With Hurricane Matthew causing significant damage to areas of the southeastern US, businesses will soon look to secure insurance recoveries for property damage and business income losses. While the safety and security of those affected should remain the first priority, the recent experiences of Hurricanes Katrina, Ike, Irene, and Sandy demonstrate that commercial policyholders who pursue coverage promptly and diligently stand the greatest chance of maximizing their insurance recoveries for hurricane-related and other storm-related losses. To that end, below are five tips for your business to consider when seeking insurance coverage from any large storm losses.
1. Collect and Review All Potentially Applicable Insurance Policies
When pursuing insurance for hurricane-related and other catastrophic losses, it is important to keep in mind that coverage may be available under several different types of insurance policies, including those outlined below. Accordingly, policyholders should obtain and carefully review all policies that may potentially respond with coverage, including those in which your business is identified as an “additional insured.”
First-Party Property. Many businesses affected by storms will look to the first-party property insurance included within their commercial insurance program. While referred to by a variety of names, commercial property insurance generally provides coverage for physical damage to or loss of use of business premises and other property owned, leased, or otherwise in the policyholder’s care, custody, or control.
Business Interruption. Also commonly included within a company’s commercial property insurance program, business interruption insurance is intended to protect businesses against income losses sustained as a result of disruptions to their operations due to a hurricane or other covered peril. Business interruption coverage frequently requires that the policyholder sustain “direct physical loss of or damage to” insured property, which can include incidents that render property uninhabitable or otherwise unfit for its intended use. Contingent business interruption coverage similarly provides insurance for financial losses resulting from disruptions to a business’s customers or suppliers, usually requiring that the underlying cause of damage to the customer or supplier be of a type covered with respect to the business’s own property.
Extra Expense. A policy’s business interruption coverage may also provide insurance for “extra expense.” Extra expense coverage indemnifies the policyholder for costs in excess of normal operating expenses incurred in order to continue operations while the business’s damaged property is repaired or replaced. Covered extra expenses typically include the rental cost for substitute facilities, moving and hauling expenses, overtime wages, temporary labor, and advertising.
Service Interruption. Service interruption coverage provides insurance for property damage (e.g., spoilage of perishable goods) and business income losses caused when utility services (e.g., electric, gas, sewer, or water) to insured premises are interrupted. Service interruption coverage usually requires physical damage to the property of the utility company used by the policyholder, and it can sometimes require that the damage occur within a specified distance of the policyholder’s own premises.
Civil Authority Coverage. Commercial property insurance policies often provide coverage for business income losses sustained when a “civil authority” prohibits or impairs access to the policyholder’s premises (e.g., through evacuation orders, road and mass-transit closures, or the imposition of curfews). Depending upon its specific wording, a policy’s “civil authority” coverage may or may not require that the access restriction result from “physical loss” and, if so, often does not require that “physical loss” occur to the policyholder’s own property.
Ingress/Egress Coverage. In addition to access restrictions caused by governmental authorities, the physical damage resulting from storms may itself limit access to business premises. Ingress/Egress coverage provides insurance for business income losses incurred when access to and from insured premises is severely restricted or prevented by such physical damage occurring in the vicinity of those premises (e.g., by flooding, felled trees, or downed power lines).
2. Timely Comply with Notice, Proof of Loss, and Suit-Limitation Provisions
While the particular notice requirements vary by policy and applicable state law, a policyholder’s failure to timely meet these deadlines may unnecessarily complicate its insurance recovery, or, worse, insurance companies will argue that such a failure to meet these deadlines in a timely fashion results in a forfeiture of coverage. Commercial insurance policies typically contain two important notice requirements, which policyholders should take care to satisfy: (i) initial notice to the insurance company of the loss; and (ii) filing with the insurance company a sworn “proof of loss”. In addition, certain commercial insurance policies require a policyholder to commence litigation against its insurance company within 12 or 24 months following the loss.
Policyholders should accordingly err on the side of caution by promptly giving notice of a loss under all potentially applicable insurance policies. In addition to timing, policyholders should also follow any instructions set forth in the insurance policy concerning the manner of notice (e.g., whether the notice must be in writing, to whom notice must be given and what information must initially be provided).
3. Document Your Property and Business Income Losses
In order to obtain full insurance reimbursement, it is essential that you keep a complete and accurate record of your losses. Policyholders should therefore immediately begin preparing a detailed and contemporaneous record of all property and income losses in support of their claims. This should include photographs and/or video of damaged or destroyed real property, equipment, and inventories, together with corresponding invoices and estimates for their repair or replacement. Similarly, any correspondence evidencing your business interruption loss (e.g., order and event cancellations, and the hurricane’s impact on customers and suppliers) should also be preserved.
By following the above tips with persistence (and patience), commercial policyholders will best position themselves to maximize insurance recoveries for their storm losses. If you have any problems recovering your claim, a public insurance adjuster can help. Contact Berger Adjusters in Providence, RI.
Stay tuned for Part II for more tips on how to maximize insurance recoveries after a storm.