The Client and Its Challenge
An explosion and ensuing fire caused substantial property damage to a large petrochemical company's plant in the United States. With an estimated repair period of six to 12 months, the plant faced severe business interruption and extra expense losses. As such, the company required a reasonable settlement to recover from the disaster and quickly reinstate its operations.

The Risk Consulting Solution
The company retained Marsh's Forensic Accounting and Claims Services (FACS) to prepare the claim and work with the insurance provider and the accountant auditing the claim.

Aware that the substantial property damage to the plant could have crippled the client's business without swift action, the FACS team conducted preliminary analyses that demonstrated the client's need for sizeable advance settlement dollars from its insurer. After presenting the initial analyses to the insurer, FACS successfully secured a $10 million advance payment that allowed the client to quickly reinvest capital, reduce interest expenses, and get back on track soon after the disaster.

Once the FACS team secured the advance payment, it focused on preparing the claim. FACS created customized financial models that measured and supported the business-interruption loss and the property-damage rebuild expenditures monthly. In addition, the consultants measured the costs and benefits of paying the contractor a bonus to expedite the rebuild process. Through this analysis, FACS demonstrated to the insurer that by reinstating production two to eight months earlier than initially estimated, the client would reduce its business interruption loss significantly.

The FACS team also clearly discussed and quickly evaluated all potential loss-accounting issues. At one point during the claims process, for example, the insurer indicated that it planned to make a large reduction to its loss payment to account for excess mitigating production overseas. FACS, however, successfully proved that a much smaller mitigating reduction was justified by demonstrating that the overseas sister plants were forced to turn away sales in order to provide product while the U.S. plant was offline.

Overall, FACS worked closely with the insurer's auditor to avoid an excessively long and invasive audit that could have hindered business operations. With FACS handling all auditor requests, the client was able to focus on customer relations and reestablishing its business.

Results
With support from the FACS team throughout the claims process, the client received a fair and timely settlement. In addition to securing a $10 million advance payment, the consultants secured a $1.5 million bonus for the contractor to accelerate reconstruction. Ultimately, FACS secured a settlement of $27 million, significantly more than the insurer's initial settlement offer of $20 million. While losses of this magnitude typically take one to two years to settle, the FACS team successfully settled the claim within nine months.

The direct involvement of the FACS team with the insurer and auditor allowed the client to devote full attention to restoring operations, servicing customers, and earning profits. Pleased with the outcome of the settlement, the client retained additional FACS services to handle subsequent litigation related to some $20 million in uninsured losses and deductibles.