Winter 2021 Business Insurance Claims

The big storm that happened this week caused a lot of misery and destruction. It is anticipated that the number of insurance claims arising from this incident would be the highest ever. Considering the state's history with large-scale hurricanes, I think the prediction will come true. It has been estimated that Hurricane Harvey caused wind damages worth $19 billion. The Texas winter storm of 2021 has the possibility of surpassing the storm.

The damage caused by this severe winter weather event, which has brought with it unprecedented quantities of ice, snow, and freezing temperatures, has been felt by communities, individuals, and businesses all across Texas and has been compounded by extensive and prolonged power outages. Companies will need to face and resolve a wide range of damages, including damage to their property due to collapsed roofs and burst water pipes, the disruption of their operation due to damage to their property, the impeded access to their property, and the lack of electricity and other public utility resources used by the plant.

Businesses with insurance resources impacted by this severe winter storm should understand how to protect and maximize potential insurance recovery. The storm will result in further losses that reflect the specific nature of an insured business's situation. This checklist offers a general description of insurance policy benefits that could be linked to the damage sustained.

Choosing Potential Coverage.

Market loss insurance is the most common type of business insurance coverage for companies suffering damages arising from the crippling cold weather in Texas. Many insurers offer many different insurance coverage types, but some providers have developed customized plans to accommodate unique situations. Evaluation of your policy language is essential, as is learning your state's policy language.

Businesses can have first-party coverage that includes the elements mentioned above.

"Property damage" coverage includes compensation in the event of loss to any protected property incurred by a covered peril. The property is usually identified as the building and other buildings themselves and property such as tools, supplies, and personal belongings. Naturally, damage caused by frozen/burst pipes or collapsed roofs would qualify for damaged by protection under this scheme.

"Business interruption" compensation also includes profits or sales lost due to damage to an insured business or property. (When attempting to measure the loss resulting from a story, it can sometimes lead to disputes.)

"Contingent business interruption" coverage, which usually protects the policyholder for damages, including lost profits or sales, as a result of harm to property of a supplier, consumer, or other business partner or organization that causes the supplier or customer to become unable to deliver its goods/services or unable to take the policyholder's goods/services. It offers compensation for policies even if there has not been property loss.

"Attraction property" Coverage, which is a sub-category of Contingent Business Interruption Coverage which may apply when a hotel or restaurant is suffering the loss of income as a result of damage to a nearby "attraction property," such as a sports venue, theme park, or conference center.

"Extra expense" liability coverage pays the insured for any additional expenses incurred as a result of a loss event to restore normal operations to the extent possible and reduce other losses.

"Ingress and egress" coverage, which usually protects the policyholder when access to business premises or location is blocked for a period, e.g., if the access highway leading to the policyholder's business has collapsed.

The clause will provide redress for policyholders' damages due to a regulatory order that interferes with regular business operations. The non-property-related elements of civil authority coverage are applicable even though there is no property harm.

"Service interruption" compensation usually protects the policyholder for damages due to power outages. Most utilities require harm to be caused by an interruption of the utility company's power lines within a certain distance of the policyholder's land.

"Advance payments" of the insured's share of loss may be required by the insurance provider, even though the magnitude of the loss is yet to be calculated and changed. The payment of advance fees is also needed if a company cannot afford a lengthy transition period to collect funds for maintenance and replacement.

Under "Claim preparation" coverage, an insured is responsible for the costs of organizing, supporting, and certifying a claim.

Responses.

Despite the vast number of claims sure to arise from the ongoing Texas winter storm and the enormous total value of such claims, many limits or restrictions on coverage will be imposed by insurers. Here are just some of the common issues that insurers may address through consideration.

Insurers sometimes take a narrow view of what constitutes a business interruption, often suggesting that a full cessation of operations is sufficient to support a claim. Insurers may challenge the necessity or cause of the interruption. For example, an insurer may claim that the disruption and reduction in coverage were due to an unrelated business decision by the policyholder or economic downturns. It was not caused solely by damage to the insured property due to the Texas winter.

"The claim involves multiple 'occurrences' under the policy, each of which is subject to a separate per-occurrence deductible." Most plans have a per-occurrence deductible that limits the compensation available for each claim, depending on how the occurrence is treated. In particular, there may be disagreements over whether the entirety of a business's loss resulted from a single storm event or otherwise included several weather conditions and freeze/thaw cycles that constitute different events under the regulation.

"Some of the property damage is of a type excluded under the policy, such as for 'flood.'" While many companies - large commercial entities - have "all-risk" plans that specifically provide some measure of "flood" coverage, many others do not. Several insurers have taken strained positions to define their policyholders' water-related damages as excluded "flood" losses, including in cases of water damage to the interior of a building caused by a burst pipe.

"The claim is for losses beyond the allowed recovery period." Regulations also have clauses defining the period they compensate losses up to. Suppose the policy isn't given a strict time limit. In that situation, it could be tied to the time it will take a policyholder, employing reasonable mitigating efforts, to restore regular business operations under the circumstances. Because of the extent of Texas's damage and the number of properties impacted, it will take longer to restore the properties and resume regular business operations than if the claim had been an isolated occurrence involving a single facility.

Making a Claim.

Most policies include steps to follow for making a claim, consisting of when and how to make it. Specific procedures may require a particular deadline to be met. Failure to timely file the required forms may result in insurers rejecting otherwise protected claims.

How a policyholder brings a claim to their insurer impacts the ultimate recovery, particularly if they have limitations of liability and applicable self-insured retentions. As a result, policyholders should be diligent in obtaining legal advice, assembling a claim team, and consulting with accountants and attorneys. In addition to your policy's standard provisions, a policyholder should consider the following general, time-sensitive policy provisions:

• Proof of loss The insurer needs to be aware of a claim as soon as possible or within a defined duration, or often even immediately after knowing the circumstances. Policyholders should be aware of such deadlines and check their coverage carefully to see whether they will still have access to such plans as insureds. (For example, a landlord or property owner can use insurance obtained from a business with which they have a lease.)
• Lawsuit limitations. Policies also have a "suit limitation" clause, which specifies that to be eligible, a claim under the insurance policy must be brought within a specified time frame (e.g., "within 12 months of the loss"). This rule may not be enforceable in certain jurisdictions if the length is shorter than a particular time or if other conditions are met. In comparison to other states, stringent bans are in effect. Section 16.070(a) of the Texas Civil Procedure and Remedies Code imposes a two-year cap on acts. Yes, business owners can consult legal counsel to decide the maximum amount of time their defense can last.

Conclusion.

Due to the recent Texas winter storm, businesses suffering financial harm do not ignore their insurance policies' protections. Companies should move quickly to defend themselves and to assist with optimum insurance coverage. A skilled insurance coverage attorney is required to ascertain the viability of a claim, estimate the strength of a claim against an insurer and optimize the possible insurance recovery.