Strata Claims

Overview
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In April 2014 Sergon embarked on a journey in partnership with the Underwriter to undertake an inspection program of Underwriter’s residential Strata Portfolio in far north Queensland.

The project ‘ North Queensland Strata Building Resilience Project’, was part of a broader approach by the Underwriter— which focuses on insurance industry leadership, and creating safer, more resilient communities.

The project commenced in mid April 2014 and was focused on improving building resilience to severe weather so that customers can receive sustainable premium reductions.

  • The Challenge

    This particular project was an industry first in the Strata space, where an insurer looked to make a significant financial investment in order to give back to the residential strata community, who have faced significant premium increases over the last 5 years. The Insurer fully funded the project, working with government to ensure a successful outcome for their clients, whilst at the same time presenting them as a market leader in their pro-activity to portfolio management in this space. Sergon’s first step was to work with Insurer to understand and define what to assess as the subject matter was quite broad and technical in respect to the outcomes required. We started with a blank piece of paper and together with underwriting project team were able to define and build a series of questions that looked to the heart of risks associated with such as portfolio and the application of associated underwriting guidelines.

    Just as important as providing the building information was the direct impact this project had on the brand integrity and reputation of the Insurer, and in turn Sergon’s reputation in association with the project to deliver the outcomes for the property owner, the potential cyclone victim.

    Efficiency was key in every sense of the word, with the portfolio covering 4 major areas (Cairns, Rockhampton, Townsville and Mackay). It was integral to ensure that we could capture all information in both a consistent and timely manner. With pressure to kick off ASAP following the award of the project we were able within a 3 week period to engage Software Supplier (data collection application), build our templates, design our processes, employ tablet technology and train a small team of Sergon consultants to collect the data and kick off the project.

    The initial stages saw us complete pilot programs in Cairns, Mackay and Townsville before finalising the data collection set and ensuring all was in order to progress to the greater piece of work. A core team of three building consultants were chosen based on both skill set and location, training complete and scheduling commenced.

    Sergon had fantastic support from Centralised Services Center in assisting with our scheduling program. This was a challenging and time intensive process. The team worked tirelessly with multiple site contacts (residents, tenants, managing agents, brokers etc) to ensure all went according to plan.

  • The Solution

    The results were very successful for Sergon, Insurer and the community. The Underwriter passed on a saving of approx $1.3M in premium to its clients and retain their market share. In addition the Insurer were able to provide recommendations in respect of any remediation, maintenance or risk mitigation that could be addressed to improve a property’s resilience and risk rating, enabling the property to potentially be re-rated with a view of reducing premiums. This was a high profile project with significant media attention, recognising the Insurer initiative in this space and Sergon’s work, both in the media publications and at high level of Underwriters management meetings.

Home Owners Warranty – Scope of Work

The claimant was an Owners Corporation representing the interests of all owners of a Strata Titled complex.
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The Sydney suburb development, comprised of three separate multi-story residential apartment buildings. During the course of the matter, Sergon Building Consultants:

  • Confirmed Insurers acceptance of claimed defects
  • Prepared detailed, accurately measured scopes of works for rectification of accepted defects
  • Agreed the scopes of works with the claimant
  • Sought tenders for reinstatement based on the agreed scope
  • Reviewed tender submissions, and
  • With agreement of the Insurer and claimants, saw a builder engaged for rectification works.

Reinstatement works were progressing smoothly when Claimants lodged a further claim for additional defects at the situation. Sergon Building Consultants re-attended and conducted a review of the additional claimed items, culminating in preparation of and agreement with a detailed measured scope of works for those items. As the reinstatement of the originally agreed defects was well underway a challenge now arose.

  • The Challenge

    • A tender process would now cause delays both to additional works and those already authorised
    • The tender process would introduce others who would never be selected to complete repairs
    • Costs were likely to increase as the rectifying builder became aware he was to be selected as the sole provider of rectification prior to submitting reinstatement cost estimates on additional works

  • The Solution

    In an effort to ensure the reinstatement continued to run smoothly while controlling claims costs on additional items, Sergon Quantity Surveyors completed a site inspection with the rectifying builder, prior to his submission of a quotation for additional works. Utilising the scope of works for additional defects prepared by Sergon Building Consultants, Quantity Surveyors discussed all aspects of the additional works directly with the rectifying builder.

    The builder was acutely aware that an independent observer was now involved in the process. The builder submitted a quotation for additional works at $208,340.00 (Incl. GST). Utilising first principle estimating techniques, Sergon Quantity Surveyors prepared an independent cost estimate which was used to complete an analysis of the builders quote. Quantities Surveyors discussed inaccuracies, high percentages and the occasional double up on quoted items directly with the builder. The rectifying builder agreed with Sergon Quantity Surveyors analysis and agreed to complete reinstatement at their estimated value calculated at $188,919.50 (Incl. GST).

    The outcome was a satisfied claimant who noted scopes were readily agreed, delays did not eventuate as a result of additional items being claimed, and was pleased they could deal with a single rectifying builder whom they trusted. A satisfied builder who increased the value of work he completed at the site at reasonable pre-agreed rates.

