Hurricane Sandy Commercial/Business Insurance Claims
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UPDATED: Nov 19, 2012
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Superstorm Sandy took a massive toll on the Northeast Coast, and as business owners attempt to pick up the pieces they will be faced with a potentially long and difficult process of collecting insurance money. Any owner of a business will need to carefully review their insurance policy before filing a claim to make sure they take full advantage of their coverage. The following tips can help business owners recovering from Sandy get the money they deserve from insurance carriers. If you have questions about your coverage or problems with your insurance company, fill out this form to consult with an attorney experienced in business insurance claims following natural disasters.
Note: Governors of New York and Connecticut made it a point to advise insurance carriers that Sandy was not considered a hurricane when it made landfall. This means that insurance carriers cannot charge hurricane deductibles for claims arising from storm damage.
Type of Loss
Business owners face a variety of different types of insurable losses after a destructive storm. Sandy’s impact on businesses will be felt in a number of ways, and each loss needs to be carefully tracked.
1. Property Loss: The damage to the physical property is the easiest to document, however business insurance claims need to be thorough. There are several different types of property affected by a storm: the building itself, business inventory, business personal property, rental properties owned by the business, and anything else that a business has an insurable interest in. Further, business insurance policies may include additional coverage for debris removal and rebuilding or relocating in the wake of the storm. Business owners affected by Hurricane Sandy should carefully consult their insurance policy to make sure that any and all costs associated with the loss and recovery of physical property are included in their claim.
2. Business Interruption: Property loss is sometimes only a small portion of the losses businesses face after storm damage. In addition to the damage caused by a storm, business owners face loss of business income due to interruption or forced relocation. Many business insurance policies have coverage for income lost due to the business being closed after a storm. Evaluating loss of income due to a storm can be difficult, so it is imperative that business owners are thorough immediately after the storm in order to properly value and calculate the profits lost during recovery. A business owner needs to carefully document all the damage, and be prepared to track any additional expenses and losses that occur because the business is not operating. Most policies will require a business owner to work quickly to mitigate the loss of business profits by either expediting repairs or cutting unnecessary costs until the business is able to re-open. Some business insurance policies include coverage for costs to temporarily rent space, or to relocate after the storm.
3. Miscellaneous Losses: In addition to the losses that are directly attributed to a business and its profits, there are a number of other issues that could affect a business after Sandy. Consider the following:
a. Interruption to delivery: If a business loses money because it either cannot deliver products to its customers or it cannot receive deliveries from critical suppliers, business insurance may be able to help. Some business insurance policies provide coverage for interruptions to the commerce businesses depend on.
b. Utility interruption: In the wake of Superstorm Sandy, millions of businesses found themselves without power, water, and gas services. Some business insurance policies provide coverage for losses that occur within a specific time after a utility goes out of service. What is required for this coverage to kick in is usually fairly specific, and the length of coverage is limited, but some policies may compensate business owners for losses directly related to utility failures.
c. Loss of Access: Whether it is impossible to reach a business, or a government authority has closed an area off, there may be a clause in a business insurance policy that extends the length of coverage to owners who cannot access their business.
Business insurance policies cover a variety of losses, both present and future, so owners need to be aware of exactly what their policy says before filing a claim.
Note: One thing to keep in mind is that insurance after a storm can become contentious depending on how the damage was caused. Since most business insurance policies specifically exclude coverage for water or flood damage, a business owner needs to document exactly how each type of loss occurred.
Types of Coverage
If a business insurance policy insures the owner for the Replacement Cost Value (RCV), then the policy will pay the full value to replace anything that is lost. This type of coverage is usually more expensive, but can avoid hassles during the claim process.
A business owner with Actual Cash Value (ACV) coverage will need to work with the insurance agency to determine how much the items damaged were worth at the time of the storm. This means that each item must be properly valued considering depreciation. During the claim process, the insurance adjuster will use an established set of tables to determine the depreciation of an item based on what it is, how old it is, how much it is used, and what condition it is in. Business owners must be sure they understand how the insurance company is valuing a depreciated asset, and be prepared to challenge if the full value is not recognized.
In the wake of Sandy, insurance adjusters will be overwhelmed with claims, so thorough depreciation calculations may fall by the wayside. If a business owner has an ACV policy, they need to double check the value the insurance company assigns an asset before accepting a settlement.
Steps to Follow After Sandy
Armed with knowledge about business insurance claims, a business owner needs to be aware of a few key steps that they should follow in the wake of Superstorm Sandy:
1. Document EVERYTHING: The damage done after Sandy will be extensive, and it is critical that any business owner filing a claim document their losses thoroughly. It is a good idea to use a video camera and walkthrough the damage to show the extent of the loss of physical property, and to make sure that any future business transactions and costs are accurately recorded.
2. Review the Business Insurance Policy: As explained, there are a number of different things that business owners need to know before filing a claim. All the information about coverage is in the policy.
3. Take Necessary Steps to Mitigate Losses: Often, business insurance policies will limit how much damage they pay for after a disaster. Business owners need to make sure they know to what extent they are responsible for mitigating the losses they face before insurance pays out. This step should be done only with full knowledge of what mitigating steps the insurance company or the law requires – a business owner who conducts repairs too fully without first allowing an insurance adjuster to review the damage may lose the opportunity for coverage.
4. Keep Track of Every Communication: During the course of an insurance claim, there may be several communications by phone, email, or in person. Business owners need to make sure they keep records of every communication, and get any promises made put into writing.
Note: Business owners DO NOT need to accept any decision by their insurance company. If a business owner feels that coverage has been unfairly denied or a settlement is unreasonably low, they are free to pursue legal action to recover a fair payout.
The information in this blog is courtesy of attorneys Robert Scott and Gerry Goldsholle of Advocate Law Group, representing commercial property and business owners in insurance claims nationwide for over 30 years.