The situation: On September 28, 2022, Hurricane Ian struck Florida, becoming the fifth-strongest hurricane to ever hit the continental United States, with total insured losses estimated in the tens of billions of dollars.
The result: Businesses in Florida, South Carolina, North Carolina, Georgia, Virginia and various other states are recovering from their significant property damage and business interruption losses.
Looking ahead: Commercial policyholders affected by Hurricane Ian should collect and review all potentially applicable insurance policies while reviewing various policy provisions, including but not limited to notices, proof of damage, and limitation of action conditions.
As Hurricane Ian battered Florida, South Carolina, North Carolina, Georgia, Virginia and several other states, companies will soon seek insurance recoveries for the significant property damage and loss of business revenue. While the safety of those affected should continue to be a top priority, recent experience with Hurricanes Katrina, Sandy, Harvey, Irma, Maria and Ida shows that commercial policyholders who seek coverage promptly and diligently stand the best chance of protecting their lives Insurance to maximize recoveries for hurricane-related losses. To that end, here are five tips your business should consider when looking for insurance coverage for losses resulting from Hurricane Ian and preparing for the remainder of the 2022 hurricane season.
1. Gather and review All Potentially Applicable Insurance Policies.
When purchasing insurance for hurricane and other catastrophic damage, it is important to remember that coverage may be available under different types of insurance policies, including those listed below. Accordingly, policyholders should obtain and carefully review them Everyone Insurance policies that may respond with coverage, including those that designate your business as an “additional insured”.
First Party Property. Many businesses impacted by Hurricane Ian will turn to the first party property insurance included in their commercial insurance program. Commercial property insurance, while referred to by a variety of names (e.g., “All-Risk,” “Inland Marine,” or “Multi-Peril”), generally provides coverage for physical damage to, or loss of use of, business premises and other property (B. Inventory, equipment and machinery) owned, leased or otherwise in the care, custody or control of the policyholder.
business interruption. Business interruption insurance, which is also commonly part of a company’s commercial property insurance program, is designed to protect companies against their lost business revenue as a result of business disruption due to a hurricane or other covered peril. Business interruption coverage often requires the policyholder to suffer “physical loss or damage” to insured property, which may include events that render property uninhabitable or otherwise unfit for its intended use.
Conditional Business Interruption. Contingent business interruption coverage similarly provides insurance for financial loss resulting from disruption to a commercial policyholder’s customers or suppliers and normally requires that the underlying cause of damage to the customer or supplier related to the commercial policyholder’s property is covered.
Additional costs. The business interruption protection of an insurance policy may also provide insurance for “additional expenses”. Supplemental Expense Coverage compensates the policyholder for costs, in excess of normal operating expenses, incurred to continue operations while the policyholder’s damaged property is repaired or replaced. Additional costs covered typically include the cost of renting replacement facilities, moving and transportation costs, overtime wages, temporary work and advertising.
Service Interruption. Business interruption coverage provides insurance for property damage (e.g. spoilage of perishable goods) and loss of business income caused when utility lines (e.g. electricity, gas, sewerage or water) to insured premises are interrupted. Business interruption coverage typically requires physical damage to the property of the policyholder’s utility and sometimes may require the damage to occur within a certain distance of the policyholder’s own premises.
Coverage by civil authorities. Commercial property insurance policies often provide coverage for lost business income when a “civil authority” prohibits or restricts access to the policyholder’s premises (e.g. through evacuation orders, road and local transit closures or curfews). Depending on its specific wording, an insurance policy’s “civil authority” coverage may or may not require that the restricted access results from a “physical loss,” and when that is the case, it often does not require a “physical loss” to one’s property of the policyholder occurs. Given that federal, state, and local government agencies have already taken a number of the above actions in response to Hurricane Ian, “civil agency” insurance coverage may respond by insuring affected businesses for the associated loss of income.
Ingress/egress coverage. In addition to restrictions on access imposed by government agencies, the physical damage caused by Hurricane Ian itself may limit access to business premises. Ingress/Egress coverage provides insurance for lost business income incurred when access to and from the insured premises is restricted or prevented by such physical damage in the vicinity of such premises (e.g. flooding, felled trees or downed power lines). becomes.
2. Timely Compliance with Notice, Proof of Loss, and Limitation of Actions Policy Terms.
While specific reporting requirements vary by insurance policy and applicable state law, failure by a policyholder to meet these deadlines may unnecessarily complicate their insurance reimbursement, or worse, insurance companies will argue that such failure to meet these deadlines results in loss of coverage. Commercial insurance policies typically contain two important reporting requirements that policyholders are strongly encouraged to comply with: (i) initial notification of the claim to the insurance company (usually “as soon as reasonably practicable” according to the terms of the policy); and (ii) filing an affidavit of “proof of loss” with the insurance company (often within 60 days of the event causing the damage or, under the laws of certain states and certain insurance conditions, within 60 days of an insurance company’s request). In addition, certain commercial insurance policies require that a policyholder initiate litigation against their insurance company within 12 or 24 months of the date of the claim.
Policyholders should therefore play it safe by promptly reporting a loss under any insurance policies that may be applicable. In addition to the timing, policyholders should also follow any instructions in the insurance policy regarding the nature of the notification (e.g., whether the notification must be in writing, to whom the notification should be given, and what information must be provided initially).
Policyholders should also note that provisions relating to time limits for producing “proof of damage” or bringing a claim may be extended by written agreement, provided the extensions are limited to a specific date rather than indefinitely. Because in a number of jurisdictions the filing of proof of loss triggers a similar deadline for an insurance company to complete its own claims settlement, many insurance companies routinely agree to such extensions.
3. Document your property and business income losses.
In order to receive a full insurance refund, it is important that you keep a complete and accurate record of your lost property and business income. As a result, policyholders should immediately begin compiling a detailed and timely record of all company property and income losses to support their claims. This should include photos and/or videos of damaged or destroyed property, equipment and inventory, along with relevant invoices and estimates for their repair or replacement. Likewise, any correspondence that demonstrates your loss of business income (e.g., order and event cancellations and the impact of the hurricane on customers and suppliers) should also be retained.
4. Document the claims settlement process.
Policyholders should also maintain complete written records of all claims-related communications exchanged with their insurance companies (e.g., claims reports, responses to requests for information, and conference calls held). Policyholders should also ensure that they mention any insurance company inaction (e.g., missed deadlines, canceled meetings, or late payments) as part of their claims correspondence with the insurance companies. This not only helps to facilitate the claims settlement process, but is often helpful to policyholders in later litigation about insurance coverage.
5. Assemble an appropriate insurance recovery team.
Although many policyholders only deal with a single “claims adjuster” acting on behalf of the insurance company, the claims adjuster is typically assisted by a larger network of behind-the-scenes advisors (e.g., outside coverage advisor) who are trained in minimizing claims payments. While policyholders are encouraged to mobilize their available internal resources (e.g., in-house risk managers and accountants familiar with the business), the early involvement of experienced policyholder lawyers, along with external forensic accountants and public experts when necessary, can help level the playing field by ensuring your claims are properly prepared and presented within the limits of available insurance coverage and applicable law.
By persistently (and patiently) following the tips above, commercial policyholders will best position themselves to maximize insurance recoveries for their business losses suffered during Hurricane Ian and the remainder of the 2022 hurricane season.
Two important insights
- The experience of hurricanes Katrina, Sandy, Harvey, Irma, Maria and Ida shows that commercial policyholders who seek coverage promptly and diligently maximize their chances of recovering from hurricane-related losses.
- Policyholders should review all insurance policies that may be applicable for coverage, including those where their company is identified as an “additional insured”.