Category Archives: Insurance Recovery

After Ida, A Look At Sandy’s Flood Insurance Lessons

This article originally ran in Law360 on October 1, 2021. All rights reserved.

Hurricane Ida once again exposed our nation’s severe vulnerability to natural disasters. One-hundred-year storms are now pummeling us on what seems to be an annual basis. The breadth of Ida’s impact was unique, however, leaving a swath of destruction from the Gulf Coast to the East Coast.

While floods are the nation’s most common natural disaster, less than 1 in 10 Americans are adequately insured against flooding, according to a study conducted by ValuePenguin.com in 2019. That same study revealed that although 91% of homeowners have homeowners insurance, only 7% have flood insurance.

But, those are just broad averages. The residents of those states most prone to flooding are much better protected. For example, as might be expected, homeowners in Louisiana and Florida are insured for floods at far greater rates than the average — 44% and 36%, respectively.

Unfortunately, that means that homeowners in other states are insured at rates much lower than the average. For example, homeowners in Pennsylvania and New York — two of the states hit hardest by Ida — are insured only at the rate of 1.7% and 4.6%, respectively.

The National Flood Insurance Program

Damage resulting from floods is typically excluded under standard property insurance issued to home and business owners. Those seeking insurance must purchase a separate flood insurance policy. Flood insurance is available through the National Flood Insurance Program, or NFIP, administered by the Federal Emergency Management Agency, and from many private insurers.

Congress created the NFIP in 1968. It makes federally backed flood insurance available in communities that agree to adopt and enforce floodplain management ordinances.

For the most part, flood insurance policies under the NFIP are issued by private insurers through the Write Your Own, or WYO, program, started in 1983. As of September 2020, 60 insurance companies participated in the WYO program. Those private insurers issue flood insurance policies and adjust flood claims on behalf of the federal government. In 2019, 88% of NFIP policies were issued through the WYO program.

Flood Insurance Claims Are Undervalued

Unfortunately, even those with flood insurance may still be up the proverbial creek without a paddle. FEMA publishes statistics that reveal systematic underpayments of flood insurance claims.

Using Superstorm Sandy as an example, nearly 144,400 policyholders filed flood insurance claims. When numerous problems, including fraud, were uncovered in connection with the adjustment of those claims, FEMA offered those policyholders an opportunity to have their claims re-reviewed.

Over 19,000 Sandy claimants took advantage of that opportunity. As of January 2018, 17,854 of those re-reviewed claims were resolved with the policyholder agreeing to accept the amount as adjusted by the insurer. Of those resolved claims, nearly 85% of the claimants received additional payments totaling $258,648,226 — or nearly $14,500 for each underpaid Sandy claimant.

Take a moment to reflect on those statistics. FEMA’s own internal re-review process revealed initial underadjustments in 85% of the flood insurance claims that were submitted in the aftermath of Superstorm Sandy. Based on that large sample, if every one of the 144,000 Sandy claimants had sought a re-review, the underpayments could have approached $2 billion.

But the evidence of underadjustments does not end there. If a Sandy claimant was not satisfied with the FEMA re-review, they were entitled to a third-party neutral review by, for example, a retired judge. Approximately 2,500 Sandy claimants requested a third-party neutral review. As of Dec. 14, 2017, 2,082 third-party neutral reviews had been completed.

In nearly 11.5% of those cases, additional payments were deemed due and owing. Total additional payments of $44,603,756 were paid in connection with those third-party neutral reviews or approximately $187,000 for each underadjusted claim.

But, there is still more. Sandy claimants that remained dissatisfied with the FEMA processes, including the re-review and third-party neutral review, were able to pursue litigation. Nearly 2,000 Sandy-related flood insurance cases were filed against NFIP insurers in the federal district courts of New York and New Jersey. As of February 2018, 1,631 have been settled, with checks issued totaling $164,320,515, or approximately $100,000 per claimant.

