This is an extract from Robertson’s Insurance Principles for Leasehold Flats. To obtain a copy please click here
Parts of this extract may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without written permission from the author, providing that the author and title are clearly credited and the extract does not exceed 1,000 words. Otherwise the author’s written permission is expressly required.
When things go badly wrong in a block of flats many families and their lives are affected. Hopefully you will never experience a major loss at a block you manage but, if you do, this chapter may prepare you. We look at the example of a fire but the principles will remain the same for a flood or a major storm claim.
In this chapter we consider the following:
If you have never experienced the aftermath of a major loss before, then prepare to be overwhelmed. You need to understand the trauma the residents of a block of flat will have been through and understanding this will help prepare you.
Often fires can make horrendous sounds as they take hold of a building. Expect reports of loud bangs and explosions sounding like fireworks. You may hear of reports of a washing machine on a loud spin cycle followed by a big whoosh. These are the real sounds residents may have heard as they woke in the middle of the night, followed by the chaos of people shouting and banging on doors. And when the fire brigade arrived they will have performed a search and rescue mission, which involves entering every flat. So you can also expect people to have been woken up by the sound of an axe coming through their door.
When residents are evacuated they normally don’t have time to grab any personal possessions and have to leave everything behind, so they are in a very fragile and exposed position. As such, the calls you receive are likely to be frantic and demanding, with residents expecting answers.
Naturally you want to be on site as quickly as possible but a little forward planning will help you to be more effective. First, you need to lodge the claim with the insurance company. At this stage you will be pretty sure that this is a major incident so make sure you stress this immediately and tell the insurer this is a major loss which requires immediate assistance.
Give them an indication of how many flats are affected and ask them to appoint their major loss team. Also ask that they appoint a loss adjuster and ask them to call you and confirm what time they will be on site. The sooner the loss adjuster can be there the better. You hopefully have procedures in place where you can appoint a loss adjuster yourselves which means you can get one to site even quicker.
Don’t be afraid to get people out of bed. If it is a major loss the reputation of the property manager / managing agent may be on the line if things go badly and the directors or principals of the firm will want to know what’s going on.
Other than pen and paper there are a number of things you will want to take with you. The must-have items are a hard hat, high visibility jacket and appropriate footwear; preferably steel toe-capped boots. Also take a torch and some antibacterial hand wash, something that is vital in flood claims where you may come in contact with water that has been contaminated with effluent. And obviously take your business cards. You are best advised to also take a copy of the full insurance policy wording and the policy schedule as that will make life easier for the loss adjuster.
When you arrive expect the scene to be sealed off by the police to ensure safety and to protect the site from looters. In the event of a fire they will initially be treating it as a crime scene until the source of the fire has been established. Wearing your high visibility jacket and hard hat should allow you past the police tape and you will want to talk to the chief fire officer who will easily be identified as he or she will be wearing a white helmet. Normally you will be automatically directed to them as they are in control of the scene and are usually very helpful and informative. Probably they will give you a brief outline of what has happened and may already have a clear idea of the source of the fire. Naturally you should respect their authority and obey any directions which will be for your safety. If anything suspicious is suspected the fire brigade will normally arrange their own specialist investigation team to attend, who will offer their findings directly to the police.
Once the fire brigade have left the scene the police may well continue to contain it as a crime scene and no one will be allowed back in the block until they are satisfied a crime has not been committed. When they release the site you will be faced with a block which has been accessed by the fire brigade during their search and rescue mission. Every flat will have been searched and you can expect many of the doors to have been forcibly opened. The police will help maintain security but will expect you to immediately arrange for the site to be made secure with emergency boarding and security put in place.
Your immediate temptation will now be to enter the site and armed with the high visibility jacket, hard hat and appropriate footwear you may not be stopped. This is where you have to think carefully about remaining safe. Is the building safe to enter and should you do so? Obviously, if the fire brigade give you a tour you are probably in safe hands, but expect the unexpected as the building may have been structurally damaged and there may be many hidden hazards. Don’t put your life at risk just because you are curious to take a look. The local authority may deem the building structurally unstable, in which case only the professionals should enter. The loss adjuster will have appropriate experience and should be able to guide you.
Naturally the residents are likely to be distressed. This is quite understandable. They may have been left on the street for some time with few possessions. It is worth taking some time to think about the things they may have left behind and what that means. Their car is safe but they don’t have the keys. They have no money or credit cards and with no identity documents how will they prove who they are when they can get to the bank. They have no mobile phones so can’t call their friends. They have no change of clothes and don’t know where they are going to sleep or how they can get to work. They want to know what’s going to happen; is the building insured, where is the loss adjuster, what caused the fire and when can they get back in to collect their possessions?
Residents are likely to be unimpressed by the news that they cannot get back into their flat. Once the police leave and security is in your hands this pressure will increase. You can expect some residents to try and break into the block to get their possessions but it remains your duty to ensure they don’t do so until it is safe to enter the building. Even then you will probably need to arrange for them to be escorted until each flat can be secured and the common parts made fully safe. The power is likely to be off, leaving no lighting – remember that torch?
At this stage you will need the expertise of the loss adjuster and you will need to help them bring order to the chaos. One of the most useful things you can do at this point is to collect contact details and make notes of each resident’s intentions. Are they planning to stay with friends or family? What is their telephone number if they still have their mobile phone? Note their email address or any other means you can use to remain in contact with them. Also, you need to establish if they are owner occupied lessees or renting the flat. Agree with the loss adjuster who is to manage the contact database and ensure all residents agree to keep you updated with their contact details.
