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Happy Holidays from RWH Myers & Company

Making a business interruption claim is more than just an accounting exercise. It requires a good strategy, a thoughtful process and perhaps most of all, patience. These lessons come from experience and the team at RWH Myers has earned it from decades of preparing BI claims. Though this topic is of the philosophical nature, it is just as important as the details behind a business interruption calculation. So let’s dive in and see what you really need to make a BI claim. Strategy Every loss is different. You can’t apply the same game plan and the same approach to every claim. You have to assess the situation and all its parts to devise a specific workable strategy. Experience will help ensure your strategy is appropriate for the situation, but the claim will take on a life of its own. The initial loss assessment is derived from the loss information such as what happened, the timeline of events, the impact to operations and how long it will take to get back to normal. As forensic accountants, we will look at the entirety of the situation and dissect it from every angle to figure out the full scope of loss and then determine the best approach to measuring and supporting the claim. We will also anticipate how the claim will be adjusted and plan for arguments against the claim. Taking the time to develop a proper strategy will pay off at every stage of the claim process. Process Once you understand the situation and have designed an effective strategy, you can lay out a process to get to the desired result. The process starts off with identifying and assembling the team to execute the plan. The claim will require data from various sources and input from key internal experts to provide insights as to the impact on operations, both upstream and downstream. The process also includes managing claim adjustment, from setting the timeline to handling requests for information. During the process, your claim preparer will work to keep all phases of the claim moving forward whether with data gathering or insurer feedback. Claims tend to start out with a high level of attention, but it is common to lose momentum. Simply put, a well-defined process will keep the claim moving, limiting distractions and roadblocks. Patience Patience doesn’t equate to conceding to a lengthy and arduous process. It’s just the opposite. By definition, it means, “quietly and steadily persevering or being diligent, especially in detail or exactness.” It is important to understand that certain parts of the claim take time to develop, and that time is critical to ensuring a thorough and well thought out claim presentation. For example, taking your time in the beginning of the process to lay out the foundational elements of the claim will avoid obstacles that may delay claim settlement and the amount recovered. It’s best to set expectations early and commit to the process. Again, practicing patience will expedite the claim process and improve the outcome. You can rely on the experience of your forensic accounting team to lead that effort. So, you see, it’s not all about the numbers. There is more to the intangibles than you may have thought. Every claim has its own unique challenges. You should be prepared for anything and everything. Again, preparing a claim is just as much strategy, process, and patience as it is the technical elements of claim preparation.

Property damage insurance claims are among the most infrequent for corporate policyholders, but this year Louisiana has suffered through a record number of Hurricanes. When catastrophe strikes, recovering insured losses essential to rebuild and resume operations. Effected policyholders will need expert help to evaluate, organize and document their claim to present to insurers. Forensic accountants that devote their practice to preparing claims for policyholders have every day experience just as adjusters and auditors do, so it is certainly to your advantage to hire a firm of experts to represent your interests throughout the property damage and time element claim process. Though the specific insurance claims and the policyholders may change, the vital steps to recovery remain the same. One thing both sides agree on is that the claim process goes smoother when the policyholder is well prepared for demands of a claim from start to finish. The partners at RWH Myers prepared a detailed guide to assist policyholders in preparation for claim recovery. It is designed to serve as a resource and a framework for the claim process and includes the following sections: Establish Appropriate Accounting Methodology: Provides guidance and an organizational framework for post-loss activities, establishing specific accounts to capture the loss. Property Damage Expense Categories: Explains the types of expenses that may be included in each category of coverage and the documentation required for these costs. Claim Preparation Objectives and Overview: Identifies objectives for the claim preparation process, and provides a conceptual framework for achieving them. What is Covered: Examines the direct and indirect exposures to loss that are typically encountered, and provides guidelines for determining whether specific types of property damage losses are covered under the policy. Claim Preparation Procedures: Suggests timetables for the submission of inventory, property damage, and discusses the format and content of standard claim submissions. Audit and Settlement Guidelines: Discusses the procedures undertaken by the insurers adjusters and experts, and provides an overview of the settlement process. Click here to download the full guide.