Lessons Learned

Those that have suffered, or may in the future suffer, a flood loss can learn several valuable lessons from the experience gained in connection with Superstorm Sandy, Ida and other recent natural disasters. Those lessons can be employed both before and after the next storm.

Before the Storm

Every homeowner, renter, business owner, nonprofit and public entity should reevaluate its need for flood insurance. Flood risks that were not apparent just a few years ago are all too real in today’s climate. You can determine if you are located in a high-risk flood zone by looking up your address on the FEMA Flood Map Service Center.

Even if your home or entity is not located in a high-risk zone, the purchase of flood insurance should be considered. No property has zero risk of flooding. Indeed, 25% of all flood insurance claims are made in low-to-moderate flood risk areas.

After the Storm

If loss is sustained by those who have not purchased stand-alone flood insurance, all is not lost. Often flooding is accompanied by other causes of loss that may be covered under more commonly purchased property insurance policies that otherwise exclude flood losses. All available insurance should be examined for potential coverage.

For example, much of the damage caused by Ida in the Northeast was by reason of wind as opposed to flood. Wind damage is typically covered under standard form property insurance policies, including homeowners policies.

By way of further example, after Hurricane Katrina, many businesses argued that flooding was not the cause of their losses. Rather, those businesses contended that their losses were caused by the failure of a negligently constructed levy system. While that argument was ultimately rejected in 2007 by the U.S. Court of Appeals for the Fifth Circuit in In re: Katrina Canal Breaches Litigation after extensive proceedings, it reveals how some creative thinking may uncover coverage where none was perceived initially.

When multiple causes of loss are at issue, however, anti-concurrent causation, or ACC, clauses are often implicated. ACC clauses typically provide that when a loss is caused by a combination of covered and excluded causes, the resulting loss will not be covered.

A typical ACC clause states: “We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.”

Insurers often take the position in denying coverage that ACC clauses remove coverage for wind damage if a flood happens at about the same time, which will likely be a serious issue in property damage claims resulting from Hurricane Ida.

Policyholders that suffer a loss after purchasing flood insurance should anticipate and be prepared for FEMA, NFIP insurers and private flood insurers to initially undervalue their claims. While that shouldn’t be the case, the experience after Sandy proves once again that insurers have a strong financial incentive to undervalue claims.

The experience after Sandy reveals further that an insurer’s initial adjustment should never be accepted without a critical review. Policyholders should remain vigilant in the face of an initial undervaluation of their flood insurance claim. Any avenue for further review and reconsideration should be pursued.

The most common issues of dispute in the adjustment flood insurance claims concern the scope of necessary repairs, the actual costs of those repairs and whether the claimed damage was preexisting.

While it shouldn’t be the case, often maximizing insurance recoveries can only be accomplished with the threat of, or the commencement of, litigation. Certainly, that was the lesson learned from Sandy, where successful litigants received an additional $100,000 on average.

Lee Epstein is a shareholder and chair of Flaster Greenberg’s Insurance Counseling and Recovery Department. He represents corporate and individual policyholders in recovering insurance in response to an array of hazards and catastrophic property and business interruption losses. He advises market leaders in the airline, chemical, construction, financial services, food, HVAC&R, packaging, retail and satellite television industries. Lee is currently litigating insurance coverage disputes throughout the state and federal courts of the United States. He can be reached at 215.279.9380 or lee.epstein@flastergreenberg.com.

Matthew Goldstein is a shareholder and member of Flaster Greenberg’s Insurance Counseling and Recovery and Litigation Departments, focusing his practice on complex commercial and corporate litigation in both state and federal courts. Matthew specializes in securing insurance recoveries for corporate and individual policyholders and representing clients in business disputes and financial litigation. He can be reached at 215.279.9392 or matthew.goldstein@flastergreenberg.com.

