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Hurricane Impacts – The Aftermath of Hurricane Florence

Large scale catastrophic events can have significant impacts to your business for many reasons. The most obvious is direct damage to your facilities, which can also result in impaired operations. However, there are many secondary issues which can have detrimental effects. Utilities (including power, water, sewer, gas, etc.) often become unreliable due to wind damage or flooding. Infrastructure can sustain damage, which impedes access to and from your facilities. Governmental or other civil authorities may issue orders which restricts access to your locations. Even if your business is not located in a catastrophe-prone area, you can be impacted if large customers or suppliers sustain damage which hinders their production.

Catastrophic conditions often trigger ancillary additional coverages that are included in many policies. Frequently these additional coverages have their own sublimits, specific deductibles or waiting periods. It is important to review your specific policy terms and conditions. The following discussion is not intended to be a comprehensive review of coverages, but rather provide an idea on what to look for depending on your circumstances.

Protection & Preservation of Property (Property Damage & Time Element) – frequently costs are incurred to temporarily protect your property from an impending threat (for example boarding up in advance of a hurricane). This may also cause a business to shut down, resulting in a loss of income. Issues to consider specific to this coverage may include:

  • The costs generally need to be spent on insured property due to an imminent threat from insured physical loss or damage and be considered temporary in nature.
  • If the event ultimately does not materialize, generally the deductible for the event that would have happened is what is applied to the coverage.
  • There may be a stipulated recovery time for Time Element losses (for example 48 hours before & after protecting property).

Ingress/Egress (Time Element) – there may not be access to your property due to damage to roadways, bridges, tunnels or other infrastructure. This may result in Time Element losses. Issues to consider specific to this coverage can include:

  • The prevention of access generally must be from physical damage of the type insured to property of the type insured and at an insured location.
  • Whether the damage needs to be within a certain radius of an insured location.
  • There may be a specific number of days that the coverage is afforded for or separate sublimit.
  • Whether access need to be totally shut off, or if partial impairment qualifies coverage.

Civil/Military Authority (Time Element) – authorities may restrict access to your facility, resulting in a Time Element loss. Issues to consider specific to this coverage can include:

  • The order must be from physical damage of the type insured at an insured location or within a specified radius from the impacted location.
  • There may be a specific number of days that the coverage is afforded for or separate sublimit.
  • Whether access need to be totally shut off, or if partial impairment qualifies coverage.
  • Whether there is a specified amount of time that the order must be in place (Waiting Period):
    • For coverage to apply, and is subject to a different deductible OR
    • Which serves as the deductible for this coverage

Service Interruption (Property Damage & Time Element) – your facility may sustain damage from a loss of incoming/outgoing gas, sewer, electricity water, refrigerant, etc. This may also result in a Time Element loss for operations which rely heavily on utilities for their processes. Issues to consider specific to this coverage can include:

  • Review exclusions to confirm if change of temperature or spoilage is covered specifically for Service Interruption (for operations where this may apply).
  • Does physical loss/damage of the type insured to property of the type insured apply or can any accidental event to the utility provider’s property occur to trigger coverage. Some policies require that a specified peril (i.e. wind, flood, etc.) damage the utility’s property before coverage applies. Additionally, damage to certain types of the utility’s property may be excluded (transmission and distribution systems for example).
  • The damage to the utility’s property may need to have occurred within a certain distance from your affected location.
  • Losses may be subject to a specified waiting period before coverage applies (24 hours for example). This measurement may be different between Property Damage (the length of time utilities are interrupted) and Time Element (the length of outage and the amount of time to resume normal operations). The waiting period can serve as a coverage qualifier with a separate deductible applicable or can be considered the deductible itself.
  • The insured may need to notify the utility of the outage (save this documentation in support of your claim).

Contingent Time Element – Even if one of your locations is not in an area affected by the storm, customers or suppliers critical to your operations can be damaged by a catastrophic event. These types of scenarios can become complicated quickly as the damage has not occurred to your property and you may have very limited control over the situation. Issues to consider specific to this coverage can include:

  • Generally, the customer/supplier must have been impacted by physical loss or damage of the type insured to property of the type insured and at a contingent time element location.
  • The definition of a contingent time element location should be reviewed closely to confirm the number of customer/supplier tiers included. Policies can consider only the first/direct tier, a specified number of tiers, or include all tiers.
  • There may be specific sublimits/deductibles for Contingent Time Element coverage, which can also be scheduled on a per customer/supplier basis.

