A Forensic Accountant’s Perspective
When disaster strikes, the difference between a smooth recovery and a drawn-out claims process often comes down to how effectively an organization manages its insurance claim. By proactively addressing common issues early in the process, organizations can achieve a more efficient and predictable recovery, reduce disruption, and bring greater certainty to the claims process.
For some risk managers, responding to an insurable loss may be a regular occurrence — an unfortunate but expected reality of operating at scale. For others, this may be the first claim they have ever submitted. Regardless of experience level, challenges routinely arise, many of them manageable.
While the observations in this article apply broadly, they are particularly relevant to commercial property and cyber incidents, where documentation, timing, and communication are critical. Drawing on my experience as a forensic accountant specializing in loss quantification, this article highlights common challenges and offers practical guidance to help risk professionals and organizational leaders navigate the claims process more effectively.
This article is intended as a reference point — not a substitute for professional judgment. Every loss involves unique facts, circumstances, and policy language that must be evaluated on a case-by-case basis. With that context in mind, the following five areas highlight key considerations in commercial property and cyber claims.
1. Understand Your Insurance Policy and Collaborate with Key Claim Partners
One of the most important considerations in any insurance claim, whether property or cyber, is understanding how the policy responds to a loss. A clear understanding of coverage sets the foundation for every decision that follows.
Ideally, this understanding is established before placing coverage, well ahead of any potential loss. Proactive preparation can save significant time and stress during the claims process. If that preparation has not taken place, the period immediately following a loss is the time to carefully review your policy language.
Your insurance broker is often a key resource in this process, helping to interpret coverage, limits, deductibles, and endorsements in the context of the specific loss. Depending on the circumstances, organizations may also consider consulting coverage counsel, particularly where there is uncertainty or disagreement regarding insurance coverage or how the policy applies. Early collaboration with these partners can help frame the claim appropriately and avoid missteps that are difficult to correct later.
Key elements to focus on include coverage types and limits, deductibles, and definitions of covered causes of loss.
One commonly overlooked area of coverage is contingent business interruption (CBI), also referred to as dependent property coverage. For example, consider a professional services firm with limited physical assets that relies heavily on access to client facilities to generate revenue. If the client’s location suffers a covered loss and the professional services firm is unable to perform on-site work for an extended period, that lost revenue may fall outside traditional business interruption coverage, unless contingent or dependent property coverage is specifically endorsed. In practice, this gap is often only recognized after a loss, resulting in delayed or denied recovery.
Identifying and quantifying losses arising from these types of coverage provisions is often complex and documentation-intensive, particularly where business interruption impacts are indirect or dependent on third parties.
Hiring a forensic accountant to quantify the loss and prepare the claim can also be beneficial by helping ensure the claim is complete, well-supported, and aligned with policy requirements. Many insurance policies include provisions for reimbursing the costs of claim preparation, which may cover the cost of hiring a forensic accountant. These provisions are typically found under terms such as “claim preparation,” “proof of loss preparation,” or “professional fees.”
2. Identify and Collect Documentation Promptly
In the aftermath of a loss, quickly identifying and collecting documentation is essential for substantiating your insurance claim. Doing so can significantly affect how quickly you receive reimbursement. Immediately following a loss, it is often easier to recall the facts and circumstances than it is weeks or months later. Collecting relevant records, including a detailed timeline of the loss and its impacts, is therefore crucial.
In my experience, when leadership does not prioritize effective claims management, the process can become inefficient and drawn out. Requests for information may stretch for weeks, months, or even years. By the time the project regains momentum, employee turnover, mergers and acquisitions (M&A), and other organizational changes can make it difficult to locate the necessary documentation. Recalling details to answer adjusters’ questions also becomes more challenging with time. All of these factors contribute to delays and a prolonged claims process.
In short, timely documentation is one of the most effective ways to prevent delays and facilitate an efficient recovery.
3. Set Realistic Recovery Expectations
Following an insurable loss, it can be challenging to set an expectation for the amount ultimately recovered from insurance. A common challenge for risk managers and organizations encountering an insurable loss for the first time is managing stakeholders’ expectations for recovery.
While a submitted claim should be well supported and reflect the policyholder’s reasonable view of the loss, insurance carriers and their experts commonly apply alternative interpretations and assumptions. As a result, differences may arise between the claimed amount and the final recovery, with meaningful implications for financial reporting and planning. Claims generally undergo at least two stages of review, including adjuster review for coverage and auditor review for quantum-related modifications, during which these differences commonly arise.
Given this review process, setting a reasonable internal expectation of recovery can lead to a more effective negotiation and settlement. Typically, the claim is divided into three categories:
1. Agreed Amounts: These are often claimed amounts supported by invoices or other supporting documents without dispute.
2. Partially Agreed Amounts: Business interruption losses typically fall into this category. While an insurance carrier or adjuster might agree there is a lost profit impact to the business, the extent of that impact, such as the duration of loss or the basis of revenue and expense forecasts, is often disputed.
3. Disputed Amounts: Coverage disputes are common here. For example, a fine paid to a vendor may be undisputed in payment but excluded from coverage under the policy.
It is important to manage expectations by recognizing that the total claim amount is subject to review by the insurance carrier, adjuster, and auditor, and that differences of opinion are common throughout this process. Segregating the claim into the categories above and applying estimated collection assumptions can help management assess a realistic range of potential recovery.