Déjà Vu All Over Again: Hurricanes Katrina and Ida and the Long and Winding Road to Insurance Recovery

By: Lee Epstein, Chair, Flaster Greenberg’s Insurance Counseling and Recovery Department

Hurricane Ida made landfall yesterday, exactly sixteen years to the day that Hurricane Katrina landed. Back then, I had just completed a trial in a small Parish next door to New Orleans. Fortunately, my flight home took off safely on Friday afternoon before Katrina hit the following Monday, August 29, 2005. I was spared the devastation suffered by so many along the Gulf Coast. But so many that I befriended lost so much.

Over the succeeding years, I’ve had many opportunities to revisit New Orleans and the surrounding area. I witnessed the recovery, reclamation and rebuilding of that vital community. It was slow and it was hard but it happened.

Beyond the personal toll exacted by Hurricane Ida, the property and business losses are projected to be among the greatest caused by a natural disaster. As the recovery efforts begin in earnest, this checklist is offered to assist those who are planning to submit an insurance claim for the property or business interruption loss suffered.

As Ida continues to ruble northward, the heartache is real and will continue. We’ve been down this road. It’s long, winding and exhausting. But we’ve made it through before and we will do so again.

For more information, please contact Lee Epstein, Chair of the Insurance Counseling and Recovery Department at Flaster Greenberg PC.

COVID Insurance Rulings Are Misinterpreting ‘Physical Loss’

A version of this article originally ran on Law360 on July 23, 2021. All rights reserved.

All-risks property insurance policies typically insure against direct physical loss of or damage to covered property.

If asked, pre-pandemic, whether a policyholder’s loss of use of property — in the absence of any structural alteration or destruction — constitutes insured direct physical loss of or damage to property, the answer would have been a qualified yes. Such an understanding was supported by the historical purpose of all-risks insurance, the ordinary meaning of the operative policy language and pre-pandemic case law.

Yet, in a spate of cases, decided in response to claims of business interruption insurance for COVID-19 losses, courts have held that the loss of use of property, standing alone, does not constitute insured physical loss of or damage to property. Those courts reason that the alteration or destruction of covered property is a necessary predicate to satisfying the physical loss of or damage to property requirement.

On July 2, the U.S. Court of Appeals for the Eighth Circuit in Oral Surgeons PC v. The Cincinnati Insurance Co. continued that trend in the first federal court appellate decision on this emerging issue:

The policy here clearly requires direct “physical loss” or “physical damage” to trigger business interruption and extra expense coverage. Accordingly, there must be some physicality to the loss or damage of property—e.g., a physical alteration, physical contamination, or physical destruction.

As posited in this article, the holdings in Oral Surgeons and the other recent COVID-19 insurance cases trending in favor of insurers fail to comport with the historical purpose of all-risks property insurance, the ordinary meaning of the salient policy language, and the majority of court holdings pre-pandemic.

Indeed, shortly after the Oral Surgeons opinion, on July 13, a Pennsylvania Common Pleas court embraced those very same precepts in Brown’s Gym Inc. v. Cincinnati Insurance Co., while ruling in favor of a policyholder:

Prior to the onset of the COVID-19 pandemic, courts throughout the country adopted the contamination theory in recognizing that the existence of odors, bacteria, and other imperceptible agents such as ammonia, salmonella, lead, e-coli bacteria, and carbon-monoxide, may constitute physical damage or loss to a property if its presence renders the structure uninhabitable or unusable, or essentially destroys its functionality.

Under the contamination theory adopted in Brown’s Gym and scores of other cases, the physical loss or damage requirement for recovering all-risks insurance is satisfied when a foreign agent, including a coronavirus, renders property uninhabitable or unusable, or destroys its functionality.

The Historical Purpose and Function Of All-Risks Property Insurance

The modern-day all-risks property insurance policy evolved out of the standard fire insurance policy developed initially in New York in 1866.The standard fire policy insured “against all direct loss or damage by fire.”The operative phrase made no reference to the term “physical”; property exposed to fire would always undergo a tangible, concrete and observable alteration.

