United States: Maximizing Insurance Recoveries For Hurricane Harvey Losses

The Situation: On August 25, 2017, Hurricane Harvey made landfall on the Texas Gulf Coast as a Category 4 hurricane—the strongest to hit the United States in more than a decade.

The Result: Property damage and business interruption losses are estimated in the tens of billions of dollars.

Looking Ahead: Texas policyholders with policies governed by Texas law may want to consider the impact of Texas HB 1774 on their property and business interruption claims.


With Hurricane Harvey having pummeled much of the Texas Gulf Coast, businesses will soon look to secure insurance recoveries for the estimated billions of dollars in property damage and business income losses left in its wake. While the safety and security of those affected should remain the first priority, the recent experiences of Hurricanes Katrina, Ike, Irene, and Sandy demonstrate that commercial policyholders who pursue coverage promptly and diligently stand the greatest chance of maximizing their insurance recoveries for hurricane-related losses. To that end, set forth below are five tips for your business to consider when seeking insurance coverage for Hurricane Harvey losses.

1. Collect and Review All Potentially Applicable Insurance Policies

When pursuing insurance for hurricane-related and other catastrophic losses, it is important to keep in mind that coverage may be available under several different types of insurance policies, including those outlined below. Accordingly, policyholders should obtain and carefully review all policies that may potentially respond with coverage, including those in which your business is identified as an "additional insured."

First-Party Property. Many businesses affected by Hurricane Harvey will look to the first-party property insurance included within their commercial insurance program. While referred to by a variety of names (e.g., "Inland Marine" or "Multi-peril"), commercial property insurance generally provides coverage for physical damage to or loss of use of business premises and other property (e.g., inventory, equipment, and machinery) owned, leased, or otherwise in the policyholder's care, custody, or control.

Business Interruption. Also commonly included within a company's commercial property insurance program, business interruption insurance is intended to protect businesses against income losses sustained as a result of disruptions to their operations due to a hurricane or other covered peril. Business interruption coverage frequently requires that the policyholder sustain "direct physical loss of or damage to" insured property, which can include incidents that render property uninhabitable or otherwise unfit for its intended use.

Contingent Business Interruption. Contingent business interruption coverage similarly provides insurance for financial losses resulting from disruptions to a business's customers or suppliers, usually requiring that the underlying cause of damage to the customer or supplier be of a type covered with respect to the business's own property.

Extra Expense. A policy's business interruption coverage may also provide insurance for "extra expense." Extra expense coverage indemnifies the policyholder for costs in excess of normal operating expenses incurred in order to continue operations while the business's damaged property is repaired or replaced. Covered extra expenses typically include the rental cost for substitute facilities, moving and hauling expenses, overtime wages, temporary labor, and advertising.

Service Interruption. Service interruption coverage provides insurance for property damage (e.g., spoilage of perishable goods) and business income losses caused when utility services (e.g., electric, gas, sewer, or water) to insured premises are interrupted. Service interruption coverage usually requires physical damage to the property of the utility company used by the policyholder, and it can sometimes require that the damage occur within a specified distance of the policyholder's own premises.

Civil Authority Coverage. Commercial property insurance policies often provide coverage for business income losses sustained when a "civil authority" prohibits or impairs access to the policyholder's premises (e.g., through evacuation orders, road and mass-transit closures, or the imposition of curfews). Depending upon its specific wording, a policy's "civil authority" coverage may or may not require that the access restriction result from "physical loss" and, if so, often does not require that "physical loss" occur to the policyholder's own property. Given that federal, state, and local governmental authorities have already taken a number of the above-referenced measures in response to Hurricane Harvey, "civil authority" coverage may respond with insurance for the attendant income losses of affected businesses.

Ingress/Egress Coverage. In addition to access restrictions caused by governmental authorities, the physical damage resulting from Hurricane Harvey may itself limit access to business premises. Ingress/egress coverage provides insurance for business income losses incurred when access to and from insured premises is severely restricted or prevented by such physical damage occurring in the vicinity of those premises (e.g., by flooding, felled trees, or downed power lines).