If a disputed amount persists, additional context and support can be provided to the adjuster to articulate the policyholder’s perspective. Your forensic accountant can advise on the most useful documentation. If a disputed amount remains unresolved, it is not uncommon to negotiate and reach a settlement at the end of the claims process for some portion of the disputed amount, once the other components of the claim are resolved. Proactively engaging with your forensic accountant and adjuster throughout the process can facilitate a smoother negotiation process and final settlement.
4. Understand How Your Policy Responds to Changes in Labor
Labor decisions made early in the recovery process can significantly affect both the ultimate loss amount and the resulting insurance recovery.
Following a loss, organizations often rely on internal staff to assist with recovery and restoration. This approach can make sense, as these employees are already on-site and understand the operations and equipment. However, when seeking reimbursement from the insurance carrier for those efforts, it is important to recognize how different types of labor are often treated.
If salaried staff work extra hours during recovery but receive the same pay as usual, insurance carriers will generally view this as a non-incremental (i.e., continuing) expense, despite the added time and effort. Conversely, overtime for hourly employees or costs for outside contractors may be considered reimbursable under your policy.
Hiring outside specialists, such as restoration vendors or information technology (IT) consultants, may also qualify for recovery if the expense is reasonable and necessary to mitigate the loss. This often includes efforts that accelerate restoration and reduce the duration of business interruption. This is particularly relevant in cyber insurance claims, where system restoration timelines directly affect business interruption exposure. However, bringing in third parties is not always practical or cost-effective. In some cases, your own staff’s specialized knowledge can lead to faster, more efficient restoration. For example, during a cyber incident, in-house IT teams may restore systems more quickly and at a lower overall cost than external firms that must first familiarize themselves with the environment. In these situations, it is helpful to document how internal or salaried labor ultimately reduced the overall loss, whether through faster recovery, lower total cost, or reduced business interruption.
By understanding how your policy treats labor costs and documenting the reasoning behind your staffing decisions, you can help ensure legitimate recovery costs are properly recognized.
5. Understand How Your Policy Responds to Idle Labor
Equally important is understanding how your policy addresses employees who are unproductive or idle due to a loss, as employers and employees often face uncertainty regarding compensation for idle labor. The decision to pay or not pay idle employees rests solely with the policyholder, but it is critical to understand how this decision will impact an insurance claim. As part of this evaluation, review your insurance policy to determine whether you have ordinary payroll coverage. Such coverage allows policyholders to retain and continue paying certain employees who are idle following a covered loss for a defined period, subject to policy conditions and necessity requirements. If management decides not to pay idle employees, this will be considered a saved expense when calculating a business interruption loss, and the total claim amount will be reduced accordingly.
Consider an example where a property loss causes a manufacturer to halt production to complete necessary repairs and restoration. If management decides not to pay idle employees during the restoration period, many hourly employees, concerned about not being paid and uncertain about the duration of the outage, may seek employment elsewhere. When production resumes, staffing shortages can constrain output and can diminish employee morale. When the business interruption claim is submitted, the adjuster will reduce the calculation by the amount of saved labor. While management may believe it is being conservative by not paying idle staff, this decision can have operational consequences and, because unpaid payroll is treated as a saved expense, will reduce the business interruption recovery as calculated. Situations like this are common and should be evaluated on a case-by-case basis.
Continuing to pay idle employees is also not without risk. Some risk managers assume ordinary payroll coverage automatically reimburses all post-loss wage payments, without fully considering the applicable policy conditions, time limitations, and restrictions. Ordinary payroll coverage is typically evaluated within the business interruption framework and generally applies in connection with a covered business interruption loss. Coverage is often capped at a defined number of days, and wage payments beyond that period may be disallowed. In addition, insurance carriers may evaluate whether continued payroll payments align with policy conditions, applicable time limits, and operational realities of the loss. The decision to retain and pay idle employees should therefore be made with a clear understanding of policy limits, timing constraints, and documentation requirements, rather than an assumption of automatic reimbursement.
Understanding how your policy addresses labor allows you to make informed staffing decisions that protect recovery and minimize operational disruption. Combined with careful documentation, policy review, and collaboration with brokers, counsel, and forensic accountants, these practices form the foundation for an effective insurance claim process.
Conclusion
Recovering from a property or cyber loss and navigating the insurance claims process requires planning, informed decision-making, and a proactive approach. Collaboration with insurance brokers, coverage counsel, and forensic accountants can enhance the process by ensuring claims are well-supported, clearly articulated, and strategically managed.
By understanding policy terms, documenting losses in real time, setting realistic recovery expectations, and making informed labor decisions, organizations can better manage the challenges that commonly arise in commercial property and cyber claims. Applying these lessons allows risk professionals and organizational leaders to approach the claims process with greater confidence, minimize disruption, and support a timely recovery through a well-documented claim.
About the Author
Kyle Smith is a forensic accountant based in Chicago and a Senior Director in Ankura Consulting Group’s Forensic Accounting & Insurance Claims Consulting practice. He assists clients with insured catastrophic events, ranging from natural disasters to cyber incidents, providing claim preparation, review, and settlement support. His work frequently involves complex commercial property and cyber insurance claims, including business interruption and extra expense claims. He also assists clients with the evaluation of business interruption risks and the preparation of business interruption insurable values for annual insurance renewals. Kyle is a Certified Public Accountant (CPA) licensed in the State of Illinois and a Certified Fraud Examiner (CFE). He can be reached at kyle.smith@ankura.com
© Copyright 2026. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
