV) amount. RCV, said differently, is what the claim is worth in today’s dollars. Not what the items cost at the time of their acquisition.
From there, the claim is depreciated. This is the process whereby the insurance company determines the remaining useful life of the damaged items and pays for only that portion, deducting the already used value. Let’s say that the materials on the building’s roof is rated to last approximately 30 years. At the time of the reported loss the roofs are 15 years old. In this case, they would be depreciated 50%. Please note that depreciation typically only applies to material costs, not labor.
This depreciated payment is called the Actual Cash Value payment or amount, ACV. This is what the claim is worth considering the used condition of the claimed items. This is typically the first payment issued to the insured less the applicable deductible.

5. Recoverable Depreciation Vs. Non-Recoverable Depreciation

Many insurance policies include recoverable depreciation. This means once the insured shows that the work was completed, and proves what the total final costs incurred, they can recoup their depreciated funds equal to their total incurred costs less than any out-pocket-upgrades. Please also note that this final payment is limited by the policy’s coverage limit.
Why do insurance carriers pay this way? Because most RCV policies are very literal. They make the insurance company responsible for replacement cost value. This means that the insurance carrier is on the hook, up to the policy’s applicable coverage limits, to foot the entire bill for what it cost the insured. Note that the word cost is past tense. An estimate is not. So, until the insured can show the cost incurred, the insurance carrier is only responsible to pay for depreciated value the of damaged items.
This misunderstanding in how deprecation works is so prevalent that many insureds unknowingly leave the funds unclaimed. Insurance industry experts say that unclaimed depreciation can total $1 billion or more in a given year.

6. Get Familiar With The Term “Supplement”

If your claim is deficient in its scope, your hired expert may assist with an insurance supplement to get your claim payment to normal.

Facility Executive Magazine