When damage occurs from hurricanes, policyholders are faced with hurricane deductibles which are common in states along the Atlantic and Gulf Coasts. The meaning of "hurricane" may be determined by the policy wording or by state law. Generally, a windstorm is considered a hurricane only if is declared as such by National Weather Service. Though percentage deductibles have been used over the years, after Hurricane Andrew in 1992, percentage deductibles became more popular in policies especially after Katrina in 2005 dealing out $125 billion in damage. The common misconception is that the percentage applies to the loss sustained when in fact the percentage deductible is a factor of the total insured value (TIV). The policy wording can be confusing making it difficult to decipher and apply to your loss. We’re here to help you understand these deductibles and how they will apply should you be impacted by a hurricane. Here are a few items to look for in your policy: The following notice may appear on your policy cover - Florida information: "THIS POLICY CONTAINS A SEPARATE DEDUCTIBLE FOR HURRICANE LOSSES, WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU." The percentage may be based on various parameters. It may be per location or be more defined by structure. When it’s applied by structure it can be more advantageous for policyholders since the percentage would apply only to that structures TIV. It may pertain separately to property and time element losses of affected location(s) or it may combine business interruption and property. It is important to understand your specific policy’s wording to accurately calculate your out-of-pocket expenses before insurance kicks in. Further, contingent losses may again involve a separate percentage deductible. Percentage deductibles are often associated with a minimum deductible and, less common a maximum deductible. Here are a few examples of policy wording related to CAT loss deductibles: When a % deductible is stated above, whether separately or combined, the deductible is calculated as follows: Property Damage – % of the value, per the Valuation clause(s) of the PROPERTY DAMAGE section, of the property insured at the location where the physical damage happened. Time Element – % of the full Time Element values that would have been earned in the 12 month period following the occurrence by use of the facilities at the location where the physical damage happened, plus that proportion of the full Time Element values at all other locations where TIME ELEMENT loss ensues that was directly affected by use of such facilities and that would have been earned in the 12 month period following the occurrence. As respects property located in high hazard zones for earth movement: Property Damage: 5% per location, Time Element: 5% per location The above are subject to a minimum deductible of USD500,000 or if applicable the location deductible for Property Damage and Time Element combined, per location and a maximum deductible of USD15,000,000, combined all coverages, per occurrence. When a % deductible is stated above, whether separately or combined, the deductible is calculated as follows: Property Damage – % of the value, per the Valuation clause(s) of the PROPERTY DAMAGE section, of the property insured at the location where the physical damage happened. Time Element – % of the full Time Element values that would have been earned in the 12 month period following the occurrence by use of the facilities at the location where the physical damage happened, plus that proportion of the full Time Element values at all other locations where TIME ELEMENT loss ensues that was directly affected by use of such facilities and that would have been earned in the 12 month period following the occurrence. Deductibles for CAT losses have become more complex over the years. Interdependent operations spread the impact of loss across the organization, so it’s increasingly challenging to have confidence in the preliminary evaluation, especially when informing key stakeholders. Those who have had losses know, with hindsight, there are gaps in understanding and initial questions that are critical to the deductible evaluation. Our advice is to avail yourself of a candid, independent review from the start so that whether you have a recoverable claim or not, you’ll be informed and prepared.

