4 ADJUSTINGTODAY. COM A D J U S T I N G T O D A Y • What could or will the client do for temporary offices and production and shipping facilities? • Can the insured rebuild at the same location? Will there be a problem with building codes? Could there be a prolonged reconstruction period? What would happen if the firm wanted to build somewhere else? How will the policy respond? • Does the client recognize its obligation to the insurance company to reduce the loss as much as possible? • How will the employees be affected? Will some be laid off? If so, which ones? Will the client continue to compensate them? For how long? Is the company insured for these labor costs? Who will pay employees working on the clean-up or reorganization? Is there a need for an ordinary payroll exclusion? • How will the client substantiate the value of their stock, equipment, furniture, fixtures, etc.? Have they expensed much of this? In establishing value, have they overlooked items like in-house installation costs, power wiring, air lines, water lines and freight-in? What condition are their records in? • Does the client have accurate beginning inventories and periodic or yearly inventories? Will their accounting method(s) create a problem? (LIFO versus FIFO, for example.) • How are the inventory and accounting records being stored? • What about fluctuating inventory values? Will the limits cover a peak season? • How will the policy’s valuation clause respond to a claim? How should the property be valued? Is the client insuring at actual cash value or market value but expecting replacement cost at the time of loss? How will they deal with a possible coinsurance question? (Understanding the policy’s valuation clauses is critical. If the values provided don’t match the coverage requirements, the consequences can be severe. Most insureds don’t realize this, nor do they understand the methods of valuation or the consequences of coinsurance. Values should be set at current true cost — not book value. Businesses often depreciate equipment and fixtures for tax purposes, causing major problems after a loss. If, for example, a piece of equipment If the values provided don’t match the coverage requirements, the consequences can be severe. “ ”
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