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Navigating Property Restoration: A Comprehensive Guide Through Insurance Losses

06/01/2024 7:30 AM | Anonymous member (Administrator)

By Meaghan Brown and Nicholas Sekol, Spyder Construction

In the aftermath of property damage, whether due to fire, water, or natural disasters, a structured approach is essential to ensure efficient restoration. Understanding the sequential order of operations can streamline the process and mitigate further loss. This article outlines a detailed roadmap divided into seven phases, offering a comprehensive guide for property owners and managers facing the daunting task of reconstruction.

*** The timelines provided are what to expect and do not necessarily apply to every situation. Unexpected property damage is full of challenges, and some can be unforeseen. Please consult with your disaster recovery team of choice to discuss their specific timelines. Some of these phases can overlap on a timeline as noted below ***

Phase One: Immediate Response (First 0-5 Days Following Loss). The initial phase focuses on stabilizing the property and initiating crucial assessments:

  • Board up windows/doors to secure the premises and erect temporary fencing to establish a safety perimeter.
  • Arrange temporary power sources and execute utility safe-off procedures to prevent additional hazards.
  • Conduct environmental testing, including asbestos and lead assessments. Please note, this should be completed per unit address. If asbestos is found, immediately order a “Spill Delineation Report” from an Industrial Hygienist. 
  • Supply necessary liability release waivers to all owners, vendors, insurance carriers, consultants, and contractors requesting access to the property.  Executed copies must be returned before allowing access to the property.
  • Engage structural engineers for evaluations if structural damage is apparent.
  • Notify insurance carriers and file a claim promptly.
  • Collaborate with preferred reconstruction vendors for site inspections immediately. It is the right of the insured to partner with whomever they prefer for their insured restorative construction project.
  • Sign a work authorization with your reconstruction contractor to complete the project, with the schedule as “pending” and the value as “open.”
  • Ensure your individual unit owners within the HOA place claims with their individual insurance carriers.

Phase Two: Coordinated Assessment (5-30 Days Following Loss). This phase involves coordinating with insurance adjusters and preparing for mitigation:

  • Facilitate insurance adjuster inspections, involving contractors in initial site visits. The insurance carrier will need to inspect the loss prior to disturbing the scene. They may also require a cause and origin investigation.
  • If the building is None Detect (ND) for asbestos containing materials:
    • Secure releases from tenants and owners to begin mitigation efforts within their spaces. 
    • Coordinate with tenants and owners to remove their contents.
    • Ensure that owner and tenant release forms include a contents release, as anything left behind will be thrown out as debris by the HOA’s contractor.
    • Unit owners can contract with HOA contractor for their individual needs and also have the right to hire their own vendors independent of the HOA for their insured loss.
    • Immediately begin mitigation efforts outside the area of cause and origin, as the mitigation cannot disturb the scene until your carrier releases the scene.
  • If the building is positive for asbestos containing materials:
    • Immediately partner with a hazardous materials remediation company and provide the spill delineation report; Request that the company permit the spill response with the Colorado Department of Public Health and Environment (CDPHE).
    • The Spill Response cannot disturb the scene until your insurance carrier releases the scene.

Phase Three: Documentation and Planning (15-45 Days Following Loss). Focus shifts to documentation, cost estimation, and preliminary planning:

  • Collect and submit emergency services, site stabilization, mitigation and/or asbestos spill response invoices to insurance adjuster.
  • Obtain estimates for demolition and asbestos abatement, if necessary, and send them to the insurance adjuster.
  • Depending on the severity of the damage, a design firm may be required for a permit.  Design firms are needed when structural damage occurs or damage to mechanical, plumbing, and electrical systems accompany structural damage. However, if structural damage is minor, an engineer may be all that’s required to design the repairs.
  • Submit the design pricing to the insurance adjuster. 
  • Request that your contractor work with your insurance carrier to get a preliminary scope of work defined and assess a preliminary value that is in alignment with the CCNRs. 
  • Communicate to the individual unit owners the limitations of the HOA insurance and what their individual insurance carriers’ obligations will be.
  • The contractor will then issue Change Order #1 to the HOA amending the preliminary estimate value to the contract.
    • At this point, the contractor can attempt to forecast a repair timeline.
    • Repair timelines are always dependent upon the issuance of a building permit. 
    • The contractor can also estimate the owner’s obligations separately upon request as the limitations of the HOA coverage are established.

Phase Four: Permit Procurement and Preparation (30-60 Days Following Loss). Efforts concentrate on securing permits and preparing for demolition or abatement:

  • Apply for demolition and asbestos removal permits as required.
  • Execute demolition and abatement procedures in compliance with regulations.

Phase Five: Design and Permit Submission (45-120 Days Following Loss). This phase focuses on obtaining design approvals and submitting permit applications:

  • Obtain preliminary repair drawings (design team to collaborate with contractors before they submit for permit.)
  • Engage design team or contractor to submit repair plans for permit approval from local authorities.
  • Address supplementary items identified during plan reviews.
  • Initiate change orders for additional work or code upgrades.

Phase Six: Construction Initiation (90-120 Days Following Loss). The construction phase begins with permit acquisition and project commencement:

  • Contractor submits a production schedule within one week of receiving the permit and should amend the schedule to the contract by a $0.00 change order if there is a change from the original timeline projection.
  • Contractor begins construction. Invoicing should be billed at least monthly, based on a percentage of work performed.
  • During the production process, the Building Inspector may request work that exceeds what is specified on the plans. In the event this happens, the contractor will need to issue a supplement to the carrier for the additional expense.
  • The contractor should issue a supplement by way of a change order to the HOA to endorse for each corrective change that was required by the building department.  These are referred to as “Code Upgrades” and will typically have insurance coverage limits for these specific corrections.  These should be submitted to the insurance carrier in a timely manner so that they can be added to the claim. Code Upgrades are typically paid when incurred by the insurance carrier.

Phase Seven: Project Completion and Claim Settlement (Production Timeline Following the Loss). The final phase involves completing construction and settling insurance claims:

  • Obtain completion notice signed by HOA representative.
  • Submit completion notice and supporting documentation (photos of work completed) to insurers.
  • Receive Actual Cash Value (ACV) upfront and Replacement Cost Value (RCV) upon project completion. The ACV is the depreciated value of the repair and the RCV is the actual cost of the work the contractor charges.  The difference between these two costs is commonly paid to the insured upon substantial completion of the work.

Navigating property restoration demands a systematic approach and clear communication among stakeholders. By adhering to the outlined order of operations, property owners and managers can effectively navigate through each phase, ensuring a smooth and successful restoration process.

About the Authors: Meaghan Brown is a Business Development Specialist at Spyder Construction, working with HOAs, multifamily, and commercial properties for their community-wide reconstruction, roofing, building envelope, and large loss insurance projects.  In her free time, Meaghan enjoys spending time with her husband and dog enjoying the outdoors near their home in Idaho Springs. 

Nicholas Sekol is a Senior Project Director with Spyder Construction with over 20 years in the business and has completed over $150 million in projects during his tenure.  His focus is Fire Loss Mitigation and Reconstruction throughout the Front Range and beyond.  In his free time, he enjoys spending time with his family and riding his mountain bike all over Colorado. 

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