Here’s an example. After closing time, a small fire breaks out in Jenny’s restaurant. The fire started in the kitchen’s storage area. First Jenny orders her entire staff out of the building. Then, she arranges a roll call to be certain that everyone is safely accounted for. Finally, she makes a call to the Fire Department. All the while, she stops anyone from reentering the restaurant to attempt to extinguish the fire. As it turns out, the fire spreads from the storage area and into the kitchen, severely damaging the heart of her restaurant. After investigating the loss, Jenny’s insurer reduces her claim payment by $10,000. The lower payment is justified by their finding that the loss would not have been nearly as severe if Jenny had allowed her staff to use the available fire extinguishers and had made the emergency call more quickly.
Here’s another example. The Laggleson family goes outside to check for any damage to their home after a violent windstorm. Besides a lot of scattered debris and an overturned patio set, they notice that a large limb from their Chinese Elm was blown onto their roof, creating a large gash. Several hours later a rainstorm comes through the area. The rain that pours through the hole damages expensive furniture stored in the attic as well as ruins the drywall belonging to the bedroom located beneath the compromised attic.
Scenario One – the initial damage occurred early on a Thursday morning with the storm occurring in the afternoon. The Lagglesons decided to go on to work and school and to handle things after returning home.
Scenario Two – the initial damage occurred on a Sunday morning, around 3 a.m. with the storm occurring around 6 a.m. The Lagglesons made several frantic calls but could not find anyone willing to come out to their home to deal with the open roof until Monday morning.
In both scenarios a failure to preserve the property after the initial loss created additional damage. However, it is only in the first scenario that the policyholder may suffer a consequence. In such cases, the loss circumstances have a significant bearing on how the insurer may respond and the policyholder’s actions are critical. A reasonable effort under the circumstances may mean all the difference.
If you need more help in understanding your responsibility after a loss, be sure to discuss your concern with one of our insurance professionals.