When catastrophe is looming, Risk Managers have a lot to contend with starting with protecting their people and their properties, but their worries don’t end there. Here are a few tips from the partners of RWH Myers for before and after a named storm visits one of your locations. Pre-Loss Vet your emergency response team prior to loss - Preparation is the key in any endeavor but with property damage claims, you cannot be too prepared. There are “approved” vendors that insurance companies recommend; however, just because they are “approved” does not mean there will not be problems. We deal with this frequently. Notify the insurance company of who you plan to use and make sure you discuss expectations with your vendors to limit surprises. Choose your adjustment team - When there are opposing sides with opposing interests, the outcome will be dependent on the experience and skills of the players on your team. Carefully select the independent adjusting firm and auditors. Work with your broker to find the right partner to be named in your policy. These relationships are critical to the claims process and outcome. Choose your claim team - Having your team lined up and ready for action will help get any claim started quickly and properly. Your internal team may consist of risk management, finance and operations. It’s helpful to arrange your key sources of information that you’ll need to support your claim. Get to know your broker’s property claim experts. They will be instrumental in helping with policy interpretation and guidance throughout. Having an independent forensic accounting firm arranged ahead of time will ensure your claim preparation can begin immediately post loss. These experienced professionals will be a critical part of your claim team delivering the expertise to quantify the loss and pull all aspects of the claim together. Review Percentage Deductibles - When you are faced with a Hurricane CAT claim, whether from a recent weather event or in the future, figuring out how your percentage deductible applies may be more challenging than you expect. We suggest reviewing how it works with your broker and/or with your forensic accountants to make sure you understand how it will apply in a real-world scenario. Post Loss Clarify and document scope of work - Be clear on scope of work with your emergency response and restoration company. Make the adjuster part of that conversation. Often, emergency response does not follow the normal protocols of a typical project. There likely won’t be time for detailed estimates, so try to get the adjuster to approve the work in real-time to avoid second guessing. Take a hands-on approach - Your property may still be underwater, but once access is granted, you must be hands-on. No one should have access to your facility without the presence of a company representative. It is vital to have a company representative onsite to manage the activity and guide visitors. Audit contractor charges before approving - The first weeks after a loss is chaotic. It’s important for policyholders to put controls in place to monitor activity and to verify work has been completed to specifications and according to the terms of the agreement. Reimbursable insurance expenses should be separated and audited prior to payment for proper detail and accuracy. This should be done efficiently in real-time and be sure to involve the adjuster throughout. Address issues immediately - When the first emergency response invoice arrives, insurance companies may act surprised and even dispute the expense, especially if the steps above have not been followed. Make sure to get the parties together to discuss the issues. Don’t procrastinate and don’t assume. It is important to be proactive with any potential discrepancies. The immediate aftermath of a disaster can be stressful and hectic. Preparation and communication can help you weather the storm and minimize unwanted surprises and maximize recovery.

The world is getting smaller. Companies of every size do business around the globe. This poses unique business interruption risks both direct and indirectly. Recent examples include the devastating flooding in Thailand and the Tohuku earthquake and subsequent tsunami in Japan. Property claims can be hard enough when they are at home - adding distance and language differences can make things more time consuming and add expense to resolving a claim. There is good news though - international claims are not that much different than any other claim. Experience is the key. In 2013, Ingersol Rand suffered an $11M+ flood loss at a manufacturing plant in Shanghi, China. We calculated the property damage and business interruption loss amounts. “Utilizing their proprietary MyClaim portal rwhMyers worked extremely well with our local China management team, the loss adjustor and the insurance company's forensic accounting team to effect settlement within 3 months of the end of the loss itself,” said Kevin Lang, Director of Risk Management. Having prepared many international claims like this, we know where the perceived challenges exist and how to manage through them, such as: The Language The insurance world speaks English. The first question we are asked about preparing international claims is whether or not we have someone who speaks the language. While this might have some benefit, it is far more important that someone understand the process and the numbers. Most companies, based in English speaking countries or other, can agree on English as a common language. On the rare occasion where a translator is necessary, this is all that is needed - someone who can translate - it is not necessary to have a practitioner who is fluent. You are much better off with a practitioner who knows what they are doing on a property claim. The Location The time and cost to fly consultants around the world is a real concern. Often policyholders will be inclined to hire less experienced professionals because of their proximity to the loss. This is a mistake. For the most part, information can be transferred electronically and explained over the phone. For companies based here with operations abroad, all information necessary to prepare a claim can be transferred through headquarters. There are certain elements of a property claim where on site assistance is needed (physical inventories, building or equipment inspections, etc.) This type of specific technical assistance can be coordinated with the insurance company and local resources. Similar to accounting information, the results of these physical inspections can be documented and sent back home. There is usually no need to send someone from here to there. As real examples, we prepared and settled dozens of claims around the world without setting foot on the loss site. As described, this is accomplished by sharing information electronically and communicating by phone, web meeting, web sharing portal, etc. The alternative of using local, less experienced professionals would undoubtedly add confusion to the process. Experience is the most important requirement in preparing any property claim. Don’t get the wrong impression - we have travelled all over the world for our clients when asked. Sometimes the parties involved require it or the loss just simply demands it. However, this type of travel is less frequent now. If required, travel should be scheduled to maximize productivity to reduce the amount of travel needed. Again, experience and expertise allow this to be accomplished most efficiently. The Local Policy Local policies that cover losses abroad may have some differences from the the global policy. If these differences affect recovery, in general the master policy can be invoked to make up any differences. You will want to prepare the claim according to the local policy but be aware of differences. Your broker should be able to help sort out any differences and the reasons for those differences. The interpretation of the local policies by local adjusters can create confusion. Just be aware the the intent of the local policies should fit in with your global program - to indemnify for the loss. Summary To sum up, losses happen all over the world. Just because you are in New York and the loss is in Paris, France, does not mean you should treat it any differently than if it were in Paris, Texas. Language and location are not a barrier in this day and age. If you compromise expertise for proximity to the loss location, in the end it will cost you more. Look for a team that has had success managing international claims throughout the process leading to results for clients. As Kevin Lang says, “I highly recommend rwhMyers and their professional services for loss accounting needs anywhere around the globe.”

