Processing claims and completing renovations in a timely fashion that keeps all parties satisfied and financially whole is the goal of every improvement-minded person. However, many projects experience delays — from unforeseen human error to unavoidable or seemingly random events that unfold — leading to frustration from all parties involved.
Below are seven of the most common insurance claim delays during a renovation or reconstruction project:
1. Negotiation and Scope
The project’s final scope stands as the first potential roadblock to a claim valuation. Disagreements on the final cost, value of items, work needed, and budget limitations can all sideline a claim and stall projects.
Without a determined scope of work, plans can’t be accurately drawn and permits can’t be secured. Once there is an undisputed scope of work, the project can begin.
2. Coverage Disputes
Coverage disputes between the insurance company and the insured typically boil down to misunderstandings and disagreements on the extent of coverage. However, both sides should remember that an insurance policy is nothing more than a contract, and the terms and limitations of the contract are thus the terms and limitations of the policy. Disputes can range from policy limits to policy interpretations, and a host of different coverages or sub-coverages.
3. Contractor Commitment
Once an undisputed scope of work is determined and all parties are satisfied with the plan as it relates to the policy, the insured needs to select and enter into a formal agreement with the contractor so the project can move forward. Contractors cannot commit funds or time to order materials, recruiting or assigning skilled labor to the project and determining lead times until there is a signed contract.
Sometimes, the insured will not move quickly to secure a contractor, which increases the overall time to complete the work and close the claim.
4. Skilled Labor and Materials Availability
Labor and supply-chain disruptions can easily hold up a project in today’s macroeconomic climate. Yet, delays aren’t limited to the effects of global inputs; contractors must deal with local market conditions as well.
This happens when a project is one of many because of a regional catastrophe, such as a hurricane or wildfire. Resources are in high demand and become scarce in such instances.
Similarly, an unforeseen shortage of a geographically specific natural resource used (i.e., natural stone from a specific quarry) for the replacement materials can delay a project. True claims story: A North Carolina nursing home needed Buckingham slate for its 100,000-square-foot roof replacement, which comes from only one quarry in the world. Originally the contractor estimated 12 weeks to get the materials. However, the quarry hit a bad vein of slate and increased its estimate to two to three years, in order to cut through the bad rock in the quarry.
5. Plans and Permits
At times, it’s possible to get a permit directly from the scope of work, but it doesn’t always happen. Getting plans drawn correctly, approved, and processed through permitting can become roadblocks if there aren’t clear, complete details from the start. If the architect or engineer doesn’t have the correct scope of work in mind, plans could include more code-related items than necessary prior to the permitting process.
When the plans are ready to submit, the permitting body may be overtaxed and experiencing delayed permit times. Some agencies will allow payment of a premium fee to use a third-party plan check company and bypass their plan check process.
Also, insurers can hire expeditors to accelerate plans through the permitting process. Investment in these solutions typically is worth every dollar, especially in certain municipalities, as they are proven ways to minimize or avoid delays. Include your building consultant or expert in the plans and permitting processes up front to ensure the drawings match the scope of work as originally intended.
6. Advance Funding
If a contractor needs to order materials or manufactured items with long lead times and cannot access enough advanced funding to do so, a project can grind to a halt until those items can be ordered without threatening the investments of all parties involved.
Even in a situation where the estimated final payment is agreed upon by all parties, insurance companies should provide adequate funding for the order of long lead-time materials, possibly entering a provisional contract (which can be altered later) with the contractor to order equipment. Creating a Notice of Intent signed by both parties to help protect the capital investments of the contractor also can help prevent funding roadblocks from delaying the process.
Supplements are sudden changes to the original scope of work amended during the project because they are discovered while the work is happening. The scope of the project might have been agreed upon, but a job can pause if the contractor finds conditions or issues previously unknown to address.
For example, the contractor may find a need for methane abatement under a concrete slab during a demolition project or the inspector discovers the entire building needs re-wiring after they gained access to the electrical system. These supplemental issues cause plenty of delays and financial headaches.
Communication and Flexibility Are Crucial
The above project delays by no means represent the only roadblocks to a claim. There are seemingly millions of issues that can slow a project. However, these are the issues that seem to occur most frequently, and insurance companies should work to avoid. Clear, concise, and early communication across all stakeholders can help overcome many of these roadblocks. Flexibility and innovation to find solutions that work for everyone involved can help get claims processed and projects completed efficiently and on time.