Now that Hurricane Sandy has come and gone, many of our clients are now considering whether they have insurance coverage for property damage and business income losses caused by the hurricane and the resultant loss of power. This question is often a minefield as the scope of coverage can vary greatly from policy to policy. The following is a list of the top ten things that you can do now to give yourself the best possible chance to maximize and speed up your insurance recovery:

  1. Locate and review your policy immediately. Depending on the nature of the loss, it may be important to determine whether the policy includes flood insurance. Some commercial policies provide some level of flood insurance but many policies exclude it, in which case the policy will only cover loss and damage to the extent caused by wind. Keep in mind that many policies contain "anti-concurrent causation" clauses, which state that if damage is caused by both a covered loss (wind) and a non-covered loss (flood), the policy may exclude all damage. Following Hurricane Katrina, this issue was the subject of litigation that lasted several years. Storm surge is a form of flooding and is generally treated in the policy the same way as flood, however careful attention needs to be paid to the wording of the particular policy on this issue.
  2. Take pictures and/or videos of the damaged property, and, if you have them, provide the insurance adjuster with pictures of the same property taken before the damage.
  3. Make a detailed list of all property that was damaged, including the original cost, date of purchase and estimated replacement cost.
  4. Take all reasonably necessary steps to prevent further damage by securing property, for example temporarily boarding windows and roofs. Policies typically provide that if you do not take these steps and further damage occurs, you may not be covered for that additional damage.
  5. Do not perform major or permanent repairs or discard any property until after an insurance adjuster has conducted an inspection. However, it may be helpful to obtain your own repair estimates now as this will likely speed up the claim settlement process.
  6. Keep receipts and canceled checks of all expenses you incur for emergency repairs and extra expenses to keep your business operational. It is vitally important to document and maintain receipts for ALL such expenses as failure to do so may make it difficult to obtain recovery from the insurer.
  7. Determine whether business interruption insurance applies for lost business income. Most policies require that such coverage only applies if there has been direct physical damage to the building. In the absence of such direct physical damage, business interruption insurance might not apply. That means that businesses that did not suffer any physical damage but were shut down due to a lack of power or evacuation orders might not have coverage for lost business income caused by Hurricane Sandy.
  8. Review your policy to see if it contains one or more of the following supplemental business income coverages that might apply even though there has been no physical damage to your business:
  • Contingent Business Interruption Coverage -- covers losses suffered from damage to property owned by a major supplier or customer that, for example, prevents a supplier from supplying goods and/or services to you, or prevents customers from accepting goods and/or services from you.
  • Services Interruption/Off Premises Power Coverage -- covers losses suffered from damage to the property of a utility service provider resulting in an interruption of that utility service at your property.
  • Civil Authority Coverage -- covers losses suffered when access to your property is restricted by order or action of civil authority, e.g., an evacuation.
  • Ingress/Egress Coverage -- covers losses suffered when entry to or exit from your property is impaired.
  • Extended Period of Indemnity -- allows an insured to recover damages for a certain period of time even after its doors reopen for business.
  1. Identify the applicable deductible. Most policies contain a hurricane or windstorm deductible, which is often expressed as a percentage (typically between 1% and 5%) of the limit of insurance, and can be significantly higher than the deductible for other losses. Governor Cuomo and the New York State Superintendent of Insurance announced that hurricane deductibles will not be triggered because Hurricane Sandy did not have sustained hurricane-force winds when it made landfall in New York.
  2. Determine if a "waiting period" applies. The policy might provide for a "waiting period" whereby any business income losses incurred during a certain period of time following the hurricane (e.g., 72 hours) will not be covered.