The California wildfires destroyed many houses and businesses. This advisory provides strategies to prevent insurers from denying coverage to homeowners and businesses that cannot protect themselves against natural disasters. Proactive insurance coverage decisions may be necessary to restore homes and businesses and navigate financial challenges following such disasters.
Insurance Policies That May Matter
Affected homeowners and companies must rapidly assess all relevant insurance policies, including excess-layer plans, and follow loss notification processes. Most people and businesses have first-party property insurance to protect their valuables from fire, smoke, and other damage. Specialty coverages for specific scenarios often supplement this insurance.
Business coverage often includes:
Damage to commercial property, including computers and machines.
Business interruption (BI) occurs when a business loses earnings or revenue due to property damage or loss of use caused by an insured peril for a set time or until normal business activities resume.
Contingent BI protects against revenue loss from supplier, customer, or business partner property damage.
If roads or bridges leading to the insured property are blocked or damaged, use or access is restricted for a specified duration.
Civil authority coverage covers losses caused by a civil or government order that disrupts business.
Service interruption insurance often covers losses connected to electricity or other services or supplies.
Extra costs to resume business or reduce losses.
To ensure the policyholder is maximizing coverage while filing an insurance claim, policy provisions should be examined against potentially applicable insurance coverage law. Many property insurances are “all risks” but have exclusions, sublimits, or restrictions for certain perils or circumstances. Some coverages have policy restrictions and deductibles that limit coverage. Proper policy wording analysis is essential for the insured to maximize coverage.
Practical Ways to Increase Coverage
When filing an insurance claim for natural disasters like the California wildfire, policyholders need to consider several steps:
Actively Notify Insurers
Most insurance companies have claim presentation procedures and deadlines. If you don’t comply, insurers may limit or refuse coverage for a policy-covered claim. Policyholders should carefully analyze notice requirements, especially clauses requiring notice of a loss or incident that may or may not lead to a claim. Policyholders may benefit from early notification of loss mitigation resources and coverages.
Early Coverage Assessment
To identify flaws that may affect claim presentation, early coverage evaluation is beneficial. Experienced coverage lawyers can help find and analyze responsive plans and anticipate coverage concerns or exclusions insurers may use.
Gather and Keep Relevant Records
Insurance companies require thorough loss and damage documentation. Early detection and preservation of vital documents and electronic records is crucial. Insurers may argue that some revenue loss is due to other factors, such as poor business decisions or economic downturn; therefore, historical records must be studied and relied on.
Prepare Loss Proof
Preparing a complete inventory and documentation of loss is time-consuming and difficult, but it can help challenge insurer or loss adjustor settlement offers. Commercial plans often pay claim preparation costs, including submitting a thorough claim. Independent loss assessors or forensic accountants can help collate BI losses, which insurers often dispute. Insurers may define “interruption” narrowly, especially while business activities are ongoing.
Paying in Advance
Insurance delays in making timely payments will impede building repairs and business operations. If the policy allows interim or advance payments before loss adjustment, insureds should consider them.
Evaluate and Challenge Insurer Positions
The wording of the insurance contract and the law will affect insurers’ coverage defenses and limitations. Experienced coverage counsel can help an insured evaluate and maximize their reimbursement from insurers or loss adjusters’ coverage difficulties.