The requirement that loss or damage be physical first appeared in marine cargo and inland marine policies in the 1930s and 1940s. Some have speculated that this requirement was added to clarify the underwriters’ intent that there was no coverage for intangible losses.

Whatever the reason, the “physical loss or damage” language was later incorporated into the all-risks property insurance policy when it was introduced in the 1950s.

As summarized by the New Jersey Superior Court in its 1986 opinion in Ariston Airline & Catering Supply Co. v. Forbes, all-risks insurance is special and designed to provide exceptionally broad coverage:

[A] policy of insurance insuring against “all risks” is to be considered as creating a special type of insurance extending to risks not usually contemplated, and recovery will usually be allowed, at least for all losses of a fortuitous nature, in the absence of fraud or other intentional misconduct of the insured, unless the policy contains a specific provision expressly excluding loss from coverage.

Thus, a policyholder is entitled to recover on a policy of all-risks insurance upon establishing a fortuitous loss, unless a specific exclusion applies. As the Seventh Series of the American Law Reports explained: “Under an all-risks policy, while the insured bears the burden of showing that it suffered a loss and that the loss is fortuitous, the insured need not demonstrate the precise cause of damage for the purpose of proving fortuity.”

Conditioning coverage under an all-risks policy on the policyholder also establishing that covered property was altered or destroyed, as some courts have held in response to COVID-19 claims, is contrary to the purpose of all-risks insurance — to provide coverage for fortuitous losses unless a specific exclusion applies — and to the ordinary meaning of the operative policy language.

The Ordinary Meaning of the Operative Policy Language

Interpreting the phrase “direct physical loss of or damage to” in a manner that requires policyholders to plead and prove the actual structural alteration of property is not supported by the ordinary meaning of the operative policy language.

The term “physical” is defined by the Oxford English Dictionary as “[r]elating to things perceived through the senses as opposed to the mind; tangible or concrete.”

Thus, as stated by the Superior Court of New Jersey, Appellate Division in its 2004 decision, Customized Distribution Services v. Zurich Insurance Co., the term “‘physical’ can mean more than material alteration or damage.”

Indeed, according to the Tort, Trial and Insurance Practice Law Journal, “an insured can suffer a physical loss of property through theft, without any actual physical damage to the property.”

“Loss,” in turn, is defined as “[t]he fact or process of losing something or someone” or “[t]he state or feeling of grief when deprived of someone or something of value.”And, “damage” is defined as “[p]hysical harm caused to something in such a way as to impair its value, usefulness, or normal function.”

When its constituent terms are so defined, the phrase “physical loss of or damage to” means the tangible or concrete deprivation of something of value or when the value, usefulness or normal function of something is impaired. The value, usefulness and normal function of property is tangibly impaired whenever an insured is deprived of its use, irrespective of whether the property has been structurally altered or destroyed.

The Pre-Pandemic Case Law

Courts throughout the country have long held that the alteration or destruction of property is not a prerequisite to finding direct physical loss or damage. As succinctly stated by the Minnesota Court of Appeals in its 2001 opinion in General Mills Inc. v. Gold Medal Insurance Co.:

We have previously held that direct physical loss can exist without actual destruction of property or structural damage to property; it is sufficient to show that insured property is injured in some way. In Sentinel, we noted that the function of a residential apartment building, to provide safe housing, was seriously impaired or destroyed by the presence of asbestos fibers, although the building itself did not suffer a “tangible injury.”

Shortly thereafter, in 2002, the U.S. Court of Appeals for the Third Circuit in Port Authority of New York and New Jersey v. Affiliated FM Insurance Co. also addressed this issue in the context of a loss caused by asbestos.

