MARSH 0 May 15, 2015 Achieving a successful outcome for a major Energy loss

MARSH 1April 21, 2023

Achieving a successful outcome for a major Energy loss


Claims Scenario

Introductions

Scene Setting

MARSH 3April 21, 2023 321 April 2023


Preparation & Prevention

Important to start on the right foot - set the tone

for the way the claim will proceed

Has the policy been triggered?

Plan of action

Communicate loss to insurers

Prove your claim!

Understand the clients business, client training,

wording analysis, claims protocol, provide claims data, case studies

Lessons learnt, feedback to placing team, training opportunity for colleagues

What is the desired outcome?

Collection of funds

Are the clients rights being protected?

Notification and Acknowledgement

Coverage

Claim Strategy

Insurer Contact

Information Gathering and Analysis

Negotiation

Settlement

Subrogation Management

Appointment of FACS?

Post Loss Analysis


Fertilizer production plant with on site single train ammonia manufacturing plant

4.30 am 25th April 2012 - Fire occurring at the lubrication oil console for the Syngas compressor at the ammonia plant.

Initial indication of cause is an oil leak. Understand a Third Party Maintenance Contractor was working in the area earlier in the day.

Claims scenario: Fire Incident


Fire Incident


Insurance Claim Timeline Claim Closed

Date Of Loss - 25/04/2012


First Response

• The field operator immediately alerted the control room staff which then led to the first intervention team on site tackling the issue. The onsite fire fighting team responded immediately and successfully prevented the fire spreading to other critical items . Despite their efforts both the lube oil console and Syngas compressor were lost. This resulted in an emergency shutdown of the ammonia plant.

• All personnel accounted for and confirmed no injury or loss of life.

• Evaluation of site safety & loss mitigation

Fire Incident


Claims Scenario

Notification; requirements & significance


Claim proceduresIncident notification

Notification requirements under the policies:

• Energy Package Policy

Notice of every occurrence which may become a claim as soon as reasonably practicable on becoming aware of such an occurrence.

• Liability Policy

Details of any possible third party property damage or bodily injury / receipt of any notice (verbal or written) of any potential claim.


Claim proceduresIncident notification – Deductibles

• Plant Physical Damage Deductibles:

$250,000

$1,000,000

$5,000,000

• Plant Business Interruption Waiting Periods:

30 Days

45 Days

60 Days

Do you know your deductible?

Deductibles can be used as a guide whether or not to notify a loss incident.

IF IN DOUBT IT IS ALWAYS BEST TO NOTIFY!

Do you know your Waiting Period?


Loss Incident Report FormInsured: Name and Address

Loss location: Affiliate Fertilizer production plant with on site single train ammonia plant

Date and time of loss: 25th April 2012 at 4:30am

Details of incident: Fire occurring at the lubrication oil pump for the Syngas compressor at the ammonia plant

Damage: The lube oil pump and Syngas compressor were lost and this then resulted in an emergency shutdown of the ammonia plant

Estimated quantum: - Property Damage - ??- Expected Downtime – ??

Potential for recovery: Currently Unknown

General Remarks: Personnel Injury, 3rd party claim intimations

Contact Details: Insert details of who should be contacted for further information

Fire Incident




Loss Notification 25/05/2012

Current Loss Reserve

PD: TBA

Downtime: TBA


Hypothetical Claims Scenario

Insurance Notification Flow


Actions taken during the first hours and days following the occurrence of an incident are extremely important and a well prepared Insured, who execute best practice, will generally be able to optimize (in both speed & quantum) the recovery from their insurance program.

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Loss ScenarioInsurance Notification Flow

Risk Management

Affiliate Loss Location

Marsh

Loss Adjuster

(Local Insurer)Global Reinsurers

Complete ‘Incident Report Form’ (appendix A) and forward to Risk Management

Review ‘Incident Report Form’ and forward to Marsh as appropriate.

Acknowledge loss notification to RM & Affiliate and offer any preliminary advice/instructions.

Review ‘Incident Report Form’ and forward to local Insurer and Global Panel as appropriate.

Record notification and comment.

Select loss adjuster/lawyer (as applicable) via marsh.

Make contact with Affiliate to arrange site visit.

Issue reports via Marsh.

•Record notification and comment.•Select loss adjuster/lawyer (as applicable) via marsh.


Claims Scenario

Information Gathering & Post Incident Actions


Loss Adjuster Initial Meeting Agenda

• Presentation of involved personnel

• Role of Loss Adjuster & some basic working rules

• Brief description of the plant and company

• Details of equipment, drawing and main specifications

• Damage inspection

• Event description, causation, findings from investigations etc.

• Third party aspect.

