Deadline set for full payment of claims

By Tom Philpott : Military Update

Service members who have household goods damaged or lost during government-directed moves will be reimbursed under a more robust “full replacement value” standard starting by at least March of 2008.

Congress set the deadline in the 2007 defense authorization act signed into law Oct. 17. The National Military Family Association and other service advocacy groups had urged the action after the Department of Defense fell behind in implementing “Families First,” a personal property program initiative that includes a goal of full replacement value (FRV) reimbursement.

Air Force Col. Steven Amato, director of passenger and personal property for the Military Surface Deployment and Distribution Command, said the start of FRV might take effect even sooner, perhaps by this time next year, if Families First can get back on schedule for executing a broad re-engineering of the Defense Department $1.4 billion personnel property program.

But if Families First is not fully implemented by March 2008, the department still will shift to FRV reimbursements on household claims, Amato said.

DoD is the moving industry’s largest customer with 500,000 moves contracted for every year. About 1,300 moving companies get a share.

The department has worked for over a decade on what became Families First, a comprehensive effort to improve quality of moves, reduce claims, quicken the claims process and run the entire personal property program more efficiently through technology.

When Families First is fully implemented, a sophisticated information management system will link customers, carriers and transportation offices across the U.S. military.

But a long-standing complaint for military members, reflected in after-move surveys going back years, is low reimbursements for damaged goods. Congress now feels that solution should not be delayed until bigger challenges for Families First are worked out.

Historically, about 35 percent of military moves result in damage claims.

The figure has been nearer to 20 percent in recent years but it still tops the list of complaints tied to moves.

Currently, when household items are lost or destroyed, members receive only a depreciated value for the goods. On rare occasions when an entire shipment is lost, carrier liability to members is capped at $40,000.

A sofa that cost $1,000 five years ago, for example, would be valued using the depreciation formula 25 percent below replacement cost, a depreciation rate of 5 percent per year. Other items depreciate at 10 percent. The concept, used for decades, is that household items are “used” and so the government should pay replacement value of used items.

Under FRV reimbursement, however, if a carrier lost an item the member would get a new one. Exceptions involve cars, motorcycles and boats because replacements of equal value are easily found. But with items like furniture, appliances, electronics, carriers would buy new items or settle claims for enough money so members could buy them new.

The shift in formula will affect repairs too. Currently, if an older $300 television is damaged in a move, the depreciated value might be $150. If the repair estimate is $200, the carrier now will pay no more than that depreciated value, $150. The service member is stuck paying $50 in repair costs out of pocket. Under FRV, the mover would pay full repair costs.

Maximum FVR liability per shipment would be capped at $50,000.
FRV liability coverage already is common for private sector employee moves with companies choosing to buy the higher liability coverage.

Military members now can only buy FRV coverage from carriers on U.S. domestic moves. The cost is a few hundred dollars on an average military shipment of 6,000 pounds. For senior ranks with larger shipping weight allowances, buying FRV coverage costs $400 or more. Fewer than 10 percent of members buy the extra protection. An FRV option isn’t even offered by carriers on overseas moves, though private insurance is always an option. Not many service members opt for it.

By spring 2008, however, the entire military will be better protected financially from transportation mishaps. The higher FRV reimbursements will be paid by the government. Movers simply will raise their rates, charging the government more for each move, to reflect companies increased liability.