October 15, 2013
President: David Allan
In property-loss situations, a lot of the time there are contents that have been affected that have to be handled. That’s the niche that we are locking into. A great example is from the file that I have on my desk right now from a TV and appliance store in a smaller town in Ontario. There was a roofing company that was redoing the roof and it just so happened that while they were working, a big rainstorm came and the roof leaked. It wasn’t a bad leak, but water did come down the walls and across the floor. So all of these fridges were affected and the result was that all the manufacturers notified this store that they were no longer willing to honour the warranty. So even though the product itself was not “damaged,” it had been affected—and a lot of the times when we get involved it’s in situations of very mild loss. So, for example, a washing machine that gets some water touching the casters is still a perfectly good washing machine. However, the store can’t sell it as new because the manufacturer isn’t prepared to honour the warranty. Yes, it’s a technicality, but it is by all rights a valid insurance loss. So the company would put all this product on a schedule of loss and the adjuster would assess it and call us in to take a look at it. Say all of it is worth $100,000; we look at it and say, “You know what? It’s really not that damaged and we’re prepared to pay $50,000 for this.” We send the insurance company $50,000; that money goes toward mitigating their total exposure on the file and then we get all of the goods. And then we take that $50,000 worth of product and we try to resell it for more than we paid for it.
We also sometimes work in partnership with insurance companies. There are some situations that represent a massive exposure to us that we would prefer not to purchase outright. We’re working on a file right now that is $8 million of retail and landed-import cost is $2 million worth of product. Total removal costs are going to be about $100,000 to get it out of the insured’s warehouse. So what we proposed to the insurance company in that case is that we would handle all of the removal and then we would market it and sell it in a retail scenario, and then from the gross sales we would deduct the expenses and then take a 20% sales commission. So in that case the insurance company and Modern Salvage Consultants both have skin in the game.
One of the challenges that we always come up against is the fact that this is—and I don’t know how to say this without ruffling feathers, that’s obviously not what we’re trying to do—but the insurance salvage space has always been a little bit of a dark corner. A lot of product went missing, there was very little accounting, a lot was based on personal relationships and there was a lot of “Don’t ask, don’t tell.” That’s what we’re trying to change. We’re trying to formalize the industry, we’re trying to bring it into the spotlight. The salvage industry is not a sketchy place. It is a legitimate form of recovery and cost mitigation for insurance companies.
— As told to Regan Reid
Copyright 2013 Rogers Publishing Ltd. This article first appeared in the September 2013 edition of Canadian Insurance Top Broker magazine
This story was originally published by Canadian Insurance Top Broker.