Patience paid off for BI claim

Patience paid off for BI claim | Insurance Business

Patience paid off for BI claim
Briscoe Group has just enjoyed a first half profit increase of 21% thanks in part to a $1.3 million insurance settlement.

The settlement was for a Business Interruption claim filed for their Salisbury Street store in Christchurch which had to be demolished following the earthquake.

Although the store was back up and trading within 18 months of the earthquake hitting, CFO Geoff Scowcroft says there was good reason to wait another year from doors opening before submitting their claim in the spring of 2013.

With three other stores still open in the Canterbury area, Scowcroft had to establish how much of those stores’ extra business came from custom from the Salisbury Street store transferring over as well as work out what it might have made had it remained open.

“The difficulty came with the transfer of business and proving how much of that you would have got or wouldn’t have got, how much of it was extraordinary and so on.

“We had to prove how much of the uptake in the other stores we got was due to that store we lost as opposed to how much we picked up from the competition who were affected as well.

“Stores like Farmers and The Warehouse had stores shut down and were worse off than we were so we picked up business from that too.”

Then there was the fact that certain categories of stock were abnormally affected, both up and down, because of the nature of what household goods people were buying.

“Buckets and mops and all that sort of stuff went through the roof so that was an extraordinary pick up which we had to exclude from all our workings,” says Scowcroft.

“It’s quite difficult in terms of convincing loss adjusters and insurance companies as to how you put the claim together.”

What made it easier, he says, was having good data to work from.

“We have pretty good data here in terms of being able to detract things and pull things out. So that became quite important for us to prove our calculations.”

Scowcroft says because BI is notoriously difficult due to its subjective nature, when it became apparent that the store was going to reopen and be a good guide for their estimates it made sense to delay the claim submission while they firmed up the details.

“With Business Interruption there’s loss of profit so there’s a lot more assumption and calculation and trying to eliminate things. You have to get your assumptions as correct and as plausible and backed up with as much evidence as you can because it’s obviously not a case of here’s the value of the stock that we lost and that becomes a matter of fact, it becomes a matter of assumption.

“Once it became apparent that the store was going to reopen and be a good guide for us that protracted things as well but it helped us quite considerably in being a little bit more definitive about what the transferred loss could have been.”

Scowcroft says their insurer NZI and broker Aon were pretty good to deal with, saying that NZI soon wised up to the commercial reality but he was less forthcoming on the subject of loss adjusters.

He says it was more difficult dealing with them and there was considerable lengthy to-ing and fro-ing on various calculations before an agreement was reached.

“We’ve spent a lot of time on this, but it was important that we do so because there were significant numbers in the claim. It’s probably small in the scheme of things for some people but certainly for us it was a loss that was significant.”