{"id":894875,"date":"2018-09-13T14:35:19","date_gmt":"2018-09-13T20:35:19","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=894875"},"modified":"2018-09-13T14:35:19","modified_gmt":"2018-09-13T20:35:19","slug":"wind-flood-storm-surge-pick-peril-carefully","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/wind-flood-storm-surge-pick-peril-carefully\/","title":{"rendered":"Wind, Flood or Storm Surge: Pick Your Peril Carefully"},"content":{"rendered":"

Geoffrey Greeves | It Pays to Be Covered<\/a> | September 4, 2018<\/p>\n

A catastrophic loss, such as a hurricane strike, can force any company out of business,\u00a0even if it is insured<\/em><\/strong>. Although a business does not suffer any direct physical damage to its facilities, fickle natural disaster events can disrupt a company\u2019s entire supply chain, with ripple effects for vendors, suppliers, customers and second-tier providers of services or goods.<\/p>\n

With scorching August temperatures and the Atlantic hurricane season ramping up to full speed, the next months could, unfortunately, once again visit doom on vulnerable coastal areas, disrupting water or power services, causing evacuation and curfew orders, limiting travel, or halting operations either partially or fully. Securing insurance proceeds and FEMA assistance is crucial to business disaster recovery implementation.<\/p>\n

1. What caused my loss?<\/strong><\/h2>\n

A ubiquitous issue that arises with respect to natural disasters is how the peril is characterized \u2013 is it a hurricane, a \u201cnamed storm,\u201d a windstorm, a flood, or something else under your insurance policy? And what occasioned the particular damage at issue in the insurance claim \u2013 wind, wind-driven rain, storm surge, or flood?<\/p>\n

How the mechanism of loss is characterized has critical implications for insurance recovery. Policies commonly provide different amounts of available limits (and sub-limits) for different types of losses (e.g.,\u00a0State Farm Florida Ins. Co. v. Moody<\/em>, considering policy that limited coverage for damage caused by \u201churricane\u201d but that did not limit coverage for damage caused by \u201ctornado\u201d). And in some cases, policies may not provide coverage at all for losses that occurred as a result of certain causes\u00a0(e.g.,\u00a0In re Katrina Canal Breaches Litig.<\/em>, considering whether damage to property was caused by flood or by the negligent design and construction of levees; flood being an excluded peril under the policy, while negligent construction was covered). For example, a commercial property insurance policy may provide coverage for damage caused by wind or a named storm but exclude coverage for damage caused by flood\u00a0(e.g.,\u00a0Bradley v. Allstate Ins. Co.<\/em>).\u00a0 Complicating this analysis, policies often contain overlapping ill-defined concepts of \u201cflood\u201d vs. \u201cnamed storm.\u201d One may question whether a storm surge resulting from a named storm is treated as part of the named storm or as a flood.<\/p>\n

The net effect is that the scope and amount of coverage can vary dramatically depending on how the cause of loss is characterized up front to the carrier at the proof of loss stage \u2013 a critical juncture that is rarely straightforward and that usually benefits from thoughtful legal analysis. To hold carriers to their promises of disaster recovery, policyholders need to have a thorough understanding of the coverage provided under their policies, the relevant case law, and the mechanism or mechanisms that caused their loss. Properly determining the peril at the time of claim submission can allow a policyholder to achieve the benefit of its bargain with its carrier.<\/p>\n

2. What if there is no physical damage to my property?<\/strong><\/h2>\n

Assuming no physical damage to your insured premises, how does a business function without electricity, telephone, email or water service? Utility service interruption coverage (if purchased) indemnifies, for example, against loss due to lack of incoming electricity affected by damage from a covered cause (fire or named storm) to property away from the insured\u2019s premises \u2014 usually the utility generating station. This type of insurance is commonly referred to as \u201coff-premises power coverage.\u201d Service interruption coverage is not standard, or even common but a policy could be endorsed to cover any of the following:<\/p>\n