Fire and Claims Complications Consume Colorado’s Hot Springs Resort
In the early hours of January 31, 2013, a fire broke out at Cottonwood Hot Springs Inn & Spa in Buena Vista, Colorado, from what is believed to have been electrical wiring problems. Before the flames were extinguished, they engulfed one of the resort’s oldest buildings and caused significant damage to the main lobby where guests from across the country would enter and be welcomed before soaking in the spa’s world-renowned curative waters. By calling on a team of insurance professionals who are experts in their field and advocates for policyholders, Adjusters International Colorado; Cottonwood was able to receive a proper settlement. The resort was restored and this longstanding business was able to be reopened for so many to enjoy all that it has to offer.
The hotel was covered under a commercial policy that included adequate coverage for the structural, contents and business income portions of the loss. In the early stages of the claims process, the resort owners worked with a trusted restoration contractor who did the initial temporary and emergency repairs. As they regularly perform insurance repair work, the contractor started working directly with the carrier to determine the scope and value of the loss. Several months later, when the owners realized that they were facing obstacles outside of the typical restoration contractor’s scope of expertise, Adjusters International Colorado’s team was retained to manage the loss. The challenges in place when Adjusters International was hired to take over the claim included:
- Disputes over the scope of repair and property values
- Significant business interruption losses
- Limited or insufficient property inventories
- Limited code upgrade coverage
- Possible bad faith practices by the insurer
Although this claim and recovery was based on the January 31 fire, the resort had also suffered significant damage from a mudslide and flood that took place one year prior. This led to disputes over the scope of repair and values. There was discussion over whether or not the cost of a replacing the slab, which was compromised by removing debris from the fire loss, would be covered. Even though the carriers building consultant was not in agreement, the insured’s team was successful at getting a new slab approved.
The extensive fire damage caused the resort to close while the claim was being negotiated and repairs were made. This closure triggered a significant business interruption loss. AI retained a CPA with extensive business interruption experience to examine the resort’s financial records. Led by the CPA, the owner’s team calculated the net income lost from cancelled reservations, reviewed trends from prior year’s earnings and projected future business performance. An accurate measure of business income loss and continuing expenses was established and approved.
Because AI’s team was brought in several months after the fire took place, much of the property and damaged contents had been cleaned up and hauled away before a proper inventory could be created. In order to address this insufficient property inventory, AI brought in a seasoned specialist who was able to recreate and record all of the missing possessions that had been damaged onsite during the blaze. The team documented hundreds of destroyed content items on a spreadsheet with quantities, descriptions, links to pictures and prices.
As a hot springs resort featuring dozens of beautiful pools for its guests to enjoy, the property’s pools and facilities have to be built to certain safety standards set by local regulators. It was discovered that this property had limited code upgrade coverage. Code upgrade coverage is insurance that is purchased to cover additional costs to rebuild property to meet current building codes and legal safety standards rather than those in place when the property was originally constructed. In order to address this, the team worked diligently to make sure that the client was fully reimbursed under all other policy provisions so that they would have ample funds to offset the code upgrade costs.
Four months into the claims process, the carrier decided to reassign the claim to a different adjuster. A four-month delay in the claims process followed when the new adjuster offered a very different opinion of the claim and failed to inspect the loss in a timely manner constituting what appeared to be possible bad faith practices by the insurer. Dedicated to providing the policyholder the best possible resources for a favorable recovery, AI’s experts recommended that the owners retain an attorney who specializes in bad faith litigation. Javier Delgado, the legal expert hired from Merlin Law Group, was able to review the thorough documentation that had been compiled by the AI team and draft a series of letters to the insurer expressing the client’s concerns that the insurer may have committed actions that were in violation of consumer laws that protect policyholders. After a series of meetings with the insurer, their attorney and claims manager, all of the client’s concerns were properly addressed and resolved.
Sometimes it’s not just what you know but who you know. By working together with other highly trained insurance experts, Adjusters International Colorado was able to successfully document and negotiate a favorable settlement for their client.
After the claim was negotiated and formally settled, the client was able to successfully get back to business in the same manner as before the loss ever took place. The total paid claim was higher than Cottonwood expected because of AI’s experienced claim handling and advocacy. With these funds, the client was able to repair and rebuild their damaged property. The business owner is proud to have reopened the resort and get back to the business of helping guests heal and get healthy.