Just as New England was digging out from its most recent winter super storm, many businesses were receiving insurance coverage denials for losses caused by Superstorm Sandy. There is often coverage under various types of insurance policies for storm-related losses, including physical damage to or loss of inventory or work in progress, facilities, and/or equipment, and business interruption/extended overhead. Nevertheless, adjusters and carriers often issue denials of claims that, upon further scrutiny, should be allowed (at least in part).
If your company incurred cleanup and/or repair costs at your company’s facilities and/or job sites, or if your construction projects were interrupted or significantly delayed as a result of severe storm events, wind or water damage, floods, loss of electrical service, or loss of site access, coverage may be available for such losses under owner-controlled, contractor-controlled, or independent builder’s risk policies, business interruption insurance, and/or commercial liability/comprehensive pollution policies.
When faced with a denial of coverage or an offer to pay only a portion of an insurance claim, it is often wise to evaluate such denials/settlement offers in consultation with experienced counsel and your insurance agent or advisor. An evaluation should be conducted of all potentially applicable policies and of all damages your business has incurred (even those not previously disclosed to an insurer). A carrier that has not been previously put on notice, or a carrier that has not been provided with notice of particular losses, is often unable to successfully disclaim coverage for such claims without showing prejudice from such late notice (which is often difficult for carriers to show).
In dealing with your insurers or their agents, keep in mind that their view of what is and is not covered under a particular insurance policy is not necessarily determinative or correct. There are often disagreements among insurers, insureds, and the courts as to what is covered under commercial insurance policies, with New England courts often taking a pro-insured view of coverage. Sometimes subtle distinctions, (e.g., whether water damage occurred before or after wind gusts damaged roofs, walls, or windows), can affect coverage.
In addition, carriers often adopt coverage positions based upon what they believe a policy “should” cover, only to reverse or modify their position when applicable precedent is brought to their attention. In light of the state statutes that can subject carriers to awards of multiple damages and attorney’s fees if they are held to have unreasonably denied coverage to their insureds, carriers can often be persuaded to reverse injudicious coverage decisions. For this reason, it is often advisable for insureds to obtain a second opinion from experienced counsel as to whether their losses are covered by the policies for which they have paid premiums. An initial consultation with legal counsel (which is often relatively inexpensive and is sometimes without charge) can be time well spent for an insured.
The bottom line: it is worth the relatively small investment of time and money for every company that suffers or receives a denial for storm-related losses to consult an experienced legal professional to determine whether there is insurance coverage for all or portions of such losses.