Articles Posted in Hurricanes

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Quantifying a policyholder’s business interruption loss in the wake of wide-impact catastrophic events is a contentious issue, as methods of calculating business interruption losses vary by jurisdiction and policy language.

In “Hurricanes Helene and Milton: Evaluating Business Interruption Claims Following a Large-Scale Disaster,” Insurance Recovery colleagues  Joseph D. Jean and Amit Roitman continue their breakdown of policyholder best practices and insurer tactics as the full impact of Helene and Milton continues to be recognized and measured.

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milton-satellite-oct-9-960-300x200In the aftermath of two powerful hurricanes the process of assessing the damage and rebuilding begins. Businesses suffered billions of dollars in losses during hurricanes Helene and Milton, both in physical property damage and disruption of their business (i.e., lost profits). That is precisely why businesses purchase property and other commercial insurance—to indemnify them when disaster strikes. However, it is not uncommon for businesses to be unpleasantly surprised when they present a claim to discover that their insurers are unwilling to stand behind the full insurance coverage they promised. This is particularly so in the case of a substantial loss, and even more so in the aftermath of a wide-area catastrophe—such as a hurricane or other natural disaster—because such catastrophes have negative repercussions on insurers given the number of impacted policyholders.

This article highlights eight property adjustment and coverage issues. Understanding and being thoughtful about these issues now, including working with coverage counsel as appropriate, is critical to maximizing insurance recovery.

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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.

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The below checklist includes essential considerations and steps to take for property owners and businesses that stand to be affected by hurricanes.

  1. Make an inventory of risk pathways that could affect your business.
    • Identify essential supply chains, raw materials or parts providers and service providers to assess impact of potential disruptions.
      • Stress-test what would happen if each supply chain were interrupted.
      • Identify markets and customers whose disruption could affect your business.
    • Identify potential sources of liability if your business was impacted by the hurricanes.
      • Failure to meet contracted-for requirements
      • Failure to take adequate measures to protect customers from harm
      • Management failure to train employees to plan adequately for impacts, with concomitant claims by shareholders, regulatory authorities, customers, third parties
      • Other?
    • Identify other constituencies that might be affected by disruption to your business and risks associated with such disruption.
  2. Before any disruption occurs, identify and review insurance products that may respond.
    • First-party Property and Business Interruption insurance—for stoppage or slowdown of your own business, typically due to physical loss or damage to property
    • Contingent Business Interruption (CBI) or Supply Chain Risk insurance—for disruption of supply chains and, potentially, markets
    • Commercial General Liability (CGL) insurance—for liability to third parties arising from bodily injury or, potentially, personal injury or property damage
    • Directors & Officers (D&O), Management Liability, Errors & Omissions (E&O), and Professional Liability insurance—for claims that management personnel failed to take appropriate measures to protect the business or third parties
    • Event Cancellation insurance
    • Travel insurance
    • Workers’ Compensation insurance—adopt protocols and procedures to help employees make a record establishing work-relatedness in submitting claims
  4. Review business contracts to assess whether you are obligated to provide coverage to customers/clients, joint venture partners, contractors or others for risks outlined above.
  5. Review customer contracts to assess whether you are entitled to coverage provided by customers/clients, joint venture partners, contractors or others for risks outlined above.
    • If so, request copies of relevant insurance policies (not just certificates of insurance) and review them to assess potential coverage.