fairly typical type of insurance coverage that will reimburse an insured
for the normal profits that the insured
would have earned in the absence
of a tornado. Even if an insured
is able to keep its business going
after a tornado strikes, or resume it
shortly afterward, business interruption insurance may cover any
decrease in profits until the volume
of business returns to its normal, pre-tornado level. Recovery is limited to
the income lost while the property is
being repaired or replaced.
Even if a business does not experience physical damage as the result
of a tornado, coverage for lost profits may still be covered. “Contingent
business interruption” coverage protects against economic loss which
results when damage or destruction
of property belonging to a third party
causes an interruption to an insured’s
business. For example, contingent
business interruption coverage may
apply to losses due to a supplier’s
inability to deliver goods to an
insured or a customer’s inability to receive
goods from an insured after a tornado.
“Civil authority” coverage insures companies whose businesses were disrupted
by official government actions such as a
government-directed evacuation order
that prevents customers from shopping at
an insured’s place of business or prevents
employees from reporting for work at a
manufacturing operation. “Ingress/egress”
provides coverage for an insured’s lost
business income and extra expense when
the insured’s premises are inaccessible for
reasons other than an order of civil authority. The shutdown of public transportation
or the closure of roads that provide access
to the insured’s premises is an example.
Other coverage may be provided for utility service interruption and extra expenses
necessary for the insured to continue
to conduct its business operations. It is
important to carefully review the particular policy to determine what coverage is
provided.
ance policies require the insured to notify
their insurer after sustaining a loss. A policy
may obligate the insured to provide notice
to the insurer “as soon as possible” or “as
soon as practicable” after a loss or other
insured event. After a tornado, there may
be good reasons why an insured cannot
provide notice for some time. However,
an insured should give notice as soon as
reasonably possible. In addition, policies
often require that a signed proof of loss
form be submitted within a relatively short
time – often within 60 days after the loss
incepts or within 60 days after the insurer
requests a proof of loss unless an extension
is secured. If the insurer will not agree to
an extension, then the insured must keep
careful track of the deadline for providing
proof of loss. If necessary, submit a proof
of loss form before the deadline that provides as much information as reasonably
possible, while noting that the loss is continuing.
Those insured often have to cooperate
with the insurer in any investigation of the
loss, such as providing relevant books and
records and an opportunity to interview
witnesses and employees. They also may
have to submit to an examination under
oath by the insurer. They should be careful
not to release claims against other parties
A home in Joplin, Mo., was leveled by an EF- 5 tornado in
May 2011. A new house was built within five months.
3. What Should You Do After
a Tornado to Maximize Your
Insurance Recovery?
Those insured should be wary of poten-
tial time traps in their policy. Most insur-
against whom the insurer may have a
right of subrogation. In addition, they
should document property damage
and keep a detailed account of all
costs incurred to repair or to replace
property that has been damaged. Take
photographs and record videotape to
document property damage or loss.
Business interruption claims can
be particularly difficult to quantify
because they involve estimations and
expectations. Those insured will have
a better chance of recovery if they
can present concrete evidence to sub-
stantiate prior sales and an inability to
meet expected sales because of a tor-
nado. Therefore, they should do what
is necessary to preserve historical
sales data as soon as possible. Those
with insurance should also carefully
document all repairs and other finan-
cial hardships which result from a
tornado strike. Many businesses that
have sustained losses often commit to
a methodology of measuring business
interruption loss without or before
seeking the advice of counsel. Those
insured should take care to avoid errors in
the measurement of losses and not commit
to firm numbers until a complete loss
investigation and analysis is completed,
for which it is often necessary to consult
with legal counsel and expert consultants.
v
Nicholas J. Zoogman and Kenneth
Berline Trotter are attorneys in Dickstein
Shapiro LLP’s Insurance Coverage Practice.
Zoogman may be reached at zoogmann@
dicksteinshapiro.com, and Trotter may be
reached at trotterk@dicksteinshapiro.com.
