Cover your bases


Understanding scope of loss can help you avoid a curveball when filing a claim

In the event of damage to a commercial building, the loss must be assessed by an adjuster during a walk-through and then presented to the insurer. In all property insurance policies, it’s the responsibility of the insured, not the insurance company, to prove the value of the loss. Once the insurance company agrees upon the scope of loss, a check will be issued that theoretically should recognize the full extent of the damage and cover the cost of repair or replacement.

When property damage is adjusted correctly, the insured and the insurer will be on the same page. However, disputes often occur, and you may find yourself with a claim check that’s insufficient for the actual costs of restoration. Particularly for a franchise business owner who needs to replace to brand standards, this can be detrimental.

A scope of loss is a detailed description of the amount and type of damage a structure incurred. The document, or set of documents, measures the quantity, quality, and current cost of materials as well as the labor that will be needed to repair or rebuild. More detailed than an estimate, it may include diagrams, photos, and line-item entries broken down to comply with local building codes.

Insurance adjusters must take into account the current costs of materials as affected by inflation as well as supply chain shortages caused by catastrophes, pandemics, and other events. The software used to calculate property replacement costs must be up to date to allow for any increase in prices.

As the insured, you may be required to consult with the adjuster several times to make sure the scope of loss is adequate so you can receive all the funds you deserve.

Consider fire damage to a business property. Even if walls and furniture were salvaged but the roof caved in, the interior would inevitably suffer water damage from firefighters and rain.

A complete scope of loss would not only include the things that burned. It would also take into account further loss caused by the occurrence of the fire like smoke damage, water damage, and environmental repercussions. Costs related to removal, cleaning, and odor treatment should be added to rebuilding and content restoration.

Depreciation figures into the scope of loss, as well. If the policy pays actual cash value, the insurer will cover only what damaged items are worth at the time of the event, not what they originally cost. A replacement-cost policy is necessary to replace things like flooring or an air conditioning unit with new materials, up to policy limits. This is, of course, after deductibles have been satisfied.

It’s important to make note of not only how your policy is worded but also anything appearing on payments. If you’re expecting more money than the first check covers, be sure not to cash something that states “full and final settlement” without checking with your carrier first. Even an accidental printing can cause issues down the line.

In the case of multi-layer policies that result in multiple checks, every insurance company on the policy must come out to assess the damage. This can result in delays, disputes, and unfair claims.

To get an unbiased assessment of the scope of loss on damaged commercial property, involving a public adjuster will save time and get the results you deserve. A public adjuster will assess the damage, make sure everything is properly documented, and accurately calculate replacement costs. All insurers will then be copied on developments.

That way, you don’t have to worry that the scope of loss is insufficient or that your insurer is taking advantage of you.

brook boswellBrook Boswell is a licensed public adjuster serving as regional vice president for Jansen/Adjusters International, an AAHOA Allied Vendor Partner. Brook provides professional property claims services to hotel owners in the Dallas/Fort Worth and Oklahoma areas. You can learn more about him at


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