Business Interruption Costs Can Make Insurance Claim Skyrocket.

Case Study:  Taking Care of Business - Alberta Based Gelato Company

Time is money - especially when an unexpected event forces business to a halt.

After a fire had broken out on December 19, 2015 at a large gelato manufacturing and retail operation in Calgary, Alberta, both time and money were in short supply.

The blaze started in and was limited to the café but the entire location, including the plant at the back of the building, was impacted by soot and water damage. The company had just poured much of its capital into renovations of the café that were completed only six months before, so cash flow was an immediate issue. While there was enough gelato in stock to take their customers through the holiday season, they could not afford to have production for the wholesale market shut down for an extended period.

Another factor working against the company—and the clock—was the nature of the product itself. A large quantity of gelato was being stored at the damaged, temperature-controlled warehouse. Without proper handling, potential profit could easily melt away. A further complication was that the Canadian Food Inspection Agency’s (CFIA) approval was required before reopening.

The situation was exacerbated when the emergency restoration company indicated it would take a hefty three million dollars and four months to return the facility to working order. The owner needed funds to start emergency restoration immediately and in a much shorter timeline, but he didn’t know how to get started.

Understanding that the owner required greater support, the insurer contacted SPECS to attend the site to see what could be done to meet the client’s business needs and get the claim back on track.

When the file came in to the Calgary SPECS branch on Christmas Eve, four days had passed since the loss occurred. Within two hours of the call, a SPECS appraiser was at the site to review the emergency work required to get the facility back in operation. To expedite matters, the owner hoped to have the emergency work done by the contractor who had completed their recent renovation, as he was already familiar with the site. The appraiser agreed to include the preferred supplier in the bid process.

The owner also wanted to use its own staff to help with the cleanup, keeping them employed until operations could resume. SPECS advised them to track staff time to get reimbursed through the claim, and informed them as to what cleaners would be well suited for the job.

Following this initial visit, SPECS was asked by the insurer to be the main point of contact between the business owner and the insurance company, retaining open and clear lines of communication.

With over 20 years in the business, this type of fast track construction was nothing new to SPECS. There was, however, a steep learning curve regarding the highly technical gelato manufacturing process and the very specific machinery used.  Having six transformers on site, the factory required huge amounts of power to run the facility, including the water treatment machinery, electronics and slurry tanks.  Moreover, the warehouse was full of frozen gelato that repeatedly had to be expertly and swiftly moved around to be able to deal with impacted areas.

Despite these challenges—not to mention the holiday timeframe—SPECS prepared the emergency scope of work by December 28 and sent it out for pricing by restoration contractors. To keep the process moving while waiting for quotes, the bid documents for the permanent repairs were started. Also taking care of the contents of the building, SPECS took this time to list all the equipment and begin the replacement cost appraisal of damaged goods. This involved investigating options for refinishing rather than replacing items.

SPECS facilitated a substantial preliminary advance to meet ongoing costs and so the emergency repairs could begin right away. On the 30th of December, the emergency repair bids came in. SPECS recommended that they go with the owner’s contractor who provided the lowest bid, and the insurer gave permission to work out an agreed price and go ahead with the job.

By January 7, only seven working days after SPECS was called to help with the claim, the production facility was ready. Quick containment of the situation meant that the CFIA was able to give the go ahead to re-open production. And, given the short turnaround on the non-emergency appraisals, by the 12th of January the reports were in, and an agreement on scope and price was finalized. A large advance was given based on the settled upon repair price, including the equipment and contents loss portion of the claim.

SPECS had everything up and running again in three weeks at a cost of $600,000—a fraction of the time and money originally quoted by the emergency contractor. Working quickly over the holidays, conducting due diligence with multiple contractor bids, and finding opportunities for refinishing over replacement of some contents translated into significant savings for the insurer.

For the gelato owner, expedient repairs allowed them to maintain supply to their wholesale market and not incur any additional loss of revenue. Likewise, they could get the ball rolling on retail and office area restorations much faster than anticipated. They were further supported in their choice to use their own contractor and employees for the emergency work, making the experience less stressful for everyone.

Thanks to the deft handling of the case by SPECS, the entire claims process resulted in complete satisfaction for both the insurer and the insured. Time may be money, but good relationships are invaluable.

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