Hurricane Helene struck Florida’s Big Bend region as a category 4 hurricane on September 25, 2024, and continued to move northeast. The storm caused widespread power outages and catastrophic damage across Florida, the Carolinas, Tennessee, Georgia and other states. It has brought life-threatening storm surges in its aftermath. Now, less than two weeks later, Hurricane Milton is making its way toward Florida’s western coast and threatens to cause additional catastrophic damage.
Takeaways
- Hurricane Helene caused catastrophic destruction across a broad swath of Florida, the Carolinas, Tennessee, Georgia and Virginia.
- Hurricane Milton is forecast to make landfall in Florida late on Wednesday or early Thursday morning and threatens to cause additional catastrophic damage across parts of Florida.
- Coverage for business interruptions caused by storms raise complicated insurance recovery issues.
- Policyholders should take key steps to maintain and maximize insurance coverage for Helene and Milton-related losses.
On September 25, 2024, Hurricane Helene struck Florida’s Big Bend region as a Category 4 hurricane, before moving north through Georgia and into Tennessee, the Carolinas and other states. Millions have lost electrical service according to PowerOutage.us and more than 100 people have been killed across six states. Due to the widespread devastation, credit rating agency AM Best estimates that the insured losses from Helene will be around $5 billion due to its large wind span and its track near Tallahassee, Atlanta and other inland urban areas. Hurricane Milton is forecast to make landfall in Florida late on Wednesday or early Thursday morning and threatens to cause additional catastrophic damage across parts of Florida.
Once business and property owners begin to recover from the storms, they should prepare to bring these losses to their insurance companies: Take stock of losses, plan their response, and examine their insurance policies and their recovery options. There will be many questions. How are we going to pay to repair damaged property? What is the quickest way to resume our business? Can we recover any of the profits lost when our business was interrupted or our customers’ or suppliers’ businesses were interrupted? Are there any government funds, such as FEMA assistance, available to aid our recovery?
Securing insurance proceeds and FEMA assistance is crucial to the recovery process. Time and immediate actions are a necessity. To help address some inevitable issues, and to assist with the initial insurance claim and FEMA application processes, we provide the following initial guidance.
1. Obtain and Review Your Insurance Policies.
We say this all the time. But it is incredible how few companies are actually prepared after disaster strikes. 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. Your policies may also be subject to other requirements, such as statutory requirements, that could impact the terms of your coverage.
While insurance brokers are a tremendous resource, in times of crisis, it’s important to do the work yourself because, let’s face it, no one knows your business better than you. But it’s also important to get advice from qualified coverage counsel on the law and legal interpretations surrounding insurance policies and claims.
When reviewing your insurance policies, note any deadlines and calendar those dates with reminders set several weeks before each 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 as close as one year away). 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. Get extensions when needed—better to be safe than sorry—as most insurers will gladly provide them.
2. Assess All Possible Coverages.
For 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, flood may be covered under commercial policies. Even when flood is not an insured peril, there may be coverage when another, covered cause (such as wind or power outage) contributes to or ensues from the loss, as in a fire caused by a flood-related transformer explosion.[i] It is therefore critical to carefully review your coverage with qualified counsel.
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 caused by the property damage.[ii] Additionally, some coverage extensions 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. While regular business-interruption insurance provides coverage for profits lost as a result of physical damage to the insured’s property, contingent business interruption protects the insured against the consequences of supplier’s or customer’s problems.[iii] 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 intracoastal 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 your losses, or have 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. Insurers frequently take the position that the failure to provide timely notice is a condition precedent to coverage and seek to deny coverage on the basis of late notice.[iv]
Notice does not need to be too detailed at first, and 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, but coverage counsel should be consulted to ensure that the wording legally complies with the contractual requirements and doesn’t inadvertently walk you headlong into an exclusion. Brokers and coverage counsel should work hand-in-hand with you.
4. Document and Mitigate Your Losses.
Insurers frequently argue that it is the policyholder’s burden to prove up the availability and amount of coverage.[v] Therefore, carefully documenting losses, especially before you undertake any cleanup efforts, is critically important for evaluating the loss. This process 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. If the storm prevented you from accessing your business premises, document the obstruction. 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 backup of your records. Those photos won’t do any good if you lose them.) When in doubt, take a picture of damaged property in place before throwing it out.
You may also have an obligation to preserve and protect the property from further losses, including mitigating additional damage. Because such steps are required, mitigation expenses are covered under property insurance policies. For example, if a building is flooded, policies require the insured to take necessary steps to dry out flooded areas, and therefore they provide reimbursement of mitigation expenses, subject to certain limits. Lastly, the insurer may have salvage rights to damaged property and stock, so it is important to preserve any salvageable property to the extent possible.
Open lines of communication with your insurer regarding the disposition of any property—particularly valuable property—is better. But in some cases, life safety and protection of property requires the property be thrown out. That’s usually OK, as long as you document the damage and the reasons it had to be discarded.
5. Detail Your Business Interruption and Contingent Business Interruption Claims.
Business interruption coverage reimburses insureds for lost profits during the time that the business was interrupted because of an event (like a storm). Contingent business interruption provides coverage for business interruption losses due to damage to customers or suppliers. The biggest challenge in securing coverage for either of these types of insurance is valuing and documenting the loss.