The Port Authority court held under New York and New Jersey law that “[w]hen the presence of large quantities of asbestos in the air of a building is such as to make the structure uninhabitable and unusable, then there has been a distinct loss to its owner.” Three years later, the Third Circuit followed the Port Authority holding in Motorists Mutual Insurance Co. v. Hardinger, a case governed by Pennsylvania law:

We predict that the Pennsylvania Supreme Court would adopt a similar principle as we did in Port Authority. Applying Port Authority’s standard here, we believe there is a genuine issue of fact whether the functionality of the Hardinger’s property was nearly eliminated or destroyed, or whether their property was made useless or uninhabitable.

Most recently, the Brown’s Gym court followed Port Authority, Hardinger and other pre-pandemic holdings in a case involving insurance for COVID-19 business interruption losses:

Under the “reasonable and realistic standard for identifying physical loss or damage” established in Port Authority and Hardinger for cases “where sources unnoticeable to the naked eye” substantially reduce the use of property, an insured may satisfy the “direct physical loss or damage” prerequisite for coverage if the invisible agent renders the property “useless or uninhabitable,” or the property’s functionality is “nearly eliminated or destroyed” by that source. In pre-COVID-19 case law, including the Western Fire Insurance decision cited by Port Authority and Hardinger, the requisite “physical loss or damage” was established when vapors, odors, fumes, and other contaminants from ammonia, carbon-monoxide, arsenic, salmonella, lead, and other nonvisual sources made property uninhabitable or unusable, or nearly destroyed or eliminated its functionality.

Under the contamination theory adopted in Brown’s Gym and other cases, both pre- and post-pandemic, the physical loss or damage requirement for recovering all-risks insurance is satisfied when a foreign agent, such as coronavirus, renders covered property uninhabitable or unusable, or destroys its functionality.

To be sure, there is case law going the other way.

For example, the U.S. Court of Appeals for the Eighth Circuit in the recently decided Oral Surgeons case, relied on two of its pre-pandemic decisions interpreting Minnesota law: Source Food Technology Inc. v. U.S. Fidelity and Guaranty Co. decided in 2006 and Pentair Inc.v. American Guarantee and Liability Insurance Co. in 2005.

Neither the Source Food nor Pentair decisions, however, may be as supportive of the insurers’ current position on insurance for COVID-19 claims as they might appear to be on the surface. Specifically, the courts in both Source Food and Pentair cited the contamination theory with approval.

In distinguishing the prior Minnesota state court holdings in General Mills and Sentinel — where physical contamination, but no structural alteration, of property was alleged and the court found that there was coverage — the Eighth Circuit reasoned that no physical contamination was alleged in either Source Food or Pentair and, for that reason the denials of coverage were upheld in those cases.

As reflected in Source Food and Pentair, and the cases employing the contamination theory such as Brown’s Gym, the physical loss or damage requirement may be satisfied when physical contamination causes the loss of use of property that is not otherwise altered or destroyed.

In all, the conclusion that a policyholder cannot recover business interruption insurance for COVID-19 losses unless it first satisfies the burden of establishing that covered property has been structurally altered, contradicts the purpose of all-risks insurance, the ordinary meaning of the operative policy language and pre-pandemic case law.

Lee Epstein is a shareholder and chair of the insurance counseling and recovery practice group at Flaster Greenberg PC.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

New York Asbestos Ruling Could Change Insurers’ Approach

A version of this article originally ran on Law360 on July 2, 2021. All rights reserved.

Although many companies that historically used asbestos in their products have gone bankrupt, there are still many that have managed to survive. How? In some — perhaps many — cases, the answer may be due in no small part to insurance.

But insurers looking to reduce their asbestos coverage obligations by demanding that policyholders contribute to defense and settlement costs may be shooting themselves in the foot if their policyholders can’t handle the financial burden.

In Liberty Mutual Insurance Co. v. Jenkins Bros., the New York Supreme Court recently held that Liberty Mutual had to pay 100% of all settlements against its bankrupt and dissolved insured, Jenkins Bros., even though its policies were in force for only part of the asbestos exposure alleged in the relevant underlying asbestos lawsuits.

