September 2, 2021
This year, like last, the National Oceanic and Atmospheric Administration predicts an extremely active hurricane season. As we write this alert, the Gulf Coast, Mid-Atlantic, New York, and New England regions are just now realizing the devastation Ida has left in her path.
Now is the time to ensure your insurance program is hurricane-ready. In this client alert, our insurance coverage team provides critical steps that you should take now to ensure that you protect your assets and maximize recovery in the unfortunate event of a hurricane claim.
Know Your Coverage: What Does Your Policy Say and Where Can It Be Found?
Obtain copies of your relevant property insurance forms and read them now. Knowing your coverage, even on a general level, will help you anticipate the immediate steps to take following a loss, including how to notify your insurer of losses to your covered property.
Policyholders must ensure they have the correct coverage in place for flood and windstorm-related damage. Commercial property policies in coastal regions, such as Florida, may exclude windstorm damage entirely, may limit coverage with a windstorm sublimit that is less than the policy’s overall limit, or may contain a high deductible. Some businesses have separate windstorm-specific policies meant to complement their commercial property insurance. Property insurers use similar methods to reduce coverage for flood damage, including sublimits, or exclusions that apply to storm surge.
Even if your business makes it through a storm without any significant physical damage, damage to your supply chain can lead to production slowdowns and delays that impact your bottom line. Further, evacuation orders and storm-related curfews may impede business operations or your customer’s ability to access your business. Because damage from a single storm can be catastrophic, policyholders must review their existing insurance programs to determine whether their coverage adequately protects them based on their unique business operations and overall risk profile.
In addition to windstorm and flood coverage, corporate policyholders should ensure that they have the following specific coverages in place before a storm hits:
Have an Insurance Response Team or Protocol in Place Before the Storm
Commercial insureds should confirm that they have the proper team in place before the loss to minimize down-time and maximize recovery efforts post-storm. This team should prepare a pre-loss inventory of insured assets in order to provide a roadmap for your insurer to adjust your covered loss, even if adjusters are unable to reach your property following the storm such as was the case in Puerto Rico and the U.S. Virgin Islands immediately following Hurricanes Irma and Maria.
To ensure you adequately capture losses post-storm, the team should set up a general ledger to capture all storm-related costs, expenses, and time — including costs incurred to mitigate pre- and post-storm losses. You should also designate one person or department for submission of all storm-related invoices, quotes, and other contracts. To the extent you have multiple locations, you should create a shared file to document physical damage, applicable evacuation orders, applicable curfews, power outages, supply chain disruptions, times of closing pre-storm and opening post-storm, and descriptions of mitigation efforts and extra expenses — such as purchasing a generator or renting other property to run your business while repairs are made. Collecting these facts in real time will help you later when you present your claim to the insurer.
Present Your Claim to Maximize Recovery
Following the storm, ensure your business takes all steps necessary to maximize recovery.
Property insurance policies require prompt notice of the loss. Failure to provide prompt notice will result in the insurer asserting various defenses to coverage. Further, providing prompt notice is critical to ensuring that your claim is adjusted promptly. Insurer workforces are stretched thin following major catastrophes. For example, Floridians filed approximately 909,000 residential property insurance claims following Hurricane Irma and businesses filed over 61,000 commercial property claims.1
Your notice should contain a basic description of the loss, including where, when and how the loss occurred, as well as your contact information. Your broker or agent can assist you in reporting the claim. After successfully reporting the loss, the insurance company will assign an adjuster to handle your claim.
Your policy likely requires submission of a proof of loss and may require that it be provided within a designated time period after the loss. Be aware of these deadlines now, so that you can request an extension of any deadlines, in writing, following the loss, if needed. In addition to any specific requirements set forth in your policy, you should use photographs, receipts, videos, and any other available records to substantiate your claim.
Specifically for policyholders with commercial operations, ensure that you have a team in place before a loss in order to minimize recovery time and avoid the frenzied competition for scarcely available expertise after the loss. This team should include forensic accountants and trusted contractors and engineers to provide estimates of repair costs and ensure that proposed repairs comply with any applicable building code.
Be sure to keep a log of all documents to and from your insurer, as well as a log of your phone calls or other communications with the insurer or insurance adjuster. Many states have enacted insurance or unfair trade practices statutes that require insurers to communicate promptly, including issuing prompt coverage determinations and paying undisputed amounts as soon as reasonably possible. Ensure that you keep a log of insurer communications, so that you have this timeline ready in the event you end up in litigation over your claim.
Specific policy terms and applicable law govern the existence and extent of your windstorm coverage. In addition, policies often include endorsements or exclusions that may expand or limit coverage. These may include sublimits on certain losses that limit the total available insurance for a particular type of damage (such as flood) or exclusions that bar all coverage for damages caused by certain risks, like flood, storm surge, earth movement, and others.
However, it is the insurer’s burden to prove that an exclusion applies. Courts interpret exclusions narrowly and, where found to be ambiguous, courts will often interpret the exclusion in favor of coverage for the policyholder.
Individual and corporate policyholders are best served by a careful analysis of the terms of their policies and the controlling law governing their insurer’s obligations, as well as precise documentation and presentation of their claim. From our extensive experience resolving insurance disputes over coverage for damage caused by Hurricanes Michael, Irma, Maria, Harvey, Katrina, Wilma, Charley, Rita, Ike, Andrew, and others, the Hunton Andrews Kurth insurance coverage team knows that the claims process can be difficult to navigate. Retaining experienced coverage counsel to help you analyze your policies is critical to understanding your rights, the insurance company’s obligations, and the smoothest pathway to getting your business back on track after a storm by maximizing your insurance recovery.