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When Disaster Strikes: Navigating the Claims Process

Author: Megan R Stell Date: October 29, 2012

Disaster Planning and RecoveryWhen a disaster strikes your city, you will at first be overwhelmed with concern about the welfare of your family, the future of your business and the seemingly mounting debt. Inevitably, however, the devastation caused by a disaster will raise a number of insurance coverage issues that you will need to address. Consider the following when it comes time to file and resolve your claim:

After the storm passes, call your insurance company.

At a minimum, you'll want to ask:

  • What types of damage are covered?
  • How long will it take to process my claim?
  • Will I need to obtain estimates for repairs?

Make temporary repairs.

While it’s OK to take steps to protect your property from further damage, you should hold off on making extensive permanent repairs until the claims adjuster (a person professionally trained to assess the damage) has visited your business and assessed the damages.  Make sure you save receipts for what you spend on repairs. 

Prepare for the adjuster’s visits.

The more information you have about your damaged property ––descriptions of as many items as possible, approximate date of purchase and what it would cost to replace or repair them––the faster your claim can be settled.

  • To substantiate your loss, prepare an inventory of damaged or destroyed items and give a copy to the adjuster, along with copies of any receipts. Don't throw out damaged items until the adjuster has visited. You should also consider photographing or videotaping the damage. If your property was destroyed, or you no longer have any records, work from memory.
  • Identify structural damage to your business and any supporting structures. Make a list of everything you want to show the adjuster, such as cracks in the walls and missing roof tiles. You should also get the electrical system checked. Most insurance companies pay for these inspections.
  • Get written bids from licensed contractors. The bids should include details of the materials to be used and prices on a line-by-line basis. This makes adjusting the claim faster and simpler.
  • Keep copies of the lists and other documents you submit to your insurance company. Also, keep copies of whatever paperwork your insurance company gives you and record the names and phone numbers of everyone to whom you speak.

Business interruption losses.

Many property policies cover income that is lost as a result of a disaster like Hurricane Katrina.

Flood damage vs. wind damage.

Most “all risk” business insurance policies cover damage caused by wind and wind-driven rain. Those same policies typically exclude damage caused by flood. Insurers may argue that properties damaged by wind, but later flooded are not covered or are only partially covered.

Recovery of attorneys’ fees and adjustment costs.

Some policies cover legal and accounting fees associated with presenting a loss to the insurance carrier, and even if such coverage is not afforded, many state laws mandate that recalcitrant insurers pay for a policyholder’s legal fees incurred to enforce coverage. Insurers often ignore such rights.

Overlapping coverage grants.

Business property policies contain numerous overlapping coverage grants often containing separate sublimits. The lines of coverage may include business interruption, contingent business interruption, extended business income, extra expense, civil authority, utility services, debris removal, expediting expenses and preservation of property. Understanding these different coverage options is essential. In the past, some insurers have categorized losses in a manner to minimize such coverage.

Civil authority.

Most policies cover losses resulting from an evacuation order. Some of these policies provide set time limitations on how long such coverage is afforded. Insurers will likely argue that once a civil authority time limit is met, covered damages cease, despite the fact that other overlapping coverage grants continue to provide coverage.

Appraisal.

Insurer delay is common with complex property loss claims. Many policies have provisions that allow the policyholder to force an appraisal to cut through disagreements on value related to both property damage and business interruption. Enforcing such obligations, however, may not be easy, given the overwhelming losses this catastrophe presents.

Specific legal rights under state law.

Louisiana,Mississippi and Alabama all impose penalties upon insurance companies for unfair or deceptive trade practices, triggered by an insurer’s improper handling of a claim.

After your claim has been settled and the repair work is underway.

Take the time to re-evaluate your insurance coverage. Was your business adequately insured? Did you have replacement cost coverage for all of your assets? Talk to your insurance agent about possible changes.

Disaster Preparation and Recovery for Small Business

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