United States: Important Considerations for Preserving Insurance Claims in the Aftermath of Hurricane Katrina

Hurricane Katrina caused immense devastation to both life and property in the Gulf Coast region. To our clients, friends and families, we extend our sympathies for the losses they have suffered. As those affected begin to return and rebuild, they will face many challenges, such as lack of basic utilities, accessibility problems, and supply-chain disruptions due to impairment of infrastructure. Fortunately, many corporate policyholders will have insurance coverage available to assist them in recovering from the aftermath of this tragic event.

Obviously, insurance claims arising out of natural disasters such as Katrina can be very complex both in terms of sheer scope as well as the legal issues involved. However, to help prepare for the claim process, this Client Alert provides a basic outline of some key issues to keep in mind as restoration and recovery efforts begin.

In addition to coverage for physical structures, many first-party property policies also provide coverage for losses due to the interruption of normal business activity, such as lost revenue or profits. Further, such policies frequently include a number of "extensions of coverage" that provide even more protection for things such as "extra expenses," "service interruption coverage," "debris removal," "ingress/egress coverage," and "claim preparation costs." It is important to keep in mind that there may still be coverage even if the insured’s property was not physically impacted by the storm. Disruptions to certain suppliers and/or customers may result in "contingent business interruption" claims.

Insureds should, to the greatest extent possible, preserve all policies and other documentary evidence of coverage. Understanding the insured’s rights and obligations based upon a thorough review of the polic(ies) as soon as possible is also vital to maximizing the insurance recovery. If the polic(ies) themselves have been lost or destroyed because of the storm, copies should be requested immediately from the relevant carrier(s).

As the loss assessment phase begins, maintaining accurate records of all property that was lost or damaged is crucial. This includes property that was physically damaged or destroyed as well as property that may have been stolen in the days following Hurricane Katrina. In many catastrophe-loss situations, it is wise to engage professional claim consultants to assist in the loss assessment phase.

Notifying the carrier is one of the most important steps to preserving the insurance assets. After initial notice of loss, most property policies also require that the insured later submit a sworn "proof of loss" to categorize the damages. In addition to notice and proof of loss, insureds must also preserve and protect the property from further losses, including any necessary mitigation activities to prevent additional damage. Lastly, the carrier may have salvage rights to the impaired property, so it is best to preserve any salvageable property to the extent possible.

The Insurance Recovery group at Pillsbury Winthrop Shaw Pittman actively assists commercial policyholders with their insurance and risk management needs. Our firm has almost a century of experience helping clients obtain insurance recoveries in the wake of natural catastrophes, beginning with the 1906 San Francisco Earthquake and including last year’s Hurricane Ivan. For those in need of assistance with insurance coverage issues or claims in the aftermath of Hurricane Katrina, our Insurance Recovery Team stands ready to help.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.