2. Timely Comply with Notice, Proof of Loss, and Suit-Limitation Provisions

While the particular notice requirements vary by policy and applicable state law, a policyholder's failure to timely meet these deadlines may unnecessarily complicate its insurance recovery, or, worse, insurance companies will argue that such a failure to meet these deadlines in a timely fashion results in a forfeiture of coverage. Commercial insurance policies typically contain two important notice requirements, which policyholders should take care to satisfy: (i) initial notice to the insurance company of the loss (usually "as soon as practicable" per the policy's terms); and (ii) filing with the insurance company a sworn "proof of loss" (often within 60 days of the loss-causing event or, under the laws of certain states, within 60 days of an insurance company's request). In addition, certain commercial insurance policies require a policyholder to commence litigation against its insurance company within 12 or 24 months following the loss.

Policyholders should accordingly err on the side of caution by promptly giving notice of a loss under all potentially applicable insurance policies. Texas policyholders with policies governed by Texas law should also be aware that Texas HB 1774, applicable to first-party property claims made on or after September 1, 2017, involving "forces of nature" (e.g., flood, hurricane, or rainstorm) may reduce the amount of penalty interest assessed against an insurer that violates the Texas Prompt Payment of Claims Act from 18 percent to 10 percent per annum.

In addition to timing, policyholders should also follow any instructions set forth in the insurance policy concerning the manner of notice (e.g., whether the notice must be in writing, to whom notice must be given, and what information initially must be provided).

Policyholders should also bear in mind that provisions specifying deadlines to supply a "proof of loss" or file suit can be extended by written agreement, provided the extensions are to a date certain and not indefinite. Indeed, because in a number of jurisdictions the filing of a proof of loss triggers a similar deadline for the completion of an insurance company's own claim adjustment, many insurance companies routinely consent to such extensions.

3. Document Your Property and Business Income Losses

In order to obtain full insurance reimbursement, it is essential that you keep a complete and accurate record of your losses. Policyholders should therefore immediately begin preparing a detailed and contemporaneous record of all property and income losses in support of their claims. This should include photographs and/or video of damaged or destroyed real property, equipment, and inventories, together with corresponding invoices and estimates for their repair or replacement. Similarly, any correspondence evidencing your business interruption loss (e.g., order and event cancellations, and the hurricane's impact on customers and suppliers) should also be preserved.

4. Document the Claims Adjustment Process

Policyholders should likewise maintain a complete written record of all claim-related communications exchanged with their insurance companies (e.g., claim submissions, responses to information requests, and any telephonic conferences held). Policyholders should also be sure to memorialize any insurance company inaction (e.g., missed deadlines, cancelled meetings, or late payments) as part of their claims correspondence. Doing so not only helps to facilitate the claims adjustment process, but it is often useful to policyholders in any subsequent insurance coverage litigation.

5. Assemble an Appropriate Insurance Recovery Team

Although many policyholders will interface only with a single "loss adjuster" acting on behalf of the insurance company, the loss adjuster is typically supported by a larger network of behind-the-scenes consultants (e.g., forensic accountants, engineering/construction experts, and outside coverage counsel) skilled in minimizing claim payouts. While policyholders are encouraged to marshal their available internal resources (e.g., in-house risk managers and accountants familiar with the business), the early engagement of experienced policyholder counsel, along with outside forensic accountants and public adjusters as needed, can help to level the playing field by ensuring that your claims are properly prepared and presented under available insurance coverage and applicable law.

By following the above tips with persistence (and patience), commercial policyholders will best position themselves to maximize insurance recoveries for their Hurricane Harvey losses.


Two Key Takeaways

  1.    Experiences in the aftermaths of Hurricanes Katrina, Sandy, and others indicate that commercial insurance policyholders who pursue coverage promptly and diligently maximize their chances of recoveries for hurricane-related losses.
  2.    Policyholders should review any and all possibly applicable policies for coverage, including those where their companies are identified as "additional insured."

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Peter D. Laun
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions