Intangible prejudice: the hidden part of the iceberg
A flood, a fire, a collapse… Damage from natural, intentional or accidental causes is covered widely by the press. No surprise there.
All have tangible impacts, highly visible damage and significant consequences. Yet the other part of this iceberg is invisible: intangible prejudice, largely forgotten in the reforms made to public liability that were introduced in March 2017.
Due to the difficulties of observing and evaluating this damage, numerous insurers must call on the support of a loss adjuster. A few explanations from the intersection of finance and legal issues.
Understanding intangible prejudice
We’ll skip the etymology class. The term is clear enough. But what about its legal meaning? According to Article 1134 of the French Civil Code, intangible damage is defined as financial damage caused by tangible damage. Tangible and intangible are two notions that are intrinsically linked, with direct consequences. For example, a home destroyed by a hurricane prevents a family from moving back into the premises. In addition to the property loss, this impossibility constitutes an intangible prejudice. From here, there’s an important distinction to make, subject to certain misunderstandings about this type of damage: is it consecutive or non-consecutive?
To simplify, consecutive damage is a direct consequence that is factually connected to the tangible damage. Picture this: Something was done incorrectly during maintenance on a switchboard. The telephone server is damaged and the company claims a loss in revenue during the outage. The tangible damage, meaning the phone that has to be replaced, consecutively leads to an intangible prejudice, in this case, a slow-down in business.
Conversely, non-consecutive damage does not result from any bodily injury or tangible damage. Let’s continue in the telephone industry for our example. A telephony consulting company convinces a company of the advantages of purchasing a new telephone server. However, it doesn’t function properly. With business at a standstill, the company’s turnover logically decreases. Once again, this amounts to intangible damage, but without an immediate tangible cause. Once the technical distinction is made, providing compensation for intangible prejudice is much more complicated for insurers. Many factors may be involved, from costs incurred to loss of earnings, from damage to enjoyment to pain and suffering. All of this leaves an opening for the financial loss adjuster who can freely apply their skills in the matter.
Financial loss adjustment adds value
Following a tangible loss with intangible impacts, a financial loss adjuster must be appointed to work alongside a tangible damage loss adjuster, or as a subcontractor (particularly in the case of Construction losses). In fact, evaluating this type of prejudice revolves around a rather complex macroeconomic context. Concretely, the loss adjuster classifies information based on the relationships between the entity’s economic indicators: turnover, investment or growth. Everything is focused on analyzing margin loss and issuing comparative balance sheets showing what should have occurred and what actually did occur.
The financial loss adjuster puts their accounting experience to work for policyholders. Financial audits make it possible to evaluate the financial health of the third parties liable for said damage. However, in practice, the lack of transparency in some companies hinders this analysis, which in turn influences the compensation estimate. Drawing on financial information, analyzing accounts can help in deciding whether or not to take action against the party responsible for the loss. This action, sometimes abroad, is extremely lengthy and costly.
The loss adjuster must also deal with policyholders who are in distress (life accidents, car accidents, etc.) and who are often seriously injured. While the adjuster’s attention is mainly focused on accounting and fiscal documents, being a good listener is still an important quality. Empathy is required, but it shouldn’t mask a desire to close the case in an impartial manner. This objectivity, which aims to be logical and rational, gives the financial loss adjuster the critical distance and perspective needed on cases with significant economic importance.
A specialist adviser’s view on high-stakes cases
Depending on the case’s challenges, the financial loss adjuster may be called in as a subcontracted specialist adviser. Running from a hundred thousand euros to several million in certain cases, these unusual sums require collaboration among different loss adjustment sectors. To illustrate, here are a few examples in the vein of the methodology mentioned.
As part of a project to reorganize the air conditioning system within several operating theatres, a hospital insurer used the services of a specialist financial adviser. Working on behalf of the construction division, the loss adjuster determined the projected weekly costs for closing 12 to 14 operating theatres drawing on their specialized skills in costing tangible damage. With this type of case, the financial loss adjuster reveals another aspect of their range of skills, the predictive study. A second and final example for proof.
An aquatic center within a collection of municipalities reports leaks in its tiling. Once again working as a subcontractor, the financial loss adjuster has access to files prior to the period of closure. In this example, the leak came to light in 2016 but the work wasn’t completed until summer 2019. Just like in the previous example, the adjuster’s goal is to establish an advance estimate. This requires transversal expertise in past and future details.
You get the idea. Financial damage surveying is an essential prerequisite to correctly evaluating intangible prejudices. These skills are complementary with other damage survey sectors and all work together to serve insurers and their policyholders. In short, this synergy is essential for proper case management.
Amélie MARION-AUDIBERT, Finance Loss Adjuster (CRAC accreditated)
TGS | Stelliant group