In these unprecedented times, clients are asking, “what should we do to document the impact of coronavirus on our business?” Our advice at this stage is simply to document and track your losses including out-of-pocket expenses and payroll costs. Of all the years of preparing claims from catastrophic perils, this situation will require perhaps the most flexibility and creativity in loss presentation. We are all are facing uncharted territory and though loss recovery is uncertain at this point, your loss is very real. As the U.S. aims to limit the spread of the virus, business is slowly grinding to a halt – and with it much of the economy. This may perhaps become the most significant business interruption event in history. Business interruption, also referred to as lost profits, is affecting some industries harder than others, and the remedy to these losses are as uncertain as the pandemic itself. Loss recovery may be available or disputed through first party commercial insurance policies or some form of legislative relief. While affected organizations look for answers, we advise you to act now to document and track all of your losses. The Partners at RWH Myers have assembled the following guide to help you understand the impact to your operations and begin to document your losses. Click below to request a copy.

As a forensic accounting firm specializing in policyholder insurance recovery, we are frequently asked to measure business interruption values and exposures for our clients. The potential for improvement with BI values reporting is obvious and prevalent across the insurance industry. Some clients are looking for a more streamlined process and others are concerned about the accuracy of their numbers, but they all suspect that both can be improved. Business Interruption (BI) values are an important requirement of the insurance process. The challenge is finding a repeatable, efficient system that produces an accurate measurement of your BI exposure. Consider for a moment, just how important this information is to your underwriter. The numbers you report gives the underwriter the basis for not only writing coverage, but is the basis for calculating premium. Each renewal gives you, the policyholder, the opportunity to present your unique BI risks, however, this opportunity is often squandered due to a multilateral misunderstanding of business interruption values and the exposures they represent. So what is the best approach? Get help from a firm you can trust. RWH Myers’ partners and professionals provide extensive loss accounting services spanning a broad range of industries and insurance issues. This expertise and knowledge of business interruption loss accounting helps policyholders quantify their exposures and achieve accurate BI values. Our team will work with your organization to define your BI profile that differentiates your risk in the market. We will collect, measure and report the information that best represents your BI risks. The forensic accounting methodology used is always customized to each organization we serve and we offer various levels of analysis to meet your goals, including: Ratable BI value Allocation by location for the schedule of values CBI / Supply Chain / third-party exposures Key process / location exposure analysis Cyber BI As shown above, BI Values and Exposures studies typically fall within the following categories: annual BI Values, consolidated or by location, and annual BI Values by location with detailed analyses of the realistic exposures to loss. These exposure analyses provide quantifications of, and explanations for Maximum Foreseeable Loss (MFL) and Probable Maximum Loss (PML) exposures, as well as consideration of extra expense and contingent exposures. The exposure analysis should consider relevant factors such as supply chain, interdependent locations, business continuity and disaster recovery plans. The exposure analysis provides the necessary information to determine appropriate limits and sub-limits of insurance. This sets your BI underwriting submission apart to maximize the capacity competing on your program. When it comes to this area of a policyholders risk portfolio, it's not a matter of "if" an independent evaluation is needed. It's a matter of "when." For a marginal cost, our analysis's will deliver value with every subsequent renewal. Email Jeff Esper at jeffesper@rwhmyers.com for an estimate and make your "when" happen now!