Business interruption is the most highly disputed aspect of insurance coverage following a major catastrophic event even in the otherwise best of times. Some states hold that the policyholder has the burden to prove up the amount of business interruption coverage to which it is entitled. This includes proving that the monetary losses resulted from the suspensions of operations due to the hurricane.[vi] To make such a showing, it’s crucial to keep detailed records documenting when and how your business was interrupted. Policyholders should collect and document information such as historical sales data, sales forecasts, profit and loss statements, and industry trends and be prepared to provide such information to their insurers. And it’s usually necessary to get a qualified forensic accounting firm involved alongside coverage counsel to ensure the loss is properly measured and documented. Having coverage counsel involved early on in the process helps to not only ensure you’re getting the right legal advice, but it helps to protect communications under the attorney-client privilege and work product doctrines.
6. Engage Experts.
It is usually prudent to engage professional claim consultants, such as forensic accountants, particularly where you have business interruption loss. Additional experts may be needed to model the unique financial aspects of your business. Their professional fees and other mitigation expenses are frequently covered under property policies, subject to sub-limits. Usually, public adjuster fees are not covered. Some policies cover your internal costs for preparing the loss, so read the policy carefully and track your own time which, as claims drag on, can become very significant.
As mentioned, it’s also a good idea to retain an experienced insurance coverage lawyer, not just for when you need an advocate, but also to help you protect the privileged nature of your communications and to avoid many of the traps for the unwary in presenting your insurance claim.
Counsel may work in the background, without revealing their involvement to insurers. Insurers do the same thing!
Cooperate with the insurance company’s adjuster, but don’t forget that the adjuster works for the insurer—not for you. If you need an advocate, hire your own.
7. Follow the Policy to Preserve the Claim.
After notice of loss, most property policies also require that the insured later submit a signed sworn “proof of loss” to catalog the damages. Although this is usually done after reaching agreement with the insurer on the amount of the insured claim, policies sometimes require the insured submit a signed sworn proof of loss within a fairly short time after the loss, such as within 90 days. Insurers are usually amenable to extending these deadlines if requested, but make sure that any extensions are memorialized in writing. In addition, insureds must also preserve and protect the property from further losses, including taking steps necessary to mitigate (or minimize) additional damage, including business interruption.
8. Government Funds Might Be Available for Non-Profits Providing Critical Infrastructure and Essential Services.
Most people know that FEMA frequently provides funds to state and local governments and individuals. But FEMA and other government-based programs are also potentially available for certain not-for-profit organizations that provide critical infrastructure and essential services. Critical infrastructure and services include: hospitals and other medical-treatment facilities, fire, police and other emergency services, power, water and sewer utilities, educational institutions, libraries, museums and zoos, community centers, senior citizen centers and day-care centers. The program and application process can be complicated and daunting—and strict time limits apply. But a successful applicant can see FEMA reimburse no less than 75 percent of the eligible costs for emergency protective measures and permanent restoration costs, including debris removal and infrastructure repair or replacement. FEMA does not, however, pay for business interruption losses, and grant recipients must reimburse FEMA for any benefits that are duplicated by other sources such as insurance.
As destructive and disruptive as this weather event may be, by following these tips, businesses should be best-positioned to recover.
Pillsbury’s Insurance Recovery & Advisory Group is a nationally acclaimed, market-leading policyholder-side insurance group within one of the most respected global law firms headquartered in the United States. Pillsbury lawyers have extensive experience with property damage and business interruption claims in the wake of disasters, and they stand ready to assist with recovery efforts.
[i] See, e.g., Platek v. Town of Hamburg, 26 N.E.3d 1167, 1172 (N.Y. 2015) (explaining that a typical example of ensuing loss is fires sparked by gas emitted from pipes broken by the shaking of the earth, which is covered as ensuing loss, even though the policy excludes coverage for earth movement).
[ii] See Stamen v. Cigna Prop. & Cas. Co., 1994 U.S. Dist. LEXIS 21905, at *5 (S.D. Fla. June 13, 1994) (holding that measure of lost profits for business interruption claim includes “the increased profits that would have resulted had the [policyholder’s] stores been open immediately after the hurricane.”).
[iii] See CII Carbon, L.L.C. v. National Union Fire Ins. Co. of Louisiana, Inc., 918 So.2d 1060 (La. Ct. App. 2005) (holding that insured suffered contingent business interruption losses when a neighboring property to which it sold its product could not accept the product due to property damage).
[iv] See, e.g., 1130 West Atlantic Avenue LLC v. Scottsdale Ins. Co., 2021 WL 7502570 (S.D. Fl. Oct. 6, 2021) (holding insured’s 26-month delay in providing notice to property insurer for water damage caused by Hurricane Irma did not constitute “prompt” notice within the meaning of the policy).
[v] See In re Covington Lodging Inc., 635 B.R. 675 (N.D. Ga. 2021) (“It is the [insured’s] burden to prove the amount he can recover. The court may not guess the reasonable price for repairs under the policy.”).
[vi] See Dictiomatic, Inc. v. U.S. Fidelity & Guar. Co., 958 F.Supp. 594, 604 (S.D. Fl. 1997) (holding that insured must “prove an actual monetary loss as a result of the suspensions of operations due to hurricane Andrew” and the failure to do so “constitutes a failure to prove a prerequisite to recovery on its business interruption claim.”).
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