1 Recovering from IKE! Mike Thompson, CPA/ABV, CFE Slide 2 2
Only a Category 2 storm at land fall with sustained winds of 110
mph Estimated $12 billion dollar in insurable damage not including
flood (the third largest hurricane event and fifth largest
insurance event) Nearly 4 million people without power across seven
states in the U.S. 71 dead and between 200 & 300 missing Slide
3 3 Handle the claim with your agent (or broker). o Best when you
have a small claim (under $20k) and the policy is not complex #1
Pro It is free #1 Con You may not get all that is rightfully yours
under the policy Slide 4 4 Hire a Public Adjuster o Best when
policy issues are not in question. Usually works for 10% of claim
value, not hourly. #1 Pro You have an insurance expert that can
assist in fully valuing your claim #1 Con Could be expensive if
your loss is large Slide 5 5 Hire an Attorney o Best when claim is
complex, policy issues are in question, or policy is not clearly
understood. #1 Pro - You will get the best expertise and your claim
will be methodically laid out #1 Con Could be even more expensive
if goes to litigation (costs can be hourly or as much as 40% of
claim) Slide 6 6 Business Interruption Contingent Business
Interruption Extra Expense Civil Authority Service Interruption
Ingress/Egress Slide 7 7 Few generalizations about business
interruption endorsements can be made because the nature of the
coverage varies widely. In any given case, the particular terms and
conditions of the policy in question must be examined to determine
whether a specific business interruption loss falls within
coverage. Prot. Mut. Ins. Co. v. Mitsubishi Silicon Am. Corp., 992
P.2d 479, 481 (Or. Ct. App. 1999) Slide 8 8 the purpose of a
business interruption policy is to indemnify the insured for loss
caused by the interruption of a going business due to the
destruction of the building, plant or parts thereof. Quality
Oilfield Prods., Inc. v. Michigan Mut. Ins. Co., 971 S.W.2d 635,
638 (Tex. App. Houston [14 th Dist.] 1998, no pet.) Slide 9 9 Gross
Earnings Business Income Revenue Non-Continuing Costs Business
Income Continuing Costs Net Income Slide 10 10 Revenue Cost Slide
11 11 What is paid? o An estimate is paid How much income would
have been earned had no loss occurred? o The actual experience of
the business prior to loss. o The probable experience during the
period of interruption had no loss occurred. Slide 12 12 Tropical
Storm Allison o had no loss occurred o post-loss surge in business
cannot be used to offset losses Finger Furn. Co. v. Commonwealth
Ins. Co., 404 F.3d 312 (5 th Cir. 2005) Slide 13 13 A.Must be
direct physical damage to insured property caused by covered peril.
B.That physical damage must itself result in an interruption of
insureds business that causes actual monetary loss. C.The monetary
loss must occur during the Period of Restoration defined by the
policy. Slide 14 14 the loss caused by the interruption of a going
business Complete suspension v. partial suspension v. mere slowdown
Texas complete suspension is required Quality Oilfields Prod., Inc.
v. Michigan Mut. Ins. Co. Trend is (probably) away from complete
suspension Slide 15 15 This policy covers against loss of earnings
from necessary interruption of business caused by damage to
property, by the perils insured against, of any supplier which
results in the inability of such supplier to supply an insured
location. Archer-Daniels-Midland Co. v. Phoenix Assur. Co. of N.Y.,
936 F. Supp. 534, 540 (S.D. Ill. 1996) by the perils insured
against o Must be covered cause of loss under insureds policy o
Need not be covered loss under property owners policy Slide 16 16
Regular business-interruption insurance replaces profits lost as a
result of physical damage to the insureds plant or other equipment;
contingent business-interruption coverages goes further, protecting
the insured against the consequences of suppliers problems. Regular
business-interruption coverage did [AMD] little good in 1993, for
the flood largely spared its plants, but contingent
business-interruption coverage was just the ticket. Archer Daniels
Midland Co. v. Hartford Fire Ins. Co., 243 F.3d 369, 371 (7 th Cir.
2001) Slide 17 17 This policy covers the necessary Extra Expense
incurred by the Insured during the period of restoration in order
to continue as nearly as practicable the normal operations of the
Insureds business following a covered property damage loss.
Travelers Indem. Co. v. Pollard Friendly Ford Co., 512 S.W.2d 375
(Tex. Civ. App. Amarillo 1974, no writ) Extra Expense is defined
as: o the cost incurred during the period of restoration over and
above the total cost that would normally have been incurred to
conduct the business had no loss or damage occurred. Slide 18 18
Examples o Renting temporary space o Security o Overtime wages o
Meals Slide 19 19 Kingwood lack of basic utilities this Policy is
extended to cover the actual loss sustained caused directly by the
interruption of the specified incoming services Gas, Water,
Electricity, Telephone[,] by reason of any accidental [occurrence]
Prot. Mut. Ins. Co. v. Mitsubishi Silicon Am. Corp., 992 P.2d 479,
483 (Or. Ct. App. 1999) Slide 20 20 Covers: o Insureds own property
not damaged, but BI loss due to order of civil authorities because
of damage to other property. Slide 21 21 Loss of Ingress or Egress:
This policy covers loss sustained during the period of time when,
as a direct result of a [covered] peril, ingress to or egress from
[covered] property is prevented. Fountain Powerboat Indus., Inc. v.
Reliance Ins. Co., 119 Supp. 2d 552, 556 The court cannot find, and
neither party has provided, any case in any jurisdiction that
interprets an ingress/egress clause Loss sustained due to the
inability to access the Fountain facility and resulting from a
hurricane is a covered event with no physical damage to the
property required. Slide 22 22 Requirements for Ingress/Egress
Coverage: Ingress or egress must be wholly impaired. Not sufficient
that ingress or egress is simply more difficult. The event
preventing ingress/egress must be an insured peril. Lack of
ingress/egress must be the cause of the BI loss. Physical damage
may not be required policies differ. Slide 23 23 In summary
Consider actual claim. BI from a downtown Houston business due to
Tropical Storm Allison. Slide 24 24 Getting it Right from the Start
o Good Policies Good Claim Outcome o Bad Policies Bad Claim
Outcomes ADM case - $19,000, premium savings cost $50,000,000 in
uncovered losses Result = ($49,981,000) Understand and thoroughly
review your coverages with your broker. Make sure your Statement of
Values properly reflect both all potential values including B. I.,
Contingent B. I., Extra-expense, etc. Consider your future payroll
burdens and outstanding contractual requirements in the event of
the interruption. Slide 25 25 Not Like Liability Claims Initial
Steps o Notify Carriers (followed by formal proof of loss) o Assess
Coverage and determine if you need experts o Assess and Quantify
Losses o Ask for advances! o Remember You drive your loss, not the
broker, not the insurer, not the adjuster Slide 26 26 Types of
Loans Available o Home Disaster Loans o Business Physical Disaster
Loans o Economic Injury Disaster Loans (EIDLs) Mitigation Loans
Slide 27 27 Business Physical Disaster Loans Economic Injury
Disaster Loans AmountsUp to $2 million Interest Rates No credit
available4% Credit available elsewhere 8%N/A Length of Loan No
credit availableMaximum of 30 years; based upon ability to repay
Credit available elsewhere Maximum of 3 years; based upon ability
to repay N/A CollateralRequired for loans greater than $14,000
Required for loans greater than $5,000 Slide 28 28 Uninsured or
otherwise uncompensated disaster losses only Certain ineligible
property Previous noncompliance with SBA loans Insurance
requirements Slide 29 29
