RISKVUE ARCHIVE | RISK BITES

Twelve Tips to Secure Insurance Coverage for the Katrina and Rita Disasters

By William G. Passannante

First, Hurricane Katrina. Then, Hurricane Rita. Insurance policyholders of all types, corporations, not-for-profit organizations, municipalities, individuals and others have been pummeled by the devastation caused by these hurricanes. Insurance companies, which should be riding to the rescue, already have begun circling the wagons to avoid paying claims. The hurricanes have caused massive nationwide dislocation of operations at many policyholder locations. While losses will be enormous, so too should the insurance recovery to cover those losses. We set forth below twelve tips to assist in making sure that policyholders obtain their fair share of the insurance paid for with their hard-earned premium dollars. Remember the first principle of insurance recovery—The purpose of insurance is to insure.

1. Find Your Insurance Policies.

The loss of life and the destruction of offices, records and files may make this task more difficult. If you know the names of at least some of your insurance companies, you should send a written request for your policies. If your insurance broker’s files are available, contact that office for policy copies.

Find primary, excess, local and global property insurance policies, as well as inland marine, multi-peril, fire and business owners policies that may apply to claims for property damage or business interruption.

2. Look to First-Party Insurance.

Most policyholders affected by the storms will have policies which promise to protect policyholders from losses suffered to their own property or expectations of profit. These policies are generally referred to as “property” insurance policies, but they come under other names, like “inland marine,” “fire” or “multiperil” insurance policies. Review all of your insurance policies for potential coverage.

3. Remember Property Damage, Business Income and Extra Expense Coverage.

Property insurance policies contain three basic types of coverage: property damage, business income and extra expense.

• Property damage coverage pays for physical loss or damage to buildings and business property—machinery, equipment, inventory, raw materials—as well as property of others in the policyholder’s control.
• Business income coverage pays for the policyholder’s loss of net revenue after expenses (profit), and the policyholder’s unavoidable continuing expenses during the loss period.
• Extra expense coverage pays for the policyholder’s costs in minimizing or avoiding a business income loss.

4. Coverage May be Available Without Direct Physical Loss or Damage.

Businesses which have suffered losses unrelated to direct physical damage to their property may still have coverage under property insurance policies. Check for:

• contingent business income coverage;
• contingent extra expense coverage;
• civil authority clause;
• ingress/egress coverage; and
• utility and communications service interruption coverage.

These and similar provisions may provide coverage for events that interfere with suppliers, or customers or prevent or hinder access to premises.

5. Give Notice.

If there is any possibility that you may have a claim, give notice now. Usually, your insurance broker should give notice under all policies that could be implicated. Have the broker send you a copy of the notice letter.

Give notice even if you do not have all the particulars of your claim. You can always supplement the notice later.

6. Secure Tolling Agreements With Your Insurance Company.

Property and business interruption losses often take months and sometimes years to resolve. Provisions limiting the time for you to provide “proof of loss” or to repair or replace damaged property often are extended by written agreement.

7. Insurance Policy Renewals.

Note that these catastrophes might cause insurance programs to lapse and create unintended gaps in a policyholder’s insurance coverage because of the loss of records.

8. Emergency Repairs and Preservation of Property.

Most early emergency efforts were performed by governmental agencies and officials. Insurance companies often argue that certain measures to mitigate losses should be taken.

9. Retain an Engineer or Consultant if There is Risk to the Structural Integrity of a Property.

10. Keep a Diary. Document All Loss Items and Emergency Expenses.

Insurance companies often question, reject and contest loss items submitted by policyholders for reimbursement. Keeping complete and accurate records is helpful to ensure that policyholders are properly reimbursed for the amount of their insurance claims. Video and photographs to document losses may also be helpful.

11. Consider Help in Submitting Your Claim.

Consider hiring a public loss adjuster or an accounting firm that specializes in property insurance coverage accounting. The insurance company will almost certainly hire a supposedly “independent” adjuster, and one or more accounting firms or law firms that specialize in representing insurance companies. Getting your proper insurance recovery often means being more prepared than the other side.

12. Consider Insurance Coverage Under Other Insurance Policies.

The impact of these disasters will be farreaching. Consider what notice (such as notice of an “occurrence” or notice of “circumstances”) might be given under liability insurance policies, including general liability insurance and errors and omissions insurance, in the event of claims by third parties. Also, determine if “additional insured” status under the insurance policies of others is available.

Finally, if your insurance company appears to be beating a retreat rather than riding to the rescue and paying your claim, remember the second principle of insurance recovery—Do not take “No” for an answer.

ABOUT THE AUTHOR

William G. Passannante is a senior shareholder in the New York office of Anderson Kill & Olick, P.C., co-chair of the firm’s Insurance Recovery Group and Vice Chair of the Professionals, Officers and Directors Liability Committee of the Tort and Insurance Practice Section of the American Bar Association. Mr. Passannante regularly represents policyholders in insurance coverage disputes. Mr. Passannante can be reached at wpassannante@andersonkill.com or 212-278-1328.

This article is reprinted with permission from the September/October 2005 issue of Policyholder Advisor, published by Anderson Kill & Olick, P.C.

riskVue | The webzine for risk management professionals
November 2005