Requests for Information (RFIs) Aren’t a Laundry List

RFIs keep the insurance claims process focused and forward moving, imperative in all losses, but especially in builder’s risk claims where there are usually multiple parties and experts. The RFI provides something concrete that keeps everyone accountable – if the requested documentation is provided, then we can properly evaluate the claim and reconcile any differences. They are collaborative tools to get information flowing, questions answered, and expectations managed. It is also often helpful to involve the other experts (such as building consultants & scheduling experts) in this endeavor to make sure we are not requesting duplicate items from the insured (and creating more work for them).

So, what are the types of items requested and given the intrusive nature of same, why do we even need to ask?

Given the complexity of builder’s risk claims, including the various coverages and sublimits, we keep the RFI from becoming an unruly “laundry list” by grouping requests into sections as follows:

A. General Items

The first general item requested is always a copy of the claim and copies of all documentation utilized to compile it. Though we don’t always receive a claim (as required by the process), we have found that having a document whereby we can reconcile our figures helps with managing expectations, often leading to smoother claim settlements.

Another general item would be a timeline of the loss events – this includes when the project was anticipated to open (but for the loss) and a description of the event that prevented the completion of construction as scheduled. In an apartment or condominium building, it’s critical to know if only certain floors or units were impacted versus the entirety of operations, as well as if the project was scheduled to open in phases or all at once. In a hotel operation, was the impact on the amenities (e.g., fitness center, parking garage, pool, etc.) or were the actual units impacted that prevented the business from operating as planned? Though we aren’t tasked with determining the delay period itself, understanding the specific areas impacted helps us to quantify the loss, including any loss of income.

B. Project Financial Documents

These are the documents that allow us to measure any claimed soft costs, the largest of which is typically interest (construction loan), but also includes real estate taxes, insurance premium extensions, architects & engineering fees, project administration fees, etc., as delineated within the “soft costs endorsement” of the insurance policy. Although some may view these as the most tedious requests to compile, the insured likely has already acquired this data in formulating the claim. Further, given many of these requested items relate to “duration-related costs,” the insured has probably already had (or is in process of having) internal discussions regarding how much extending these would cost monthly. In this information age, support for these types of items is usually easily generated.

Some examples of the types of documentation requested (and readily available) in risks such as this include:

• General
  • Owner project ledgers / Job cost journal & chart of accounts
• Interest Expense
  • Copy of construction loan agreement
  • Monthly loan statements
• Real Estate Taxes
  • Property tax statements
• Builder’s Risk Insurance Premium Extensions
  • Invoices reflecting the premium extension(s)
  • Copies of all policy declaration pages & related endorsements
• Architect/Engineering Expenses
  • Invoices for each vendor or a job cost journal
  • Contract/agreement for each vendor
• Project Administration Expense
  • Developer agreement
  • Developer fee forecasts and invoices

C. Operational Financial Documents

These are what most see as the typical “accounting” requests and include the monthly financial statements, general ledgers, proforma income statement/financial budgets, rent rolls, and payroll registers. These types of financial documents are used to compare the anticipated financial results of the project to what actually happened during the measured delay period, which allows us to evaluate any lost income component that may have occurred.

Although an RFI might, at first glance, appear to be a “laundry list” met with an eyes-glazing-over stare, most of these items are likely already on the insured’s radar and are easily acquired for collective review. If the information requested is explained properly and coordinated with other experts (including those of the insured), it is a crucial tool in the claims evaluation process.

By Amanda Schubert

The statements or comments contained within this article are based on the author’s own knowledge and experience and do not necessarily represent those of the firm, other partners, our clients, or other business partners.