Hurricane Irene’s path along the Eastern Seaboard has affected millions of people and exposed businesses to property loss, business interruption, and supply network disruption. Those affected by Irene should think about insurance coverage for their loss.
Commercial Property Insurance
In the event of a 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); and
- Provide the insurer with a signed and sworn proof of loss. The statement should include the time and origin of loss, description of damage, and the property’s actual and/or replacement value. An insured should usually provide proof of loss within 90 days; 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.
- Timely 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.
- If the insured intends to continue the business, it should resume all or part of previously-occurring business activities on the premises as soon as possible.
Contingent Business Interruption Insurance
In Hurricane Irene’s wake, many businesses will find 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 Irene 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 permanent 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.