After tearing through the Caribbean, Hurricane Matthew’s path brought it north to the Southeastern coast of the U.S., bringing evacuations, business closures and damages to the region. Florida, Georgia, South Carolina and North Carolina have declared states of emergency.
As business and property owners weather the storm, they should also prepare for the aftermath of bringing these losses to their insurance companies. As they prepare to take stock of their losses, plan their response, and examine their insurance policies and their recovery options, they are going to face many questions. How am I going to pay to repair damaged property? What is the quickest way to resume my business? Can I recover any of the profits I lost when my business was interrupted or my customers’ or suppliers’ businesses were interrupted? Are there any government funds, such as FEMA assistance, available to aid my recovery?
Securing insurance proceeds and FEMA assistance is crucial to the recovery process. To help address some inevitable issues, and to assist with the initial insurance claim and FEMA application processes, we provide the following guidance.
1. Obtain and Review Your Insurance Policies.
To begin with, it is crucial to obtain, review and evaluate all potentially applicable insurance policies for coverage. Understanding your rights and obligations requires a thorough review of the policies to determine what coverages may apply. Property insurance is the most obvious source of coverage, but do not overlook auto policies, marine cargo policies, pollution policies and, for those facing potential third-party claims, liability policies. Also be aware that your policies may be subject to other requirements, such as statutory requirements, that could impact the terms of your coverage.
When reviewing your insurance policies, note any deadlines and calendar those dates with reminders set several weeks before the deadline. First, calendar the policy deadlines for you to give notice, file a sworn proof of loss, and file suit if you disagree with the insurance company’s coverage determination (note the deadline to file suit might be years in the future). Any tasks that must be completed within a “reasonable” amount of time should be done as soon as practicable. Missing deadlines can be fatal to an insurance claim.
2. Assess All Possible Coverages.
With respect to storm-related damages, “first-party” policies such as commercial property policies are the ones most likely to provide coverage for business or property owners’ own losses. Although residential policies frequently exclude flood loss, floods may be covered under commercial policies. Even when a flood is not an insured peril, there may be coverage when another, covered cause (such as a wind or power outage) contributes to or ensues from the loss, as in a fire caused by a flood-related transformer explosion.
In addition to providing coverage for physical damage to an insured’s property, many commercial property policies also include coverage for losses due to the interruption of the insured’s normal business activity due to damage to utilities, customers, suppliers, infrastructure and other critical, or dependent, properties. These extended coverages may apply even if the insured’s own property was not physically damaged. For example, depending on policy wording, damage to certain suppliers or customers may result in covered “contingent business interruption” losses. This may be critical to businesses whose supply and customer chains are disrupted as a result of damage to and closure of transportation infrastructure, including roads, railroads and even intercoastal waterways.
Similarly, disruption of power and other utilities may trigger losses insured by service interruption coverage. As well, curfews, prohibitions against entry and physical obstructions to roads may trigger civil authority or loss of ingress/egress coverage. A thorough review of the insuring provisions is critical to determine whether, and the extent to which, such coverage may apply.
3. Place All Insurers on Notice.
Even if you have not yet identified all of your losses, or determined that a policy might apply, provide notice as soon as possible to any insurance company under whose policy you might seek coverage. Do not assume you do not have coverage. Give notice anyway. Notice is just that: notice to your insurance company that you might have a claim. It does not need to be too detailed at first, so there is no reason to delay in providing notice. Be sure to precisely follow the directions in each insurance policy regarding notice, and be aware that different policies might have different notice requirements. Pay close attention to your notice deadline, the person or organization you have to notify, and the required form of notice. Insurance brokers may be best positioned to provide the notice, so consider consulting with your broker for assistance.
4. Document and Mitigate Your Losses.
Carefully documenting losses, especially before you undertake any cleanup efforts, is critically important for evaluating the loss. This includes not only property that was damaged during the storm, but also any property rendered unusable in the days following the storm—for example, inventory exposed to moisture. Take notes and photographs. Keep a log of all actions taken. Track expenses for professional fees, mitigation and clean-up costs. Establish separate accounts to track losses. Save all repair receipts and other records of additional expenses made necessary by storm-related damage. Remember: Most phones have pretty good cameras in them; take pictures and otherwise document your losses. (But also remember: If you rely on your phone, make appropriate copies—make a “back up” of your records. Those photos won’t do any good if you lose them.)