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Five corporate insurance tips to consider before a storm strikes
As Hurricane Isaac threatens the Gulf Coast, the storm recalls end-of-August hurricanes of years past: Andrew, Irene and Katrina. The churning winds also raise the question: Have you reviewed your company's insurance policies lately?
CorpCounsel.com invited Mary Craig Calkins and Ronald Kammer into the legal storm cellar to discuss the topic. Calkins, a partner at Jenner & Block in Los Angeles, is the immediate past chair of the American Bar Association's insurance coverage litigation committee on the policyholder side. Kammer, a partner at Hinshaw & Culbertson in Coral Gables, Fla., is the committee's current chair on the insurer side. The two attorneys look at insurance from different sides of the aisle, but they share plenty of common ground on what do before and after a storm.
1. EVALUATE THE RISKS YOUR BUSINESS IS LIKELY TO FACE
Deciding on the insurance coverage your company needs is a planning process. Calkins says that in-house counsel should think of it this way: "What kind of risks and what kind of losses are we likely to suffer, and does our insurance cover those kinds of risks that we think might happen?"
For example, does your company have a property, such as a warehouse, that would be at risk for flood damage? It may be the case that your existing policy only covers wind damage, not flood damage. "Again, it comes back to the idea of looking at what kind of damages you might suffer," says Calkins. "Is the insurance you have in place going to cover those types of losses?"
Which is why you should always …
2. READ YOUR EXISTING POLICIES CLOSELY
If there's one mistake Kammer sees policyholders make again and again, it's this: "I think an overwhelming majority of policyholders do not review their policies. They don't really have a good understanding until there is a loss about what is and is not covered."
Remember, an insurance policy is essentially a contract between the insurer and the insured. Calkins notes, "It all comes down to what the policy covers, what the language of the policy is, how broad it is, and what the exclusions are that are worked into the policy because the policy will give you coverage, but the exclusions will take it away."
3. NEGOTIATE FOR MORE COVERAGE
Once you've eyed the risks and read your policies, what should you do if you want more coverage? Negotiating is an option, says Calkins. The general counsel who is proactive on that front "is going to put the company in a better position to recover in the event of a loss," she says.
Calkins' rule of thumb for any renegotiation is to ask the insurance company for eight to 10 changes in what a policy will cover. "Even if you only get three or four, that's three or four more than had you not asked in the first place," she says.
Kammer agrees with the upsides of negotiating, but he cautions that the typical corporate policyholder (i.e., a company outside the Fortune 1000) probably won't have enough leverage to negotiate new terms. "While it's a good idea, it may be difficult," he says.
Also, the annual meeting that takes place between policyholders and their insurance broker or agent is the most opportune time to negotiate new terms not once a hurricane warning has already been announced.
4. PROTECT YOUR BOOKS AND RECORDS
Suffering property damage in a storm would be bad. Suffering property damage and losing your business records would be really bad. You'll need to show them to your insurance company afterward so keep them safe. "If a hurricane hits, and you don't have any records, you don't have the ability to show or to meet the burden of proof for your claim," Calkins says.
Kammer concurs. "That's very important," he says, "because every insured has an obligation to cooperate and make those books and records available in order to not only prove their loss, but to allow the insurance company" to review those claims.
5. GIVE PROMPT NOTICE OF DAMAGE
Businesses should turn their attention to two things immediately after a damaging storm, says Kammer. One is to take steps to mitigate the amount of damage done, which is typically an obligation in an insurance contract.
The other is to let your insurance company know what happened ASAP. Even what some businesses might see as a "relatively short delay" in giving notice won't be considered "short" according to state law or the insurance company, Kammer says.
"Every insurance policy contains a notice provision which requires the insured as a condition precedent to coverage to give notice either immediately … or 'as soon as practicable' those are the phrases that will be used in the policy," he says.
And if the insurance company denies your claim? That's where Calkins and Kammer differ at least somewhat.
Calkins' advice: "Push back," and consult with insurance coverage counsel if the insurance company tells you no. Kammer agrees: "Pushing back and asking questions is fine."
But in Florida, for instance, insurance companies are required to inform policyholders in writing as to the specific reasons for a denial. If those reasons strike the policyholder as sound, "it's time to move on," says Kammer, and start thinking about obtaining broader coverage for next time.
Either way, the details of your company's weather-related insurance policies are too important it ignore. And if your company and employees are in the path of a storm be careful and stay safe.
Catherine Dunn writes for Corporate Counsel, a Daily Report affiliate.