If you are in the insurance/ risk management industry, you have likely attended several presentations at conferences and chapter meetings. How many of them do you still remember? How many were interesting? How many were entertaining? As a presenter, there are ways to convey your message so that your audience will not only enjoy your presentations; they will remember you and your message long after the event. One such way is to use stories as the vehicle to transport your topic. It will work whether you're presenting to your board, underwriters, an internal company meeting or a RIMS event. In this article, I’ll explain why stories work so well and how to do it properly, so that you can improve your skills and get more out of every speaking opportunity. When learning new information, the human brain will attempt to compare the new information to something they already know. When communicating an idea or new information, why not proactively make the comparison for them? When Henry Ford described one of his earliest automobile designs, he may have said, “it’s like a horse and carriage, but without the horses.” That description creates a relatable picture as a point of reference to better understand what you are describing. What picture did that create in your mind? Stories work the same way. As long as it’s a relatable story, the audience will be able to follow along with the story while retaining the information you are sharing. An effective story will connect better with an audience than a straight data dump, which is what most presenters do. Stories are a superior teaching method. According to a study at the University of Wisconsin, by Jill Eck, when learners are exposed to storytelling in a classroom setting they are “highly engaged in the learning process” and are “practicing reflective learning as they process information on a deeper, more meaningful level.” A professional speaker knows this to be true from experience because they can see when the audience is captivated by a story, so why not take advantage of it in your presentations? Stories help in other ways as well, such as:  Stories break the ice and warm up the audience  Stories establish rapport with the audience  Stories are more entertaining and will reinforce your point In January of 2017, I attended a Minnesota RIMS event. During the networking cocktail party, while I was introducing myself to new people, someone stopped me and said, “I know you. You’re the ‘thousand legger’ guy.” He saw me give a presentation almost a year earlier in May of 2016 in St. Louis and not only remembered my story, he remembered the topic which was “quantifying cyber exposures.” I must admit, I was a little surprised, but that is exactly how it is supposed to work. If you tell a good story and tie it back to your message, people are more likely to remember. This was just one of many times this has happened over the years, but in this case, I was even more gratified, because I added that story into my talk just before I took the stage. That day, I had my slides together but I was still struggling with my material, and I had yet to come up with a story to help make my point. I was speaking for the first time about cyber exposures and was consumed by getting the technical content correct. Have you ever been in that situation? Being in front of a room full of peers, I really wanted to nail the subject matter and wasn’t even thinking of a story. After giving hundreds of speeches and presentations, if there’s one thing I learned that makes your message memorable and your point stick with the audience, it’s telling a good story. I knew I needed to come up with a story fast. As I sat there waiting to go on stage, I began scanning my mind searching for the right story use. Finally, it came to me. I immediately perked up and began thinking about how to integrate it. I hadn’t used this story before, so it was going to be a challenge, but I knew the story would help me connect with the audience and help make my point. I realize that you may not have tried using a story in your presentations before and likely have some concerns, so consider these three suggestions to help you get started on the right path. 1. WHAT STORIES WORK BEST? Though you can use any kind of story, I have found that personal stories work best because you know it well and can share it from direct experience. You won’t need to rehearse it in order to remember it, but you should practice the best way to tell it for maximum impact. Personal stories connect with the audience on a more personal level and can quickly enhance rapport with your audience. Humans have emotions so take advantage of a variety of them e.g. humor, suspense and even fear. There are no limits other than time and appropriateness. Not all stories are interesting or have a meaningful point, so you’ll want to make sure you have the right component parts. 