Identifying and Documenting Excessive Fees

FARALLON HELPS INSURANCE COMPANY IDENTIFY EXCESSIVE CLEANUP FEES

When an insurance company suspected it was being overcharged for cleanup of a dry cleaning site, it turned to Farallon to investigate.

An insurance company responsible for a cleanup effort lasting more than 6 years at an annual cost of hundreds of thousands of dollars needed third-party review of the cleanup contractor’s work.  An extensive record of successful cleanup actions at dry cleaning sites made Farallon the perfect choice for expert review.  After examining thousands of pages of documentation, Farallon was able to demonstrate that the cleanup contractor’s charges were beyond what normally would be considered reasonable and necessary.  Farallon presented its findings to the client’s legal counsel, and provided technical support that resulted in a favorable settlement.

Property owners often require a tenant who operates a dry cleaning facility to maintain insurance coverage against environmental damages resulting from spills of hazardous substances.  These policies insure the property owner and the operator of the dry cleaning facility against remedial investigation and cleanup costs.  In this case with mounting cleanup costs and no end in sight, the insurance company suspected fraud, and turned to Farallon to conduct third-party review of project-related technical documents and costs.

“We had to go through vast amounts of information and figure how to convey our findings succinctly and in a manner that would be understandable to lay people,” said Clifford T. Schmitt, Principle-in-Charge.  To accomplish this, Farallon used a color-coding system to reveal patterns and showcase errors.  In one instance, it was clear that pages in a report were simply copied from a previous year’s report with minimal changes.

Farallon presented its findings to legal counsel and the parties involved:  the client, the insured owner, and the cleanup contractor.  “We were able to communicate clearly and understandably that the consultant’s fees were excessive in relation to the services performed,” said Schmitt.  “This led to a settlement in which the insurance company was granted a release from further obligation, something that is rarely ever done.”