• Production loss suffered so far and ahead

• Extra costs of working (over and above normal costs)

• Physical damage, inspection and testing

• List of main items to be repaired

• List of main items to be replaced

• Planned scope, time schedule and organization of damage rectification

• Details of potential modifications that may influence costs or time schedule

• On-site engineering resources

• Costs accounting and control• Review of loss estimate


Example of Detailed Information Request - Compressor failure• Who designed, manufactured, supplied, installed, commissioned operated and maintained the compressor ?

• Why was the compressor shut down and what were the operating variables that led to this decision?

• What was the operating regime of the compressor prior to shut down, eg start-up, normal duty, max duty, or was it actually running down at the time of any incident?

• What was the sequence and nature of alarms and trips that preceded the shut down and what were the alarm and trip levels applied?

• Had the compressor experienced a history of shut downs under similar circumstances?

• What was the history of alarms and trips for the compressor train as a whole, ie including the prime mover and power supply?

• What are the normal operating variables for the compressor?

• Have there been any unusual changes in the normal operating variables of the compressor train as a whole since it was commissioned?

• What were the balancing/alignment problems experienced during commissioning, if any?

• Are there other similar compressor trains in operation at the plant and have they experienced any problems or unusual trends in operation?

• What maintenance has been performed on the failed compressor train, including running maintenance and replenishment of lubricant?

• What is the specification of the lubricant, is it routinely sampled for analysis and if so what are the results?

• Was the compressor a cause of the failure or a consequence of a failure elsewhere?

• What components do we need to preserve for investigation purposes?

• What extent of oil pressure, oil flow and vibration monitoring was applied to the unit: where are the sensors located?


Claim proceduresPost incident actions

• Take all reasonable steps to prevent further damage. Acting at all times as a prudent uninsured.

• Prior to commencement of dismantling/repair work, take photographs of the incident scene and the damaged equipment/parts– use of video footage is becoming more common

• Preserve damaged equipment/parts for further inspection by the appointed Loss Adjuster / External Experts– protect from the elements– Designated ‘Lay Down Area’

• Notification to third parties holding them responsible for loss in order to preserve Insurer’s rights of recovery.



• Investigate the loss & identify cause(s)– Root cause analysis essential to the adjustment of the claim essential to prevent recurrence– secure documents, drawings, specifications etc.– obtain witness statements

• When a Loss Adjuster is appointed, agree expenditure and actions in advance with him

– need to establish a primary contact for communications with the Loss Adjuster


Post Incident ActionsThe importance of Cause and Origin

Underwriting– Statistics– Loss prevention

Subrogation Not employees Equipment vendors Contractors

World class experts in relevant specializations may be

employed to determine cause.


Claim proceduresPost incident actions - PD Assessment Protocol

• Inspection

• Determination of most economic repair options

• Options discussed with BI team for their approval

• Agreement on methodology of testing and interpretation of results

• Agreement with Insured on proposed repair-replacement

• Discussion with BI team on economics of expediting; overtime, air-freighting, domestic or import procurement

• Review all tender bids and appraise final choice

• Preparation of critical path schedule for repair stages



• Effect temporary / emergency repairs required to resume operations.

• Obtain witness statements as soon as possible while memories are clear.

• If applicable restore fire protection to site.



• Open a claim file Keep duplicates of all information given to other parties (loss adjusters,

brokers, contractors, licensors, suppliers, vendors, consultants etc.) Document everything.

• All expenses relating to the loss should be carefully recorded via allocated cost-center including:

– repair and replacement costs

– labor & supervision (time sheets)

– expenses incurred to mitigate the loss (labor, emergency response, equipment etc.)



• Third partly liability claims:– Do not admit to or assume responsibility / fault for the injury or

damage (even verbally)– Cooperate fully with legal authorities– Do not guarantee payment for any damages or injuries– Open a claim file in which duplicates of all relevant documentation

should be held– After initial contact, limit communications with any third party

claimants– Any communication received from a third party should be forwarded

without reply to Risk Management.



• Claims progress reporting

• Preservation of recovery opportunities – protect insurers rights of recovery against third parties – do not prejudice

possible subrogation actions– disposal of scrap and debris, salvage etc. to be agreed with Loss

Adjuster


2 months since incident…

• Loss adjuster has visited site and made an initial assessment

• Document request list has been submitted to Local Affiliate

• Preliminary report has been submitted to Insurers with an initial reserve

• Root Cause Analysis is being finalized

• Loss Location has now completed their reinstatement/repair plan and have decided to make some modifications from the original specification which will allow an increased throughput. Estimated lead time for procurement and commissioning of new units is 12 months

• Following adjuster visit, the site can now be cleared, with damaged units safely stored to preserve for any future analysis.

