Navigating a contract works claim: 5 tips to ensure a successful claims experience
Whether it’s damage to building material or an allegation of negligent business activities, a contract works claim can be a stressful, time consuming and confusing process.
So that you’re prepared, if the unfortunate does happen, we’ve outlined below our top five tips to ensure a successful contract works claims experience.
1. Have in place a policy that meets your risk requirements
While this tip seems like an obvious one, it is often the most common step overlooked by policyholders when it comes to proactively ensuring their insurance evolves with their business’ risk requirements.
Whether it’s taking on more complex or larger building projects, compensating for the rising costs of materials by reducing cover or expanding your services, there are several elements that can trigger a misalignment of what your business is covered for versus what it needs.
In these situations, it’s important to adjust your coverage limits and potentially inclusions to protect your new levels of risk.
2. Capture all the detail at the time of the incident to best defend negligent allegations down the track
If anyone, especially a sub-contractor’s employee, is injured while working on a construction site, collecting detailed information of the incident straight away is usually included as part of the business' workplace health and safety (WH&S) procedures. Sometimes what seems like a minor issue can progress into a significant issue later on.
While this information is mainly used to support the subsequent workers compensation claim, it is also extremely valuable to defend an allegation of negligence should it be instigated down the track.
A workers compensation claim can be a lengthy process, often taking months and, in some cases, years to finalise. Once a claim is processed, the insurance provider may seek recovery from the main contractor by stating that they are liable for a certain amount of the incident expenses due to their negligent business activities.
Where this may occur, having a thorough incident report, multiple witness statements and photos supporting your worksite WH&S can help in defending the allegation. Additionally, a public liability policy can help cover legal expenses that accrue as a result.
3. Start a separate cost code for expenses associated with a material damage claim
When problems arise on a project, contractors need to make prompt decisions in order to avoid unnecessary time delays and cost increases.
In the event of theft or damage on a project, a builder typically has two options:
- Submit a claim to seek reimbursement as soon as possible and potentially delay the project while resources are used to collate the necessary submission information
- Move forward with the project to ensure the deadline is met and submit the claim once there is the capacity to complete the request.
Claims can also be a time-consuming exercise and may not trigger an extension of the agreed project completion date.
In the instance where a claim is submitted post-project completion, it can be an arduous task to go through all invoices a while after the event and work out what expenses are related to the claim.
To help save time and effort, our brokers recommend creating a separate cost code as soon as the incident occurs. Adding this unique code to any labour and material expenses associated with the claim will enable you to quickly pull a copy of all invoices required for submission.
4. Review the adjuster’s report carefully
As part of a material damage claims submission, the insurance provider will likely send out an insurance adjuster to investigate the claim and determine if and how much they will compensate you for the damage or loss that occurred.
After an adjuster inspects the loss or damage incurred as part of your claim, they will prepare a written assessment of the damage requiring repair or replacement and their estimate of the costs for each. It’s important to thoroughly check an adjuster’s report to ensure the costs allocated accurately reflect the original material invoices.
Did you also know that most contract works policies allow for a fair and reasonable margin to be incorporated into a material damage claim? Make sure you check with your broker to understand what’s included in your policy and to ensure the reasonable margin has been captured in the adjusters report.
5. Work with a broker who will advocate on your behalf
An insurance broker is a professional advisor with expertise in risk and insurance management.
It’s important to remember that an insurance broker acts on behalf of the client, whereas an agent is often contractually required to act on behalf of the insurer.
As well as arranging and placing cover for your business, brokers can also act on your behalf in the event of a claim. They can offer advice to help simplify the process, engage directly with an insurance provider and carefully review adjuster reports, ultimately saving your business the time and effort often associated with a claims process.
The reality is that not all claims are black and white. In the event of a contentious claim, a denial or even a reduced settlement, a broker can advocate on your behalf and negotiate with insurers with the aim to achieve a positive result.
