HOW DOES THE EXPERT PROCEDURE WORK IN THE EVENT OF A CLAIM?
16st April 2021 by P. Merker
With the expert procedure, the german legislator has created a very efficient, reliable and proven instrument for settling property damages in companies.
We hope that you will neber have a fire disaster in your company. Nevertheless, it makes sense to familiarise yourself with the procedures and pratices and to have contacts at the ready, just in case.
WHAT YOU NEED TO KNOW ABOUT IT AS AN ENTREPRENEUR
The call catches you ice cold on Saturday night while you’re having dinner with your family: Your brand-new CNC machining center is on fire.
Two days later: The fire is out, the police were already there. Fortunately, no one is injured. However, the pervasive smell of burning and the charred machine parts bring tears to the eyes of even the most hardened company manager.
At this point at the latest, you call your insurance company and – if you have one – your insurance broker, because now it’s a matter of safeguarding your company and countless jobs.
In order to get your cool head back as quickly as possible in such an exceptional situation, it makes sense to have gone through the decisions and processes that are now pending once in a quiet minute. I would therefore like to outline them for you in the following.
Responsible for property damage (which typically includes fires, explosions, lightning, and damage from aircraft) is your property insurance company, with 3 specialty lines: technical equipment, business interruption, and property. This regulates:
- The property damage to equipment, i.e. the replacement or repair of machines, office chairs, IT cables, etc.
- Business interruption, e.g. loss of profit, ongoing fixed costs and contractual penalties for non-performance, but also damage to your goods and inventories
- The property damage to real estate, i.e. repair, refurbishment or even reconstruction of your business premises.
At your insurance company you will talk to the so-called claims adjuster. The claims adjuster and hopefully also your broker will inform you that the calculation of the amount of damage in Germany is done by experts. This is done either in the expert procedure or in the advisory board procedure.
Importantly – and your broker and insurance company should point this out to you – under the terms of your policy, you have a right to the expert procedure process.
There are special experts for every field. So don’t be surprised if there are already plenty of experts involved even in the case of medium-sized damages.
But what exactly are expert procedures and advisory board procedures, what are the advantages and disadvantages, and which should you choose? And how do you get an expert witness? Here are answers:
WHAT IS AN EXPERT PROCEDURE?
The expert procedure is regulated by law in §84 VVG (Insurance Contract Act) and § 10 AFB (General Conditions for Fire Insurance). This is an extrajudicial procedure to determine the amount of the damage. The prerequisite for this is that you and the insurer agree to conduct such proceedings.
In the expert procedure, each party – i.e. you as the policyholder on the one hand and your insurance company on the other – appoints an expert of your confidence. Both experts, in turn, agree on a common chairman (who also comes from the circle of qualified experts).
Together, the two experts determine the amount of damage and jointly prepare an expert opinion.
For example, for the damage to technical equipment, this expert opinion must contain a list of all damaged machinery, equipment, operating equipment, chairs, tools, etc., as well as their insured values, the restoration or replacement costs, the residual values and the costs insured under the insurance contract.
If the two experts do not agree on individual points, these points will be finally decided by the umpire. The findings of the experts and/or the umpire are binding for both parties to the contract and can only be challenged in court in the event of significant deviations. Significant discrepancies are assumed according to common jurisprudence in the case of discrepancies of more than 25% in the opinion of one of the parties involved (you, the insurance company, expert). In my more than 25 years of practice as an expert, I have actually never experienced this. This means that the result of the expert procedure is of the highest reliability for all parties involved.
The expert procedure is applied in the same way for the determination of property damage and business interruption damage.
As you can see: There are already 6 experts sitting at the table. I have also experienced damages with even more experts, because special knowledge was required, e.g. in structural engineering.
Important: As a rule, the costs for experts are also insured according to §85 VVG, i.e. your insurance also covers the costs for your experts.