• Loss adjuster has requested financial information in order to calculate the potential business interruption exposure.

Fire Incident




Loss Notification

Loss Adjuster Visit

RCA?Adjusters Preliminary

Report is issued to Insurers


PD: $20m

BI: $200m


4 months since incident…

• 4 months since incident…

• Root Cause Analysis issued: cause was a failure of a ½“line at a connecting joint. The failure of the line is a result of inadequate torqueing/maintenance error. The failure of the line resulted in a spray of hot lube oil on a hot surface, providing a case for auto-ignition of the lube oil.

• Loss Adjuster has confirmed to Insurers that cause is accurate and that policy liability is engaged.

• Request for Advance Payment

• Due to the damage of the existing gantry crane it is necessary for Local Affiliate to hire a temporary crane in order to remove the damaged units. This cost will be given consideration under the ‘Extra Expenses’ provision in the policy as it will reduce total downtime.

• Local Affiliate has submitted financial data to loss adjuster, along with latest downtime estimates.

Fire Incident


Property Damage Claim Submission:

Compressor & Lube Oil Pump USD 22,500,000

Instrumentation USD 350,000

Compressor House USD 420,000

Facility Rack USD 1,100,000

Gantry Crane USD 130,000

Others USD 72,000

Total USD 24,572,000

Application for PD Advance USD 2,000,000

Fire Incident


Business Interruption Estimation:

Estimated Total Downtime 450 days

Gross Profit per Day $525,000

Temporary Crane Hire $98,000

Waiting Period 60 days

Total Loss of Profit 450 x $525,000 = $236,250,000

Less Waiting Period 60 x $525,000 = $31,500,000

Crane Hire = $98,000

Net Claim $204,652,000

Application for BI Advance $?????????

Fire Incident




Loss Notification

Loss Adjuster Visit

RCA

Adjusters Preliminary Report is issued to

(Re)Insurers


PD: $20m less $2m POA

Downtime: $200m less ?? POA

Initial Coverage Analysis

Interim Report issued recommending POAPartial Claim Submission


August 2013

• All reinstatement and commissioning works were completed by 14th July 2013

• Plant resumed full operation as of 19th July 2013 (450 days since loss incident).

• Final claim submission has now been submitted to loss adjuster. Loss adjuster has now completed his final report which includes a recommendation for full and final settlement of the claim.

Fire Incident


Property Damage Claim Submission:

Fire Incident

Claimed (USD) Adjusted Amount (USD)

1. Compressor 22,500,000 18,000,000

2. Instrumentation 350,000 350,000

3. Compressor House 420,000 420,000

4. Facility Rack 1,100,000 1,100,000

5. Gantry Crane 130,000 130,000

6. Others 72,000 57,000

Less Deductible -1,000,000 -1,000,000

23,572,000 19,057,000


Final Business Interruption Claim:

Total Downtime 450 days

Less Waiting Period 60 days

Less Re-design Period 60 days

Less Planned Turnaround 50 days

Indemnifiable downtime 280 days

Total Loss of Gross Profit 280 days x $525,000 = $147,000,000

Crane Hire = $98,000

Net Claim = $147,098,000

Fire Incident


Final Settlement

Net Property damage $19,057,000

Net Business Interruption $147,098,000

Total Net Loss $166,155,000

Less First Advance $32,000,000

Less Quarterly Advance Payments $100,000,000

Final Payment USD = $34,155,000

Fire Incident




Loss Notification

Loss Adjuster Visit

RCA

Adjusters Preliminary Report is issued to

(Re)InsurersInitial Coverage Analysis

Interim Report issued recommending Advance

Partial Claim Submission

Settlement Negotiations Final Report

Final Claim Submission Final Coverage Analysis

Sign Proof of Loss

Collect and transfer funds

Insurers Agreement


HOW DID IT WORK OUT ?

Did the process start off correctly ?

Was there early acknowledgment that policy been triggered?

Was there a clear plan of action

Was the Communication with insurers effective ?

Did you prove your claim!

Were Lessons learnt recorded and acted on ? Were the training opportunity for colleagues

achieved ?

Did you achieve the desired outcome?

Were all funds collected timely ?

Were all the rights protected?

Notification and Acknowledgement

Coverage

Claim Strategy

Insurer Contact

Information Gathering and Analysis

Negotiation

Settlement

Subrogation Management

Post Loss Analysis


Key requirements for Successful Outcomes

• Leadership

• Team Approach

• World Class Experts and Adjusters

• Regular Reviews and Updates

• Communication – No Surprises for either party

• Timely and reliable information is critical


Questions?

Documents

MARSH 0 May 15, 2015 Achieving a successful outcome for a major Energy loss