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Developing a risk-management manual.

Like it or not, most property managers today must deal with the complex, often frustrating issues of insurance and risk management. Too often, managers must resolve situations that were not handled "according to policy" because a staff member simply did not understand what the policy was. However, a manager can assemble a risk-management manual to eliminate the confusion of maintaining multiple documents dealing with insurance and claim matters, and thus alleviate this problem.

A well-organized manual should have the key sections necessary to address the major areas of concern to property managers. In addition, it should be organized to allow employees to answer their questions quickly and easily, without paging through piles of forms or hunting through endless file drawers.

A good manual will contain:

* A purpose statement. It should briefly describe the contents and include management support and endorsement of the effort. A signed letter from the CEO or the president of your company can be an effective attention-getter.

* A table of contents. The managers who will most likely need this manual no doubt have many other materials on their desks already, so keep it simple.

* A glossary of terms. Insurance often can be confusing because of the unique language it entails, so a basic glossary of terms most frequently used should be included in the manual. The glossary also can include terms that are unique to your particular organization.

* A loss-prevention section. While some property managers may wish to keep a separate manual on loss-prevention activities, some reference to those activities should be made in the risk-management manual. Separate programs, including property issues, general liability concerns, and workers compensation, should be included.

Again, this section should be tailored to an organization's specific operations. For example, managers of malls generally will spend more time on general liability concerns than managers of apartments or condominiums.

* Claims-handling procedures. One of the primary roles that a risk-management manual plays is providing a detailed description of the procedures involved in claims handling. At one time or another, most supervisors will become involved in a claim--either directly or indirectly. Knowing specifically what is required will make settling those claims much easier.

One aspect of claims handling that often is overlooked is the claims-investigation process. Thus, the manual should specifically list the documents required and describe the proper use of witnesses. Because most claims investigations concern workers compensation and general liability claims, an organization that potentially faces more of these claims should provide more of this information in its risk-management manual.

In addition, because of the potential for litigation in general casualty claims, the importance of photographs and eyewitness accounts--so critical to general liability claims--should be stressed in the manual.

Required claim forms also should be included, along with instructions on how to complete them.

* Loss runs. For many organizations, loss runs are distributed to divisions and subsidiaries. The manual should include a section on interpreting loss runs and the impact they have on operations. This is especially critical for organizations that use sophisticated cost-allocation systems for direct charge-back of loss experience.

* Insurance coverage. For most property management firms, insurance will be handled primarily by one individual. However, as other people in the organization are often requested to explain certain aspects of that program, the firm's risk-management manual should contain a section on coverages that includes a description of the programs in place, along with the items they cover; this includes the insurance company, broker, limits of coverage, the annual premium, and other information.

Major policies generating the bulk of premiums should be given more attention. For many, this would include the property insurance (including property damage, extra expense, business interruption, and EDP), general liability, umbrella liability, workers compensation, and automobile liability.

* Contracts. A basic element of many contracts is a hold-harmless or indemnity clause. This in effect becomes a risk-transfer mechanism and should be reviewed closely by either the professional risk manager or legal staff.

Someone signing a contract may unknowingly be assuming risks that are rightfully those of the other parties. The insurance manual should contain acceptable wording to avoid this.

* Legal issues. Inevitably, many property managers will be called upon to become involved in some type of lawsuit or other legal proceeding. Documenting the methodology of properly handling such a situation is critical in order to avoid unnecessary delays and improper responses to what often can be a serious situation. This can include responding to slips or falls or employee situations involving sexual harassment or improper terminations.

* Other sections. Other sections can be tailored to your particular situation. Many companies choose to have a financial section explaining the allocation of cost issues or retention levels. Separate sections may be appropriate for workers compensation issues. Back-to-work programs, rehabilitation services, and medical-cost containment can be explained if their role in your organization is important.


For many firms, a risk-management manual will be an invaluable tool to help staff perform their jobs more effectively. Properly prepared manuals can reduce the cost of insurance by training supervisors and others how to deal with loss prevention and claims.

Risk management is growing in importance at most property management firms. Having the tools to do the job properly will go a long way toward helping managers meet their broader corporate objectives.

Mark Charron, CPCU, is senior manager with Deloitte & Touche in Hartford, Connecticut. He is a member of the JPM editorial review board.
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Author:Charron, Mark P.
Publication:Journal of Property Management
Date:Jan 1, 1993
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