(An edited version of this article appeared in the July 1996 issue of Claims Magazine)

THE GOLD THAT FALLS THROUGH THE CRACKS IN THE FLOOR- SALVAGE

HOW INDEPENDENT ADJUSTERS CAN HELP YOU MINE THAT GOLD

by Ronald J. Zaremba, CPCU, AIC, ARM

Just about any activity that could postpone the closing of a claim file is looked upon by the average claims adjuster with the same regard as a voluntary exposure to a social disease; "It isn't worth the effort". Unfortunately subrogation and salvage are looked upon as such file extending activities, which will be waived off as "It isn't worth the effort".

In fact, they usually are worth the effort. We have clients who have made the pursuit of subrogation a very profitable art form. What it takes is a shift in the adjuster's perspective and a redefinition of the adjuster's expectation of when the claim file can be properly closed. The same change in perspective and expectation is needed to maximize your salvage return. The adjuster must realize the importance of the salvage to the insurer and the insured. Depending upon the type of loss and your specific state laws, the salvage proceeds will reduce the insured's uninsured loss, the insurer's incurred loss or both.

To determine salvage, someone has to look at the damaged property and make three conscious decisions; what can be sold, how and where to sell it so the sales proceeds will exceed the costs, and who will buy it. Due to the extreme perishability of most salvage with its exposure to further loss, these decisions must be reached as soon as humanly possible.

Generally, commercial salvers offer five services:

1) preserve and protect property from further loss

2) evaluation and inventory of property

3) verification of values

4) recommend the best way to handle the salvage

5) disposal and collect proceeds.

There is no doubt about it, a good experienced commercial salver can minimize the loss by maximizing the salvage proceeds and additionally, provide valuable assistance to adjust the loss. Usually, they are willing to go anywhere and have a wide array of markets available including their own retail outlets. Every property examiner and supervisor should have a list of two or three commercial salvers they can rely on. But in a large number of claims, the salvage is not always worth the effort (and costs) of a commercial salver. How do you handle the smaller salvage ?

Don't let your smaller salvage be the gold that falls through the cracks in the floor. You may remember the Broadway show and subsequent movie, "Paint Your Wagon". The main character was a gold miner who was down on his luck with no 'prospects', when it dawned on him that a considerable amount of the gold being mined was accidentally falling through the cracks

of the floors in the rough and tumble boomtown. Thus he and his cohorts mined the gold from beneath the floorboards throughout town with great success.

Consider the independent adjuster as your "miner" who can recover your gold that is falling through the cracks of the floor. Since there are a lot more independent adjusters than commercial salvors, the independent adjuster is likely to be closer to the location of the salvage. Independent adjusters, especially those who handle property losses, can inspect the loss and can quickly make the three conscious decisions; what is salvageable, how and where to sell it and who might buy it.

For example, in our area we see a number of apple salvage losses. These apple losses usually arise as cargo claims when the truck overturns. The apples can be loose in bins or ready for market in cardboard boxes. If you don't know the difference and are unfamiliar with how the variety, grade, and size impacts the price of the fruit, and are unfamiliar with the costs to recover and store the fruit in refrigeration, I hate to be the one to tell you this, but there is a good chance the buyer took advantage of you. We get right on the salvage losses as time is critical for the maximum recovery. Locally we have a dozen or more firms and individuals who will bid on this salvage. These are not big recoveries, but with prompt action to recover and preserve the fruit along with our contacts who want to buy the fruit, we can move the salvage quickly and maximize the recovery so that it will reduce the loss. The point is not that our firm has a particular expertise in recovering small salvage, but that nearly every independent adjusting firm in this country has a specialized local expertise and markets to sell salvage. This is true whether you are dealing with apples, grain, metals, finished durable goods or any commodity.

Check with the local adjuster. If you don't do anything else when you have a new loss with an unknown amount of salvage, immediately call an independent adjuster in the area to survey the salvage to give you their opinion on damage and recovery. The cost will be small and your prompt action will generally maximize your recovery.

Quite often, the insured will want to retain the salvage as there is still some utility and marketability left in the property. If the property is for resale, then the salvage can be discounted back to the insured so that he maintains his same markup/margin when he sells it. If the property is not for resale, then the adjuster, based on his judgment, can evaluate the salvage and reach an agreed sale of the salvage with the insured. This can all be done quickly and expediently with minimal costs. The key is the experience level of the adjuster. So, qualify the assignment before you give it.

Independent adjusters are not and do not want to specialize as commercial salvors. However, most independent property adjusters can perform some or all of the services offered by commercial salvors, particularly on a smaller scale. Independent adjusters can arrange with the insured and others to protect the property. The independent adjuster knows the advantages of using commercial salvors and will recommend a commercial salvor if it is cost effective for the insurer and insured. The independent adjuster will be familiar with local markets to quickly dispose of salvage. The independent adjuster will work with the insured to sell the salvage for the optimum return.

The independent adjuster will work with the commercial salvor to maximize the return on the salvage as well as provide valuable assistance in adjusting the loss. The independent adjuster will be interested in maximizing your return, not the quick closure of the claim file. Rather than lose your gold that falls through the cracks of the floor, recover it by calling an independent adjuster. It is worth the effort.