What Should I do with this Electronic Equipment? 

This is an ongoing series of articles designed to help adjusters deal with electronics affected by claims.  This months’ article is titled:  “Why spend $ if it isn’t worth it? “

As an adjuster, you know that your insured wants to return to a pre-loss condition as quickly as possible.  This means they need their equipment to work.  It is up to you to determine the steps needed to make the insured whole again, but what must you take into consideration when doing this?  Below is a list of factors that come into play when adjusting a claim containing electronic equipment.  The first assessment to be made is: What is the real value of the affected equipment?

1. What affects the value of electronic equipment?
1. Amount of damage to the equipment – is it a total loss, or do you see the potential for repair?
2. Is this a BI claim? – How much money is going out the door each day the insured is out of business?  Is a $50,000 piece of equipment keeping the insured from making $100,000 per day?  Can temporary equipment be rented at a reasonable rate so the affected equipment can be restored?  And where will the equipment be set up?
3. Age of equipment – Does the age really matter?  Some equipment is designed to last 25 years and other equipment is discontinued in under a year.  Items such as an electrical generator producing thousands of kilowatts for a city or other large electro-mechanical equipment can last over25 years.  And some state of the art equipment used in very competitive environments might normally be replaced yearly because the new technology coming out can give a company an edge over others in the industry.  The type of equipment involved will also influence the availability of parts.
4. Availability of parts – Higher tech equipment is usually replaced by consumers faster than lower tech items because newer/faster/better units enter the market every 6-12 months.  This replacement schedule and new model introduction rate makes the current models obsolete, which will make replacement parts harder to find in a shorter span of time.  Another factor affecting the availability of parts is the manufacturer.  For instance, all states have a law requiring manufacturers of electronic consumer products to have repair parts available for a period of time(3-5 years) after the model has been discontinued, but many manufacturers ignore this law and force the replacement of equipment because they don’t make repair parts available.  This blatant violation of law can greatly influence an adjusters’ ability to use repair as an option.
5.  Is it acceptable to use a refurbished part to repair the equipment? - There is a strong secondary market for many electronic items, and these dealers will often guarantee their parts for as long as a year.  What is your companies’ policy regarding this?  If you replace a damaged part with a refurbished part covered under a warranty, aren’t you, in effect, improving the equipment and the position of the insured?  But there are also items where no secondary market exists.  This could be because the manufacturer maintains a very tight grip on training repair personnel, or because the manufacturer won’t let anyone else sell parts, or because very few of the machines exist.  An example of this is the HP Indigo 1000 printer.  This commercial level printing press costs several hundred thousand dollars new, and HP is the only company that can repair it or sell you parts.  And some replacement parts can cost $65,000!  But in other countries where these printers exist, parts are much cheaper and independent dealers are capable of providing repairs.   Plasma televisions are another example of a product with little secondary market.  This is because parts are generally not available for them.  In fact, several “plasma junkyards” are starting to spring up around the country to take advantage of this void.
6. Cooperation of the manufacturer – Many manufacturers are very supportive if you propose taking the repair path instead of the replacement option.  They will take an honest look at the equipment and suggest ways to get it back to a pre-loss condition.  But there are also manufacturers on the other end of the scale who will automatically void warranties and refuse to service a unit just because it got one drop of water on the outside of it.  I’ve had the pleasure of dealing with this on more than one occasion.
7. Honesty of the local dealer/repair shop – I can’t begin to tell you how many claims I’ve consulted on where the insureds’ dealer claimed that “parts are no longer available.”  And in 99% of the claims that I’ve worked on where the dealer made this statement, it wasn’t true.
8. Number of qualified repair companies – Having choices will always improve your odds on getting the affected units working again.  If a dealer tells you he can’t get parts or you feel that he is just trying to make a sale, you can go down the street to find someone else to assist you.  I have often done this when a claim involves a copier.  But on the other end of the spectrum; you may have a claim in a small town far from any larger city that would normally provide the opportunity to pick the repair company.  And if you bring an “outsider” from the big city to work on the insureds’ equipment, which affectively snubs the local dealer, will the local dealer ever be willing to help maintain the item again?  Sometimes the small town network is difficult to bypass and you must work within its’ confines to ensure that the insured will be able to get service and support for the equipment in the future.
9. Is there data that must be recovered? – The data is often worth more that the computer.  Does the insured have coverage for data? If so, what is the best way to recover it?  Computers that have been in fires will often still work and the data can be inexpensively recovered.  The worst type of damage a hard drive can suffer is physical.  I have often seen this in laptops that have been dropped.  The best way to protect data is to back it up off site.  I have worked too many losses where the insured did every thing right except they left their backups by the computers and everything is destroyed or stolen at the same time.
10. Can the original software be replaced? - Companies rely on their data and software more than their hardware.  And sometimes the software can no longer be replaced, which might make the equipment useless and force you to replace it even if it is possible to repair the hardware part of it for less than the replacement cost.

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