Last week, nearly 200,000 people were evacuated from areas downstream of the Oroville dam in northern California. Today, separate recommended and mandatory evacuation orders continue for about 50,000 San Jose residents due to rising flood waters along Coyote Creek. Between the Oroville Dam crisis and the harsh storms hit by Northern California, California is facing large-scale floods, the threat of flooding, landslides and the like. Fortunately, some damage to property and business can be mitigated by insurance.
Although commercial property insurance excludes property damage due to flooding, some policies may provide coverage through approval or through manuscript forms, often limited to a sublimit. However, insurance cover for property damage is only part of the equation. Companies, including those outside flooded areas, may be subject to major damage as a result of the flood, in the form of lost profits due to interruptions in their business or business as a key supplier or customer.
Insurance interruptions are designed to enter and cover the loss of income due to a disaster, such as flood and eventual repair. However, many policies require that the loss of income is due to an otherwise caused loss. In addition, many policies have coverage for business interruptions even where the insured business does not retain any physical loss or damage, but a key supplier or vendor does so. Called "contingent business interruption", this coverage applies where the business operations are affected by physical damage that has occurred off-site by a supplier, carrier, customer or other party to which the company is dependent. Unlike dollar deductions in other policies, interrupt coverage usually contains a waiting time, requiring a certain time type, typically 24 to 72 hours, before the transfer becomes available. However, once triggered, business interruption coverage often continues until a certain sublimit is reached or when the property in question is actually or hypothetically repaired, replaced, or rebuilt.
Finally, companies may be entitled to cover for loss of business income derived solely from the issue of an order from a civil authority, such as an evacuation order. This coverage usually applies when a mission from the civilian authority prevents or restricts access to an insured company due to actual or threatened property damage. Likewise, most commercial possessions provide coverage for the company's loss of income caused by the inability to intervene or engage in a covered business, as well as when a service or a disruption of service affects normal business.
Rebuilding after a flood is often expensive and time consuming. Fortunately, insurance can help keep your business afloat after the water returns.