    A satisfied Insurer who had a difficult claim resolved without customer complaints, was satisfied that works were scoped accurately and quoted appropriately, recognised that while some additional costs were incurred by engaging other specialists this resulted in claim cost management producing a saving that readily exceeded professional fees.

Project Management and Quantity Surveying

Overview
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Sergon was engaged by the Loss Adjusters to Project Manage all aspects of the reinstatement.

Due to a rapidly increasing Business Interruption loss following the incident, the claimant immediately engaged their preferred builder who provided reinstatement design documentation, arranged Council approvals and submitted their own Scope of Works for reinstatement.

The Builder also submitted a detailed Reinstatement Tender for consideration by the Insurers.

  • The Challenge

    While a quick reinstatement was a priority to mitigate consequential losses, Insurers and Loss Adjusters required control over the reinstatement process to ensure the scope was limited only to the insurable damages and to manage the costs. Also required was a separation of costs, i.e. two Insurers (for the Landlord and Tenant), and the issue of upgrades and requests for changes in design.

  • The Solution

    Sergon engaged a team of experts consisting of a Project Manager, an Engineer and Quantity Surveyors. From the outset, the team regularly met on site with the Insured representatives, engineers and builders, allowing all stakeholders to work collaboratively on a thorough review of damage, which ensured a scope of required reinstatement works was readily agreed. This was an important step to avoid confusion or disagreement.

    Regular onsite meetings also allowed the scope to be monitored and refined to the agreement of all stakeholders. This not only avoided delays but also ensured that the scope related to reinstatement of the fire damage only eliminating scope creep and unrelated building works.

    As part of the project management process a rigorous review of the Builders tender submission was carried out by Sergon Quantity Surveyors who completed a Tender Appraisal Report. It became evident that the Builders tender submission included numerous high value provisional sum allowances and contingency sums. Inconsistencies were rectified and a revised budget estimate was successfully negotiated with a demonstrated saving of approximately $164,000. As a result of agreeing for Sergon Quantity Surveyors to monitor all reinstatement costs, Insurers gained sufficient comfort to allow reinstatement to proceed. Builders monthly progress claims were reviewed in detail by Quantity Surveyors and corrected as required prior to recommendations for payment being released to Loss Adjusters.

    All costed variations were submitted in writing to Quantity Surveyors who approved reasonable costs only within the agreed Scope of Works. At the conclusion of reinstatement, Sergon Quantity Surveyors completed a detailed reconciliation of all Provisional Sum Allowances.

    Outcomes
    The involvement of Sergon Project Managers and Quantity Surveyors produced the following results:

    • Building reinstatement was completed in a compressed time frame.
    • Consequential losses for the Landlord and Tenant were significantly minimised.
    • Cost control by Quantity Surveyors resulted in direct savings of approximately $269,000.
    • Scope creep and unrelated building matters were eliminated and variations were tightly managed, producing unquantifiable additional savings.
    • Reinstatement went smoothly and the Tenant was able to return to normal operations in a shorter than expected time frame.
    • The matter has now progressed to the Supreme Court as the Insurer is pursuing recovery of their outlay. The Insurers are confident that the costs were tightly controlled and anticipate no disputes on quantum.
    • The Builder was required to submit all invoices to demonstrate costs and substantiate their spend resulting in a further saving of approximately $105,000.

Home Owner Warranty – Tender Review

Overview
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Sergon first completed a ‘Scope of Works’ upon receipt of defects being claimed under our Clients Home Owner Warranty (HOW) policy. Tender requests were sent to multiple builders to complete associated remedial works.

  • The Challenge

    Complications were identified during the emergency works phase completed by ‘Builder One’. Further investigations during this phase revealed additional issues arising from the accepted defect items which totaled to 204 items, impacting on the initial scope.

    Builder One’s revised quote came in at a significant sum of $2.3M. A further two quotes were also obtained from a second and third builder, coming in at $2.1M and $1.3M respectively.

  • The Solution

    Through the appointment of Sergon’s Quantity Surveying expertise, a review of the Scope of Work was conducted and a theoretical estimate for the remedial works was calculated by Sergon’s experts at $1.1M, less than all the estimates provided.

    It was clear that the complex nature of the claim had resulted in some misunderstanding of work required and in consultation with the respective builders, builder number 2 was able to provide a reduction of approx $500K to $1.5M, however this was still more than the most competitive quote submitted.

    By working closely with the Client (Insurer), Sergon were able to appoint Builder 3 with their competitive quote of $1.3M to complete the work in line with the scope, a great result given the highest quote was $2.3M, providing a possible saving of $1M. In addition, Sergon’s Building Consultant was specifically requested to project manage the repair works through to completion.

    This is one of many examples that shows how through collaboration between Sergon’s various service offerings and expertise, as well as the strength in working closely with our clients and suppliers, we are able to provide a valuable and successful outcome for all stakeholders.