The court held that Liberty was a real party-in-interest in the asbestos lawsuits because it agreed to defend and indemnify Jenkins Bros. when it issued the relevant liability insurance policies, and it was Liberty that appeared and negotiated asbestos settlements on behalf of its bankrupt and dissolved insured in those lawsuits.

As the real party-in-interest, the court reasoned Liberty could not pay only a pro rata portion of settlements based on the time Liberty’s policies were on the risk, leaving the plaintiffs to swallow the orphan share. And, in any event it, it was estopped from doing so because it was the one that actually negotiated the settlements.

The court, however, did not stop there. Perhaps more importantly and of broader application, the court stated that regardless of whether Liberty was a real party-in-interest in the underlying asbestos lawsuits, the pro rata allocation methodology would never be appropriate when the allocation would result in an orphan share being allocated to a tort victim due to gaps in coverage and a bankrupt defendant.

In such instances the all-sums, or joint and several allocation, methodology would apply, which would also result in Liberty paying 100% of settlements for Jenkins Bros.’ asbestos liability.

Finally, and also noteworthy, the court adopted the 2000 ruling of the New York Appellate Division, First Department in In re: Liquidation of Midland Insurance Co., which held that the trigger of coverage in a long-tail asbestos claim is the inhalation of asbestos fibers, or exposure — not manifestation of the disease or exposure in-residence, e.g., the period between last exposure and manifestation of the disease.

Not all asbestos defendants are global corporations that can be viably reorganized in bankruptcy. The Jenkins Bros. decision sheds light on what might ultimately happen when an asbestos, or other long-tail tort, defendant goes out of business and is eventually dissolved and wound up, or becomes completely defunct.

Consider the situation where a manufacturer is sued hundreds of times per year for injuries allegedly caused by exposure to asbestos in products it made decades ago. The cost to defend these lawsuits is substantial, as is the cost to pay settlements or, in some cases, judgments.

But this manufacturer has insurance coverage under its old occurrence-based general liability policies and the issuing insurers have stepped up — as they should — to provide the manufacturer a full defense and indemnity. In turn, the manufacturer is able to stay in business.

What happens if the insurers grow weary of their coverage obligations and seek to shift a portion of the cost to defend and settle cases to the manufacturer?

For example, assume one of the participating insurers is ordered into liquidation or the insurers wish to capitalize on a perceived advantageous development in the applicable law addressing how to allocate defense and settlement costs when the alleged asbestos exposure occurs partly outside the insurers’ policy periods.

Now our manufacturer must either sue to maintain a full defense and indemnity or negotiate a cost sharing arrangement where it must contribute to some degree. Either scenario will be a material drain on its financial resources.

Focusing on New York law for the moment, insurers and policyholders tend to take a very different view of how to allocate legacy asbestos liabilities when the alleged exposure occurred partly within viable policy periods and partly without.

Insurers typically argue the pro rata allocation method applies to both the duties to defend and indemnify except in a relatively narrow set of circumstances, such as when a policy contains a noncumulation or prior insurance clause. That means the insurers would only have to pay their fractional share of a loss that occurs during their policy periods compared to the entire period of loss, which can be lengthy, and the policyholder must pay for the remainder.

On the other hand, policyholders typically argue the all-sums allocation method applies, which means if an insurer’s policy is triggered, it must fully defend and indemnify the insured for the entire loss until its policy is exhausted, with no contribution from the insured — though contribution may be available from other insurers.

At minimum, an insurer must fully defend asbestos lawsuits even if settlements or judgments can be allocated pro rata among insurers and the policyholder.

Given these differing viewpoints, one can easily see that in practice businesses with legacy asbestos liabilities are put in a tough financial position when their insurers don’t agree to provide full coverage.

The court dockets in New York are replete with expensive, drawn-out fights between insurers and policyholders on these issues. On the other hand, if insurers contribute only a fraction to pay for asbestos liabilities, the business may not be able to afford the remainder.

The court’s ruling in Jenkins Bros. should make insurers think twice before looking to shed some of their asbestos coverage obligations.