The loss adjuster will arrange emergency accommodation for all the residents in local hotels. It is prudent to advise residents that the insurance company will only agree to pay the emergency accommodation and that they should not expect the insurer to pay for their mini bar or bar bill. You will be surprised how many will otherwise think this is reasonable.
At this stage you will hear some alarming phrases and you will need to be prepared for these. First the police will have declared the site a crime scene. This is normal as they need to be satisfied that no crimes have been committed that they need to investigate. Once they are satisfied that nothing is suspicious they will release the site. The local authority may intervene and declare the site unsafe. Until your structural engineer has satisfied them that the site has been made safe, access will be prohibited.
So now you have access to the site but the loss adjuster tells you he wants a forensic investigation to be conducted before the residents are granted access. This is standard practice and is not as scary or sinister as it sounds. The reality is that the insurer will want to understand the cause of the loss. Sometimes this will enable them to make a recovery at a later date from another insurer. For example if the fire was caused by a contractor working on the property or as the result of faulty workmanship or a recently installed defective appliance.
Possibly the biggest concern of residents will be to establish that the loss is covered. The loss adjuster will probably tell you that liability has not been established and indemnity has not been confirmed by the insurer. Don’t panic at this stage, as you need
to understand the process that will unfold. The loss adjuster will probably have authority from the insurer to commit to certain emergency actions up to a given limit. After that the loss adjuster will need to obtain authority from the insurer and this process will take some days. The insurer will check cover was in place, that the cause of the loss is insured, the building is adequately insured and that there is no foul play. The reality here is that as a property manager, if you have done your job correctly when placing the insurance there will be nothing to fear.
Obviously you need to reassure residents at this time of crisis but it is most important that you balance their concerns with the need to ensure you don’t make any promises outside your authority. Again, you should seek guidance from the loss adjuster before making any commitments for which you could later be held accountable.
You cannot confirm indemnity until the insurer has confirmed it but you need to make residents realise that nothing is unusual at this stage. You also need to start to understand the covers that are in place and how they are intended to perform.
Some flats may be rented by lessees and you will be faced with their tenants who are resident in the block. Most of these will be renting on assured shorthold tenancy agreements which are normally automatically contractually broken when the flat becomes uninhabitable. Either this break is immediate or, on some tenancy agreements, a break comes into effect after 30 days. When the tenancy agreement is terminated on this basis
the landlord needs to return the deposit in order that these residents can find alternative rented accommodation. It is likely that these residents will discover the cost of comparable rented accommodation will be more expensive and the block policy will not cover their increased costs for renting elsewhere.
In Chapter 8 we explored alternative accommodation and loss of rent and the differences in the market. Generally you will expect the block of flats buildings policy to cover alternative accommodation but not all policies will cover loss of rent incurred by lessees. This may have been a conscious decision by the insuring party, for example where the lease did not permit sub-letting, or it may be an oversight. You need to be very careful that what you promise will happen – always get any decision confirmed by the loss adjuster.
Probably the biggest issue over the next few days will be communication. It is really important to ensure you provide regular updates to the residents, who naturally will be very anxious. You need to ensure you keep accurate and up to date records of where they are staying and how you can remain in contact. You may wish to consider holding a meeting in a local venue such as a church hall or community centre and typically these venues will be supportive and happy to accommodate you.
The loss adjuster will be looking to establish the types of tenants resident in the block and will arrange appropriate alternative accommodation for owner occupied lessees. Typically this will be rented accommodation and the loss adjuster will normally be
able to arrange for the insurer to pay the security deposit or issue a letter of guarantee. The reality however is that most residents will not have contents insurance and the block of flats buildings policy will be unable to assist them with this, although it is commonplace that the loss adjuster will be able to arrange for the rental of a package of basic furniture.
The second major challenge is keeping the site secure and arranging controlled access for residents to rescue some of their belongings. Following a large fire, most of these will have been destroyed by not only the fire damage but also by smoke and the water used to extinguish the fire. When access is granted you may need to escort residents and you should consider the health and safety implications of doing so. This may mean purchasing additional safety equipment such as hard hats.
Following a major loss you can expect some unusual challenges. Elderly residents may have special needs and hotel accommodation may not be suitable if their flat was modified to assist with their care. Placing an elderly resident in a care home as a temporary measure may be very stressful both for them and their family and friends. These matters have to be handled with great care and compassion.
Many hotels have strict policies on pets and this may pose a problem. Also, some residents may have unusual pets and this may have unexpected consequences. Sadly, some pets may have been killed and others will die because it is not possible or safe to rescue them. Examples are tanks of tropical fish and some reptiles, where the lack of power to the block means they will be unable to survive.
Residents may have unusual ideas of what they are entitled to while staying in a hotel. Don’t be surprised to see claims for the contents of the mini bar and expensive meals. While the insurer is likely to consider a contribution towards an increased cost of living, there are firm limits to what the loss adjuster will consider reasonable.
It is not uncommon for residents to be deeply mistrustful of insurers and become uncooperative, with an unrealistic expectation of what the insurer should do. Generally those that engage and are proactive tend to help themselves reduce the impact of the event. Good and open communication will hopefully encourage residents to cope during what is likely to be an extremely difficult time.
This is an extract from Robertson’s Insurance Principles for Leasehold Flats. To obtain a copy please click here
Parts of this extract may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without written permission from the author, providing that the author and title are clearly credited and the extract does not exceed 1,000 words. Otherwise the author’s written permission is expressly required.
