Meteorologists dubbed Hurricane Sandy a “perfect storm” or “superstorm” long before it even made landfall on the East Coast, and it lived up to those terms. Sandy brought gale-force winds, flooding, heavy rain, and snow to much of the Eastern Seaboard and the Northeast, including densely populated areas such as Washington, D.C., Baltimore, New York City, and Boston. Though Sandy’s full effects likely will not be realized for months, it will undoubtedly rank as one of the most costly storms (if not the most costly storm) in U.S. history.
Companies and individuals affected by Sandy should consider whether insurance covers their losses and act quickly to maximize their insurance recovery.
Commercial Property Insurance
In the event of a property loss, a company should take steps to preserve coverage. Under a commercial property policy, a company must generally:
- Give immediate notice of any loss to the insurer
- Attempt to protect property from further loss or damage (if possible)
- Separate damaged from undamaged property (if or when possible)
- Timely provide the insurer with a signed and sworn proof of loss (usually within 60 to 90 days), which includes the time and origin of loss, description of damage, and the property’s actual and/or replacement value. If the insured needs an extension, it must request one and the insurer must grant it in writing.
Business Interruption Insurance
Business interruption coverage compensates the insured for lost income and continuing ordinary business expenses incurred as a result of direct physical loss or damage to the insured’s business premises. To preserve business interruption coverage, a company must generally:
- Promptly notify the carrier of the loss
- Take all reasonable steps to protect the covered property from further damage, regardless of the cause of loss
- Keep a record of all expenses necessarily incurred to protect the covered property
- If possible, set aside the damaged property in the best possible order for the carrier to examine
- Permit the insurer to inspect the property as often as it reasonably requires, including relevant books and records
- Provide the insurer with a signed, sworn proof of loss or obtain a written extension of time. The insurer should supply the necessary forms and indicate the information it requires.
- Resume all or part of previously-occurring business activities on the premises as soon as possible
Contingent Business Interruption Insurance
Considering the widespread damage following Hurricane Sandy, many businesses will find that their customers or suppliers have sustained physical damage and are unable to do business. Contingent business interruption coverage protects an insured’s earnings following physical loss or damage to the property of others upon which the insured’s business depends. Thus, if your business experiences loss because Sandy limited your suppliers’ ability to provide necessary goods, contingent business interruption insurance may cover that loss.
Several other types of coverage may be available. Consult a specialist to determine the extent of your policy’s coverage.
An insured should take immediate action following a loss to preserve its rights under the policy and increase its odds of a full recovery. Companies faced with a loss should exercise caution and consult insurance counsel to identify, preserve, and maximize coverage. As always, Haynes and Boone stands ready to assist.