If their policyholders go out of business, declare, or are forced into, bankruptcy, or eventually dissolve and wind up, the insurers may be left holding the bag — either as a real party-in-interest because orphan shares can’t be allocated to tort victims, or because the plaintiffs obtain an unsatisfied judgment against the defunct policyholder and sue directly under New York Insurance Law Section 3420.

Even worse, insurers could find themselves defending cases without the benefit and buffer of a viable business as the direct defendant — yikes.

The point is, even if there is a real dispute over how to allocate long-tail losses — and I favor the policyholder position — the Jenkins Bros. ruling should encourage insurers to meaningfully protect their policyholders and find a sustainable path forward — the way insurance is supposed to work.

As a corollary, the Jenkins Bros. decision may impact the mergers and acquisitions space for entities shouldered with legacy asbestos liabilities. Acquiring companies often see asbestos liability as anathema and may steer away from an otherwise strategic acquisition.

In short, they don’t want to be left answering the phone if the target goes belly up due to its asbestos liability — setting aside the actual likelihood and validity of this fear coming true. This sometimes knee-jerk reaction may be ameliorated if the entity that would ultimately be left answering the phone is the target’s old insurance company pursuant to Jenkins Bros.

However one chooses to view Jenkins Bros., it’s an interesting decision that could have far-reaching effects.

John G. Koch is a member of Flaster Greenberg’s Insurance Counseling and Recovery, Litigation and Environmental Practice Groups, focusing his practice on policyholder-side commercial insurance recovery and environmental law. His practice also includes commercial litigation, alternative dispute resolution, transactions counseling, contract indemnity disputes, supply chain disputes, and product recalls. He can be reached by emailing john.koch@flastergreenberg.com or calling 215.279.9916.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

Insurance Recovery Best Practices After a Natural Disaster: Checklist for Policyholders

Gather all applicable insurance policies.

  • Often a single loss can trigger coverage under multiple insurance policies.
  • Examine each loss through the prism of each policy to determine the potential for coverage.

Review each applicable insurance policy’s terms and conditions, including:

  • Notice requirements. Insurance policies typically require prompt notice of a loss or notice within a specified time period. 
  • Proof of Loss requirements. A Proof of Loss form is typically furnished by an insurance company and must be completed by an insured and submitted within the time limits set forth in the policy. The form requires the insured to set forth the amounts being claimed under the policy, among other things. Some policies require the submission of this information automatically (even if a Proof of Loss form is not furnished by the insurance company).
  • Coverages, Limits, Sub-limits, and Deductibles. Commercial property policies typically provide coverage for property damage to buildings and contents/business personal property, Business Income loss, Extra Expense, among other things. To the extent possible, losses should be categorized within these coverage “buckets” when they are submitted to the insurance company. Consider consulting professionals, including a forensic accountant to assist you in quantifying and categorizing losses.

Provide prompt notice.

  • It is an obligation, and it triggers the insurer’s duty to investigate and pay or deny.
  • Failure to provide timely notice could result in the forfeiture of insurance. 

Appoint a “Clerk of the Claim” to maintain a chronological record of all events pertinent to the claim (a “Claim Log”), including:

  • the date notice was provided;
  • the date and description of all mitigation efforts;
  • the date and description of all communications and events pertinent to the loss; (such as communications with insurance company adjusters), inspection dates and details (who inspected, what they inspected, when, and for how long); 
  • any admissions made by insurance company representatives.

Document the loss through photographs, documents and witness interviews. 

Mitigate. Insurance policies typically require the insured to protect property from further damage.

Seek assistance when needed. An insurance recovery attorney can help you navigate the claim process from the outset, so you can maximize recovery under your insurance policies. For more information on the contents of this alert, please contact Lee Epstein, Meghan Moore or any member of our Insurance Recovery Practice Group.

Click here for a printable one-page PDF version of this checklist

Insurance Recovery Best Practices After a Natural Disaster

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