From left, JC Abreu, Peter Gonzalez, and Jorge Abreu install hurricane shutters at a home in Key Largo, Fla., in preparation for Hurricane Irma on Wednesday, Sept. 6, 2017. (Photo: Al Diaz/Miami Herald via AP)
Law firms that suffer business interruption because of Hurricane Irma should document not only damage to their office and what they did to get up and running again, but also the number of referrals they would normally get during that time. This is especially important for firms that are contingency-fee-based.
While Florida’s insurance industry may be better prepared to handle claims than it was in the past, widespread damage may make it more difficult to get claims paid, lawyers said. The overarching recommendation from insurance lawyers is that firms carefully document losses and what they are doing to mitigate them.
William Simonitsch, a partner with K&L Gates in Miami who advises clients on legal risk management, offers three rules that apply universally when it comes to filing an insurance claim: First, don’t miss deadlines to file for damage. The second rule is that claimants need to keep careful records that document how things were before the storm, losses and expenses after the storm, and steps taken to mitigate the damage. They should have photos and copies of all estimates, receipts and invoices. Finally, claimants should keep track of all communications with the insurance company. This includes not only emails and letters but all phone calls, including the ID number of who answered the phone when they called and what was discussed.
Most commercial insurance contracts also include business interruption coverage that kicks in after a business closure of more than 72 hours. The coverage applies when the insured cannot conduct company business for such reasons as a blackout. But a business owner without power cannot sit back and expect to collect. Policy holders are expected to show they took reasonable steps to rein in the losses.
“Do you have the opportunity to open up a satellite office? Do you have the opportunity in this day of technology to use off-site opportunities to continue your business? Because you have an obligation to mitigate your losses,” said Stephen Marino Jr., a shareholder at Ver Ploeg & Lumpkin in Miami who has represented storm-damaged law firms in litigation against insurance companies. “Document with as much specificity as you can what you tried to do and what you were prevented from doing so that when you make that claim you have a better basis for the insurance company to make payment.”
With advancements in technology such as laptops, cellphones and tablets that allow lawyers to work from home, documenting losses that are due to an inability to work out of a law firm location will be more important in filing and fighting for a business interruption claim, Marino said. Insurance companies are likely to point to these alternatives in litigation.
Marino started his career as third-chair co-counsel representing the Country Walk homeowners association in a lawsuit filed against the association’s insurer. Country Walk homes were destroyed by Hurricane Andrew. He has represented plaintiffs in insurance cases almost exclusively ever since.
“If you are an hourly-billing firm, a commercial litigation firm, you can point to documentation that you have in your computer that says, ‘I was making and billing X dollars a month for all these months and I was out of business for five months, here’s my loss,” Marino said. “It becomes more difficult and more contentious, in my experience, when the contingency fee firms are asking for business interruption compensation because there was often a dispute as to what loss of business can be credited for that time period. … You may have cases that come in now, that don’t necessarily pay out until a year or a year-and-a-half from now.”
It’s important to document with as much specificity as possible what staff tried to do and what it was prevented from doing so that when the firm makes a claim it has a better basis for the insurance company to make payment. Firms should jot down details, such as when they couldn’t advertise, or the billboard and direct mailings were down, or the phone lines where referral calls come in weren’t working, he said.
Another big point of contention is when a law firm that owns its own building suffers significant storm damage, leading partners to decide it is time to make improvements. That leads to disputes over how much of the claim is related to damage caused by the storm and how much is due to the owners wanting improvements.
“Make sure before you start going down that path that you advise the insurance company of that claim, give them a chance to inspect and estimate how much it would cost to rebuild it as if you were putting it back the same way,” Marino said. “You need to get a report of how much it would cost to build it back to where it was the day before the storm.”