Attraction Property (Time Element) – Your property can be spared from significant damage, but it may rely heavily on a nearby property, which you do not own or control, that becomes damaged (for example, a hotel which relies on guests being attracted to a nearby non-owned theme park). Issues to consider specific to this coverage can include:

  • Generally, the Attraction Property must have been impacted by physical loss or damage of the type insured to property of the type insured.
  • The Attraction Property may need to be within a specified radius from your location.
  • There may be a specific number of days that the coverage is afforded for or separate sublimit

Deductibles: Deductibles may seem like a relatively straight forward issue, but can quickly become complicated if there are multiple perils involved (i.e. flood & wind in a hurricane), several locations, or if they are calculated on a non-monetary basis. Deductibles can apply on a:

  • Per Occurrence basis-one deductible applies to all losses associated with the same event (no matter the number of locations involved).
  • Per Location basis – a separate deductible is applied to each location involved, even if more than one location is involved in an event.
  • Combined Property Damage/Time Element basis or separately for each coverage type.
  • Generally, only the largest deductible applies to a loss, unless it is otherwise specified in the policy.

There can be several different ways that deductible values are determined. Some examples are as follows:

  • Monetary Deductibles-a specific stated dollar amount.
  • Percentage Deductibles-generally a stated percentage in the policy is applied to the values present at a damaged location (Property Damage) or to the annual Time Element value that would have been earned (Time Element) to determine the monetary value of the deductible. Depending on policy wording, the percentage can be applied to all values combined or separately to each individual unit of insurance involved (Building, Stock, Contents, Time Element, etc.). Percent deductibles are often applicable to properties that are in high hazard wind or flood zones.
  • Day Equivalent (or Average Daily Value)-a stated number of days multiplied by the total daily Time Element value at the affected location (plus the proportion of the Time Element value at any affected interdependent locations).
  • Day Equivalent Contribution-a stated number of days multiplied by the Time Element value for which the damaged property contributes to the entire affected location (plus the proportion of the Time Element value at any affected interdependent locations). This deductible can have a significant advantage over the Day Equivalent when a location has a loss where only part of operations are affected. For example, consider a plant that has three lines; all which contribute to 1/3 of the operations’ value. If only one line is damaged, then the Day Equivalent Contribution deductible only applies to the Time Element value passing through the damaged line. This results in a deductible which would be 1/3 of the Day Equivalent, which considers the total Time Element present.

In an increasingly complex and interdependent marketplace, insurance claims can quickly become complicated and confusing-especially following a catastrophic event. Hays has the expertise to assist with navigating complex property damage and time element claims; with the goal of mitigating operational impacts and expediting the claims process.

Contact our claims team for assistance:

Emergency Claims Hotline

612-758-8551

1-844-239-4937

Email:

hurricaneclaims@hayscompanies.com

What’s Next After Hurricane Florence?

Hays is here to help. When trying to clean up the damage caused by a storm of this magnitude, it can be overwhelming to know where to begin. We have you covered with our dedicated disaster recovery team.

After receiving the official announcement from authorities that it is safe to return and you find you have sustained property damage or business interruption, you should:

  • Call Hays Emergency Claims Center at 844-239-4937 or email hurricaneclaims@hayscompanies.com
  • Record video or photograph of property damage.
  • Track all expenses you incur to mitigate your loss and continue business.
  • Exercise caution when inspecting damage. Do not try to inspect damaged utilities and appliances; contact a professional to do so.
  • Do what you can to prevent further damage to your property, (e.g., putting a tarp on a damaged roof), as insurance may not cover additional damage that occurs after the storm.
  • Secure Inventory – prior to a storm’s arrival, you should have compiled an inventory of all of your possessions at your home or business. If you did not create one, start as soon as possible.
  • File a Claim Immediately – it is in your best interest to file a claim as quickly as possible. Insurance adjusters may not be able to access the property right away, but it helps insurers to know where to look for damage and how to contact you in the coming weeks.

For additional information on how to stay safe after a hurricane, please visit: https://disastersafety.org/hurricane/after-a-hurricane-safety-tips/

Additional Helpful Links:

National Ocean Service Hurricane Florence Updates: Aerial photos taken by NOAA following the storm, which can be overlaid to pre-storm satellite imagery.  Depict where flooding has occurred.