ADVISORY BOARD PROCEDURE
You can also agree with your insurer on the so-called advisory board procedure. The main difference here is that only one expert is commissioned to determine the amount of damage, and both parties agree on this. The advisory board procedure is therefore a fast and streamlined procedure for settling claims. Here, too, the path to court is only available in the event of significant discrepancies.
It is important to know that you can still switch to the expert procedure during an ongoing advisory board procedure, so you do not block your way under any circumstances.
ADVANTAGES / DISADVANTAGES AND DECISION SUPPORT
- While for your insurance company the claim settlement is everyday business and routine, you are confronted with a – hopefully – unique exceptional situation. A seasoned and experienced expert acting on your behalf involves you in the calculation of the damage, explains all the steps and subtleties, answers your questions and guides you through the entire settlement process, which can sometimes take more than two years. So having an expert you can trust ensures transparency. This means that the more questions you have and the greater your desire for individual support, the more likely you are to choose the expert process.
- You know the saying: two experts – three opinions. Even when assessing the amount of damage, there is often no one truth, but rather different perspectives, differing assessments of facts, and room for discretion. The expert procedure can therefore ensure the greatest possible balance of interests. In other words, the more complex a loss is, the more extraordinary effects have to be taken into account at the same time (such as the current Corona), the more likely it is that the expert procedure will produce fair results.
- The smaller and clearer the loss, the more likely it is that the advisory board procedure will produce quick and reliable results, since fewer people are involved. Claims settlement can take longer than two years, and the more people involved, the tougher the process can be. And: You can change. This means that you can still decide in favor of an expert procedure even during the claims process with an ongoing advisory board procedure.
Practical tip: Check your policy or consult with your broker and make sure that the costs for your expert are actually covered.
Which brings us to the next important question, namely:Choose experienced, experienced and highly qualified experts, so that the settlement of your claim is handled professionally. Which brings us to the next important question, namely:
WHAT IS A SUITABLE EXPERT AND WHERE CAN I FIND ONE?
Experts are specialists in their field. For this reason, separate experts are appointed for each of the individual specialist areas. The following are therefore possible
- For equipment/movables property damage: experts for machinery and technical equipment
- Business interruption damage: experts for business interruption damage
- Property damage to real estate: experts for damage to buildings
Scepticism is appropriate when expertise is stated for everything. So if someone knows real estate, and movables, and goods and inventories, and motor vehicles, and, and, and …
With the following qualifications, experts prove that they meet the high standards of their profession and continue their education:
- Public swearing-in and appointment
- EU certification according to DIN EN ISO/IEC 17024
While public appointment and swearing in is traditionally the “seal of quality” of the German chambers of commerce and is carried out by them, EU certification is geared towards international recognition and standards.
Good surveyors work routinely, are experienced and trustworthy. You should therefore rely on personal experience, references and recommendations.
You can get recommendations from your insurance broker or your insurance company, for example. They are professionals and prefer to work with professionals. If you already know an expert in a particular field, ask him or her for recommendations. Often, different experts know and appreciate each other from working together on previous claims.
For example, have you ever had your business property valued and had a good experience with the expert? Give him a call. My clients know me, for example, because I do their appraisals for insurance values and therefore contact me.
Make a note of my telephone number: +49 40 602 13 33
With a resilient contact, you already noticeably reduce the stress in an exceptional situation.
There are also good expert networks. I am a member of this network and therefore make the following recommendation:
Our practical tip for finding a technical expert: TES Technical Experts and Surveyors
Furthermore, you can find lists of publicly sworn and appointed experts on the websites of the chambers of commerce.
Other sources are Linkedin and Xing.
CONCLUSION: EXPERT PROCEDURE
With the expert procedure, the legislator has created a very efficient, reliable and proven instrument to settle property damage in companies. I hope that you will never have a fire disaster in your company. Nevertheless, it makes sense to familiarise yourself with the procedures and practices and to have contacts at the ready, just in case. Because then you will have the necessary resources to act with a clear head.