2. WHAT ARE THE MAIN COMPONENTS? A good story is like Henry Fords car. It can take you anywhere you want to go as long as it has working parts. The first part is the set-up. To set it up properly, you’ll need to describe the situation so that people can see it in their minds. Where does it take place? Who is there? What is happening? Be descriptive enough to enable listeners to visualize the scene. Next, it must have problem or dilemma. This is key. If there’s no challenge the character is facing, there’s no story. People will imagine what that must be like or perhaps even picture themselves in that situation. You want your audience to connect emotionally to the problem because it creates the suspense you’ll need for the next step. Once you have them where you want them, it’s time for the climax. The climax comes in many forms. If it’s a humorous story, it is the punch line. If it’s a serious story, it’s the turning point. In either case, the best climax has an unexpected twist that makes it more interesting and/or funny. Any book, sitcom or movie has these elements and it will be good practice to identify them. Finally, in the end it must have a lesson, aka a take home message. When it is a part of a presentation or speech, you’ll need to relate that message to your presentation to reinforce the point you’re trying to make. 3. HOW DO YOU INTEGRATE IT INTO YOUR SPEECH? Once you have your story, you’ll need to figure out when and where to inject it. Sometimes, you can start off with the story and then segue into your presentation opener. Other times, it’s better to open the presentation and then transition to the story. The transition is the key. This is the part where you move into your story, so that is a seamless and smooth. You should not say, “And now I will tell you a story.” There are many ways to make the transition. You can transition into it like you would with an analogy by saying, “it’s like when” or can say, “for example…” The better you get with making the transition, the better the results will be. What you want to avoid is losing the audience in transition. If they are wondering what you are talking about or why, they will not be listening. Once you’ve told you story, you can and should reference that point again and again to remind the audience of the connection. This is called a “callback” and it can be very effective. Now, let’s explore how I did it in St. Louis. The point of my cyber presentation was that by analyzing your companies exposure from the inside out, the fear of an incident is reduced because you’ll be better prepared for managing this risk. When I began my talk I set the stage for all the outside influences and pressures around the cyber threats. Then, I said, “With all the uproar about cyber attacks, it’s easy to become a little irrational. (Here is the transition to my personal story) For example, my wife has a bit of a bug phobia. She hates bugs and goes crazy when there’s a bug in the house. It’s not that she is afraid of them, but she doesn’t want them in our house and if there’s one inside, she will stop at nothing to kill it. (The set-up) One day, my kids were playing with Legos on the dining room table. When it was time for bed, we told them to clean up the Legos. My 5-year-old son, Chase, helped for a few seconds and then disappeared leaving my 8-year-old daughter, Melina, to clean up the bulk of them. When Melina cleared the table, she stood up and screamed in terror. 'There are a thousand Legos on the floor' I was nearby and saw the mess and knelt beside her to help. (The climax) A few seconds later, my wife came running in from behind us with a shoe cocked and ready to strike. She demanded, ‘Where is it?” Confused and startled we asked, ‘where’s what?’ She said, ‘The thousand legger!” (The twist) (The point tie in) When you are too uptight about anything - whether it’s cyber bugs or real bugs - everything starts sounding like a threat. It’s far better to keep the risk in perspective by understanding your exposure to that risk on your bottom line.” (The lesson) There was a wave of laughter and then the point set in. From there, I continued on with my presentation, but I can tell you, I had their attention. I then presented my Cyber Exposure Wheel, our framework to help risk management quantify their company’s exposures. At the end, I concluded, “if you focus from the inside out, you won’t need to chase any ‘thousand leggers.’ You’ll be better prepared for whatever threat comes your way.” (The callback) The thousand legger story actually happened so it was easy for me to remember and share. I had already told my friends and family the story for a laugh. All I had to do was draw the simile of the threat of bugs to the threat of cyber to make it work for that presentation, so I was able to pull it off as a last minute addition to my speech. I have lots of stories like this one and can use any of them to make various points. The good news is you have lots of stories too. Using stories in your presentations makes them more interesting for the audience and more fun for you as the presenter. The next time you have a presentation to give whether it’s at a RIMS meeting or at a company meeting, I encourage you to add in a story of your own to help make your point. You’ll be amazed at the feedback you get. And, you’ll be thrilled when someone references your story at a later event. It may sound odd, but I’m proud to be the “thousand legger” guy!