Last week, Hurricane Michael devastated the Florida Panhandle. The hurricane was the third strongest to strike the United States and the largest to ever make landfall on the Florida Panhandle. Some of Florida’s most historic gulf coast towns, from Mexico Beach to Panama City Beach, were destroyed. Other towns and cities hundreds of miles inland were also ransacked by Michael. Damage from Hurricane Michael has been estimated to exceed $10 billion. These losses include both direct property damage as well as business interruption losses. Businesses hundreds of miles from the Michael’s path may experience lost revenue as a result of damage suffered by suppliers or customers whose operations were damaged by the storms.
As Florida businesses begin the process of cleanup and recovery in the aftermath of Michael, insurance must be a priority.
If you are a Florida business owner, the following are key steps you should take to ensure you take full advantage of the insurance you purchased to protect your business from catastrophic losses like Hurricane Michael.
- Review all insurance policies you have for your business and property. Take some time to go through your records to locate your insurance policies to assess your available insurance coverage. If you worked with an agent to secure insurance, ask the agency to send you copies of your insurance. As a business owner, you likely have “first-party” policies that provide coverage for losses including commercial property, marine property, and other business losses. While most first-party policies are written to include losses on an “all-risk” basis, you should examine the policy for exclusions for losses resulting because of hurricanes. Additional key insurance for hurricane losses for all types of businesses include:
- Business Interruption (BI) Insurance. Covers lost profits that a business would have earned but for the interruption of business caused by physical damage to, or loss of use of, property covered by the policy.
- Contingent Business Interruption (CBI) Insurance. Many businesses outside the storm’s direct impact will experience lost income caused by damage to the business’ suppliers and customers. Even if your business did not experience direct property damage, your property policy may provide CBI coverage for economic losses arising from supply chain disruptions such as inability to acquire goods or services from your suppliers, or an inability to deliver your products or services to customers.
- Service Interruption Coverage. Covers any loss or expense caused by interruption of utility services resulting from damage to a utility’s property.
- Civil Authority Insurance Coverage. Protects businesses from losses resulting from a government order restricting access to a business property or closing airports, roadways, bridges, or ports.
- Extra Expense Insurance Coverage. Covers expenses necessary to resume normal business operations and mitigate losses.
- Ingress/Egress Insurance Coverage. Pays for loss of business income caused by physical damage to property of others that prevents ingress/egress to your business.
- Cyber/Data Security Insurance Coverage. Covers losses arising from a network security breach that results in the unauthorized disclosure of confidential data. A company’s network security systems (or those of its venders) may be impaired or disabled during a natural disaster, making the company more vulnerable to cyber-attacks.
- Give Notice to your insurance companies as soon as you can. Insurance policies typically require the insured business to notify the insurer “immediately,” “as soon as possible,” or “as soon as practicable” after the insured becomes aware of a potential claim. Prompt notice to your insurance carriers is essential.
- Once it is safe to return to the property, document and record the extent of the damage. Take photographs and video of the damage and business interruptions. The more you can document and record, the better prepared you’ll be to make the appropriate claims. To ensure full coverage under BI and CBI insurance for lost profits, you should document the losses by maintaining proof of business performance prior to, during, and following the disaster, including (a) production and sales records; (b) records of cost of goods sold; (c) business forecasts and budgets; (d) inventory records; (e) cost accounting records; and (f) payroll records.
- Take steps to mitigate losses and protect property from further loss or damage. Policies require the insured to mitigate the physical damage and business interruption arising from a catastrophic storm. It is also equally important to communicate your efforts to mitigate damages and business interruption with your insurance company. Additionally, you should maintain all records of costs incurred to avoid or reduce the loss including (a) overtime records related to maintaining production at pre-loss levels; (b) price premiums and extra shipping charges to expedite delivery of machinery or inventory; (c) relocation costs; (d) costs incurred in the purchase of generator or replacement power; and (e) costs of notifying customers of a relocation or to maintain customer relationships during down-time.
- Document carefully your communications with insurers and their agents. Resolution of catastrophe claims can be slow. This shortage is caused in part by the high demand for adjusters following any hurricane. It is essential to keep timely, detailed records of all communications with insurance companies and their representatives to discourage delays in the resolution of your claim.
- Be cautious about internal and external communications about your claim. Businesses should be careful with what they say about insurance coverage in both internal and external communications with brokers, insurers, and their adjusters/agents. If litigation over insurance coverage becomes necessary, insurers may gain access to internal communications such as emails and memoranda regarding a business’s claims for insurance. How the loss is characterized in such communications may be used to deny coverage. An important principle is for the company to have one point of contact with the broker and with the insurer.
Retaining the right legal counsel for these kinds of claims can often be extremely important. Not everyone who suffered losses from this tragic hurricane will require the assistance of a lawyer, but we hope that residents and commercial property owners will seek the assistance of legal professionals to protect their rights when those rights are in question or being threatened.