Keeping a focus on expenses for environmental claim adjusters

Insurers know that some of the more expensive claims can be on the environmental side. When you take into account all the concerns that have an effect on their handling, it is easy for costs to snowball for the adjuster. There are many important considerations that can drive these costs up as these claims typically are based upon human health and the environment (clean soil, groundwater and air quality). Further, when you add in strict state and federal regulations, expenses can quickly escalate.

Adjusters though, have a duty to pay what is owed on a claim file and that all begins with knowledge. The more you know about these often-costly remediation projects, the more you can save.

An experienced environmental professional can partner with an adjuster and provide valuable insights on the claim. What is reasonable, necessary and consistent with industry standards? An upfront review and analyzing proposals prepared by remediation contractors is a good start to familiarizing yourself with the scope, strategy and objectives (along with reviewing regulations and the applicable policy language).

Reviewing cost estimates

Prior to a case beginning, it is imperative that you review a detailed scope of work and cost estimate. This is required for any level of work performed from site investigations, delineations or remedial investigations, monitoring well installations, air monitoring, any form of sampling, all the way through remedial actions and related items. Such estimates should contain detailed line items, labor rates, equipment rates, expenses and subcontractor costs, estimated duration on-site and more. An experienced environmental professional and confirm whether costs are reasonable or not.

Some specific items to be aware of include rates associated with labor, equipment and laboratory costs. Additionally, soil and groundwater disposal rates may be priced higher than typical figures. Sometimes a simple “typo” can mean the difference in thousands of dollars for a particular item. All of these items should be reviewed upfront since it can be difficult later to reduce these costs while the claim is ongoing.

Whether or not it makes sense to bring in an environmental professional, the adjuster should always review all invoices associated with any aspect of the claim, including work associated with remediation, investigation, delineation, well installations or sampling. Paying special attention to contractor labor rates, equipment rates, time on site, costs of disposable and non-disposable items, and laboratory costs is extremely beneficial. A review will determine if markup percentages on laboratory costs and other expenses exceed typical accepted industry standard rates. An assessment can also determine if backup documentation is necessary from the contractor for various items, many of which can confirm whether costs are reasonable. To this end, remediation contractors should always be able to produce backup documentation for items such as soil and groundwater disposal and backfill material, as these costs can add up quickly. An environmental professional who is on-site can help with the observation of remediation activities.

Proposal review, invoice review and on-site observation are all important tools at the disposal of insurance adjusters when looking to mitigate environmental claim costs and ensure that you are truly paying what is owed with respect to your claim.

Matthew Johnson is a senior project scientist with H2M architects + engineers in Parsippany, NJ. He has been involved in supporting insurance clients in the management of environmental issues and controlling costs for over 12 years. Contact him at mjohnson@h2m.com. 

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