Tips for Submitting and Managing Large Property Claims

Florida insurers have reported nearly $5.2 billion in payouts related to Hurricanes Helene and Milton, according to data from the Florida Office of Insurance Regulation. The two hurricanes resulted in 436,167 claims, of which 27.7% were closed without payment. This raises the question of what steps a business should take in making an insurance claim after sustaining losses from a natural disaster or similar event.

The first step after a property loss is to understand what coverage may be available to you. This article will focus on first-party commercial property insurance. However, every policy is different, and there may be other liability or specialty coverages available for certain losses. Understanding the coverage limits, triggers for coverage, and exclusions applicable to your policy will assist you in making a claim to your carrier.

At a threshold level, commercial property insurance covers direct physical loss or damage to covered buildings and personal property, subject to policy exclusions. For example, most standard form property insurance policies do not cover loss or damage caused by or resulting from flooding. In addition to coverage for physical damage to property, the next most common type of coverage triggered by a loss is business income and extra expense. While business income is relatively self-explanatory and encompasses income lost due to the impairment of the insured’s operations, extra expense can be more amorphous. For example, in evaluating your claim, consider potential costs for cleaning services, additional labor, rental equipment, temporary transportation or freight charges, and any other necessary expenses incurred in an attempt to continue operations over and above the expenses normally incurred.

Assuming the scope of the loss exceeds the deductible or self-insured retention under your policy, the second step is to provide notice to the insurer that you are making a claim. Typically, the claim notice requirements will be found in the General Conditions portion of the policy, and will set out the specific requirements for what that communication should include and where and to whom it should be sent. In putting together the notice of claim, it is important to

By Co-Chairs: Sean P. McCormick Esq. Thompson Hine LLP

Kelsey J. Mincheff Esq. Thompson Hine LLP outline the relevant facts and tie them to specific policy language providing coverage. The insured should include in the notice the description of the property involved, the specific time and place of the loss, names and addresses of available witnesses, and if there has been any loss or damage that may trigger business income or extra expense insurance. continued on page 9

Each policy differs, but an insured should pay special attention to the timing requirements for submitting a claim and be sure to fulfill all notice requirements set forth in the policy. This is even more critical in the context of property damage the nature of which could change rapidly. In such a circumstance, an insured will want to notify the carrier immediately so that the insurer has an opportunity to investigate the loss as soon after the event as possible. Any late notice could result in the insurer claiming it suffered prejudice and rejecting all or portions of the claim. If you are not sure whether the claim is covered, then as a general matter, it is always best to err on the side of submitting the claim.

You will never receive coverage for a claim that is not made, and with the severity of the impact from storms like Hurricane Milton and Hurricane Helene, it is likely the market at large will already be affected by premium increases regardless of whether a claim is submitted.

Following submission of the claim, the insured next should take all measures to protect the covered property from further loss or damage and keep a record of all expenses incurred in protecting such property. In addition, if you are trying to recover losses for business interruption or extra expense, you will need to gather documentation of the insured’s financial status prior to the loss as well as any evidence of lost income post-dating the loss. It is important to note that if the insured is reasonably able to continue business operations following the loss, it must do so as quickly as possible. Most commercial property policies will require the submission of a sworn proof of loss within 90 days of the date of loss.

That the insured has a duty to cooperate with the insurer throughout the entirety of the claims process. This may include, but is not limited to, responding to requests for inventories of damaged property, permitting the insurer to inspect damaged property, allowing the insurer to examine the insured’s books and records, and, in some instances, allowing the insurer to examine a representative of the insured under oath.

Following its receipt of the claim and having conducted its investigation, the carrier is required to provide a written response either accepting coverage for the claim, rejecting coverage for the claim, or accepting coverage for all or part of the claim subject to a reservation of rights.

Commonly known as a “Reservation of Rights” or “ROR” letter, this communication should highlight any exclusions the insurer intends to rely on and should provide the insured with an idea of what parts of the claim may present an issue.

Reservation of rights letters are oftentimes very difficult for a layperson to accurately interpret. If the insured has any question about the insurer’s coverage position, then he or she should consult an experienced insurance coverage attorney. It can be the case that having independent coverage counsel review your policy and the insurer’s reservation of rights may give the insured an opportunity to push back on the carrier’s position, resulting in additional coverage. For example, the vast majority of property policies will include policy endorsements, which alter the scope of coverage provided. It is not uncommon for insurers to either misinterpret, miss, or ignore the import of these endorsements in analyzing the insured’s claim.

As is true with any contract, the specific terms of each insurance policy vary and must be analyzed in light of the specific facts underlying each loss. Especially when dealing with a large casualty event, best practice is to engage experienced coverage counsel as soon as you are aware a claim is likely to be made to assist in the claims process as well as to advocate on your behalf if necessary.

OUR TEAM CONSIDERS YOUR STRATEGY FROM EVERY ANGLE

Your success is uniquely yours. We will work with you to understand the challenges and endeavors to strengthen your financial future. That’s why you deserve better than a pre-cut, one-size-fits-all wealth plan. Our team works to understand you and your goals to craft a strategy that fits your priorities and preferences to a tee. The LCNB Wealth team is here to help you plan for the future, manage your portfolio, and assist with trust and estate services.

Ready to cut to the chase? Let us go to work for you.

LCNB.COM/WINNING-EDGE

Frank Williams

Vice President