Winter Storm Uri, the storm that swept the United States in mid-February, has been blamed for more than 50 deaths and broke many low-temperature records, especially in the central and southern plains.
Uri caused blackouts. for millions, including creating a major power crisis in Texas. The storm also brought severe destructive weather to the southeast, including several tornadoes.
Companies across the country, especially in southern states that are less accustomed to extreme cold, experienced heavy losses due to freezing of water and fuel lines. Preliminary estimates suggest that this storm could cost the country's economy $ 50 billion.
Many companies can have a valuable asset in the form of first-party insurance. Insurance can provide cover for physical damage to or loss of property and for financial losses due to inability to conduct business at the same levels as before; the additional costs incurred in dealing with the effects of extreme cold, including those in advance to minimize or mitigate any damage and loss; and the costs of determining the extent of the losses.
Companies claiming winter storm losses may face a number of coverage issues that insurers are likely to claim. While the following are important issues that we believe may arise in property insurance, policyholders should also check their liability for pollution, environmental damage and other types of insurance that may cover business interruptions from this event.
Physical Loss or Damage : First party property policies generally provide insurance for "direct physical loss of or damage to property." An "all-risk" property policy insures against all loss risks unless it is expressly excluded. Traditional losses that are not exempt from first-party property policies may include tangible property, including buildings, permanently installed machinery or equipment, fixtures and fittings. Most property insurances also insure personal property. This coverage may be provided by an "unplanned personal property" provision, which provides coverage for unplanned personal property that is "common or temporary to the local population" or "used by an insured in the premises described." These policies cover companies' personal property, including, for example, products, supplies, materials, machinery and inventory. Property insurance can exclude certain intangible losses if the insurer shows that the excluded risk is the cause of the loss. However, some courts have ruled that if a property is left unusable, for example by freezing or the presence of harmful substances, a first-party property policy may provide coverage.
Insurers can dispute whether a freeze is a physical loss or damage that is sufficient to trigger property damage or business interruption coverage. According to an all-risk policy, a policyholder must only show that he has suffered an unintentional direct physical loss of or damage to insurable property during the insurance period for any reason. To avoid paying an otherwise covered loss, the insurer bears a steep burden to prove that the loss was caused by an excluded danger. Insurers may try to attack policyholders' claims that their losses involved physical loss or damage. In the case of freezing, companies during the storm may have experienced property damage by expanding ̵
Losses arising from broken pipes caused by freezing are damage to property that triggers the policyholder's property coverage. To exclude losses due to "water, other liquid, powder or molten material leaking or flowing from plumbing, heating, air conditioning or other equipment (except fire protection systems) caused by or resulting from freezing", an insurance company must prove that the policyholder does not "exercised reasonable care to maintain the heat in the building or structure" and not "empty the equipment and turn off the supply if the heat is not maintained." Consequently, the reasonable care of a policyholder deteriorates the exclusion of the insurance.
Language for business interruption coverage may require that interruptions result from physical loss or damage to covered real or personal property for which the insured has an insurable interest. This coverage often reimburses a policyholder for profits that a policyholder would have earned but for interruptions in its operations. Business interruption coverage is available in many forms and through several different coverages in first-party insurance that do not require loss or damage to insured property.
Coverage without physical loss of or damage to insured property: During the winter storm, many roads were impassable or otherwise blocked, mass transit services were interrupted and commercial transport was largely closed. Of course, heavy snowfall often causes physical damage to insured property that is separate and apart from – or in addition to – damage to property that involves "freezing". The winter storm also led to many companies suffering significant losses even though they did not suffer any direct damage to property. First-party insurance provides several coverages that compensate business interruptions to companies that do not bear any direct physical loss on their insured property.
Coverage from civilian authorities can provide coverage to a policyholder who loses business income because access to its premises is prohibited by a government document, such as an evacuation order or curfew. The civil authority's coverage varies considerably from insurance to insurance, and some such coverage is available to the extent that physical loss or damage occurs where the policyholder's business is located, when a government order still interrupts the insured business.
In addition, commercial real estate policies will often provide entry or exit coverage when access to or from a policyholder's business has been prevented or hampered due to a storm. The availability of entry / exit coverage varies greatly between different policies. Often an insurance policy will cover the loss suffered by the policyholder "due to the necessary interruption in the insured's business due to the prevention of entry into or exit from the insured's property, regardless of whether the insured's premises or property have been damaged" if the interruption was due on damages of a type insured against by the insurance.
In addition, commercial property insurance often provides coverage for service losses. This coverage pays the policyholder for losses, either through damage to property or more frequent business interruptions, from interruptions in incoming or outgoing tools and other services, including electricity, gas, fuel, steam, water, cooling and drainage services. The loss of the service must be the result of otherwise covered physical loss or damage to the service provider's property. Termination of service coverage is usually subject to a deductible period and a sublimity.
Policyholders should review their first-party policies for other coverages that provide compensation for business interruptions, including any business interruption coverage.
Deductibles and Insurance Contracts Limits
Many insurances contain a deductible and state that it must be met "per event", "per event", "per loss" or "per claim." Some insurances require a complex calculation linked to a percentage of the value of the insured premises to determine a policyholder's deductible. In connection with time element coverage, such as business interruptions, deductible can be stated as a number of hours or days that must elapse before the coverage applies. Policyholders should pay special attention to ensuring that they do not pay a greater deductible than what the insurance requires.
Property insurance also limits the amount of dollars that an insurer will pay for a covered loss. A limit per event is the highest amount that the insurance company pays for a certain event. A total limit is the highest amount that the insurance company pays for the entire insurance period. A sublimit is any insurance limit within another limit. For example, the policy may have sublimits for "earthquake", "flood" or "windstorm" that may limit recovery. Insurers may try to reduce the policyholder's claim for financial loss by incorrectly applying sublimits that are intended for physical damage.
An important factor in determining the number of deductibles or limitations that apply to a particular loss is the "number of events." Courts often find in large-scale loss situations that a single event occurred in an attempt to allow policyholders to access that insurance. However, policyholders have strong arguments that the winter storm was a single event.
Those who have suffered losses due to the winter storm may have a significant Policyholders should consider their coverage options and act promptly to recover all benefits available under that cover.It is important for companies to: (1) assess the extent of their losses as soon as possible; (2) ) assess the extent of the coverage of these losses from all available insurances and coverages; and (3) provide their donor with a written notice of loss or damages. Running an insurance claim after a large-scale loss is often a complex and challenging process. We find that a well-coordinated team of in-house entrepreneurs, external coverage advice and an accounting consultant can play key roles in helping to maximize all insurance recoveries.
Jared Zola is a partner in the Blank Rom LLP Insurance Recovery Method in New York. He can be reached at firstname.lastname@example.org. Alexander Berman is employed at the company's office in Washington. He can be reached at email@example.com. Catalog