North Carolina Department of Transportation: Map with affected roadway closures by region.

South Carolina Department of Transportation: Interactive map with Hurricane Florence conditions.

Duke Energy-North Carolina: Impacts to North Carolina power grid

Duke Energy-South Carolina: Impacts to South Carolina power grid

National Weather Service: https://alerts.weather.gov/

National Hurricane Center: http://www.nhc.noaa.gov/

Public Health Sanitation Division: http://www.wvdhhr.org/phs/disaster/index.asp

Hurricane Preparation and Recovery – Claims Guidelines

Hays is standing by to assist clients who have been affected by Hurricane Florence; including those with facilities that have been directly impacted or experiencing supply chain disruptions.

If this is an emergency, please contact our Emergency Claims Hotline at 1-844-239-4937 or via email at hurricaneclaims@hayscompanies.com

Hays has the expertise to support you with navigating the complicated claims process, which allows you to focus more of your time and energy on assisting employees, mitigating losses and restoring business operations.

We suggest the following three-phase approach to facilitate an efficient and successful recovery.

Phase I – Emergency Response
1. Notify Hays and your insurer of the loss as soon as possible.

2. Coordinate your loss response team and direct responsibilities for each individual. Typical parties which may be involved include the following: Risk Management, Finance, Operations, Supply Chain, Logistics, Third-Party Vendors, and your Hays Claims Consultant. We suggest appointing a singular direct point of contact with the adjuster (often the risk manager).

3. Establish accounting procedures for capturing loss activity (typically a separate accounting string to which all loss-related expenses are tracked).

4. Contact remediation contractor(s) to complete emergency repairs (water extraction/drying equipment). Protect buildings and equipment from additional damage by making temporary repairs. Restore service to fire protection systems as quickly as possible. Document conditions with photographs.

5. Evaluate and separate damaged from undamaged stock. Document with photos and retain all property for the adjuster to inspect. Create an itemized inventory of the property including type (SKU, make/model, S/N, etc.), description, quantity, disposition (undamaged, reprocess, dispose of) and price.

6. Create a recovery plan for re-establishing operations and mitigating business interruption. Typical options include the use of undamaged inventory on hand, outsourcing to sister facilities, implementation of additional shifts/OT, and rental of temporary alternate locations.

7. Review applicable leases (Landlord/tenant, leased machinery/equipment, etc.) for insurance requirements and notify third parties who may have an additional interest.

Phase II – Recovery and Claim Submission
1. Review of policy jointly with Hays to identify policy provisions and deductibles which may be relevant. Frequently there are special coverages, sublimits or deductibles that apply to hurricane-related losses.

2. Commence with reconstruction. This should be coordinated with the adjuster to ensure agreement on the scope of work and how invoices will be issued (competitive bid, agreed lump sum, or time & materials basis).

3. Track and document all loss-related repair expenses (emergency response, temporary repairs, reconstruction, inventories, etc.).

4. Identify and document loss-related issues that impair operations, which may include: direct physical damage at your location(s), infrastructure damage (bridges, roadways, etc.), utility interruption (sewer, power, gas, etc.), damaged facilities of customers/suppliers and orders issued by civil/governmental entities. For issues that do not originate at your location, confirm the specific cause and site where the damage occurred.

5. Prepare loss analyses demonstrating Business Interruption losses and Extra Expenses in a clear and concise format, in accordance with your insurance policy.

6. Prepare overall damage estimates and communicate potential loss exposures with the adjuster to ensure they understand the total impact to your business.

7. Submit claim(s) to your insurer including explanatory narrative, calculations and supporting documentation. Request advance payments from your insurer as necessary. It is essential to communicate timelines for payment expectation with the adjuster well in advance, to allow adequate time for evaluation and processing.

8. Continually monitor timelines for claim process and business recovery.

Phase III – Ongoing Activities, Adjustment, and Settlement
1. Respond to inquiries from your insurer and their representatives.

2. Direct timely and complete exchange of claim documentation. Analyze insurer’s evaluation/response to determine areas of difference and coordinate with Hays to strategically respond.

3. Prepare for and embark upon final claim negotiations and settlement with the insurer.

Please contact your Property marketing representative or the claims team at any time to discuss your claim and how Hays may be of assistance.

Emergency Claims Hotline

612-758-8551

1-844-239-4937

Email:

hurricaneclaims@hayscompanies.com