As the first major hurricane of the 2011 Atlantic hurricane season reminds us, policyholders must anticipate and prepare for natural disasters that could wreak havoc on their business operations and property. Policyholders mindful of their insurance coverage rights and obligations can best weather the storm.
Policyholders, most importantly, should locate and analyze all insurance policies that may afford coverage for such disasters. Property damage policies cover physical damage to property including, for example, a policyholder's building. These policies also may cover the costs associated with rebuilding, repairing, or replacing damaged property. Business interruption, extra expense, and contingent extra expense coverage may provide further relief when a policyholder's and/or its vendors' or suppliers' damaged facilities cause a suspension of operations.
As with any potentially insured losses, issues may arise regarding the cause of the loss, whether the policy excludes the loss, and what coverage limits apply to the loss. Some policies provide specific coverage for weather-related losses; others specifically exclude flood and related losses; and still others provide limited coverage with dedicated sublimits. Policyholders can identify and enforce their coverage rights by collecting, organizing and carefully reviewing their insurance policies. Policyholders also should identify and obtain copies of policies issued to other businesses -- such as vendors, current and former affiliates, and suppliers -- that may provide insurance coverage to them.
Most insurance policies require an insured to provide timely notice of potential claims. Some property policies, for example, require that businesses provide notice of a loss "as soon as practicable," while others require notice "immediately." Most property policies also require policyholders to submit "proofs of loss" arising from covered losses. Businesses, therefore, should collect and maintain records documenting their damage, lost revenues, and additional expenses and be sure to submit all required information as and when required by their insurance contracts. To the extent a policyholder needs more time to prepare its proof of loss, it should consider approaching its insurers for additional time and confirm all extensions in writing.
Because insurance companies fill their policies with legal and technical jargon, policyholders understandably may have questions regarding the scope of coverage available to them. Businesses should consult with experienced professionals, such as insurance brokers, accounting consultants, and coverage counsel, who can help them understand their insurance, navigate the claims process, and ultimately maximize their insurance recovery.