Articles Posted in Business Interruption

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A critical component of any insurance policy is of course its limit, which is usually the most an insurance company must pay for a loss. But many property insurance policies include “sublimits” that provide a lower limit for particular losses.

iStock-535435283-sub-300x200Identifying the sublimits in a policy is usually straightforward since they typically appear in a list or chart in the policy’s declarations section. Sublimits generally fall into one of two types: (1) sublimits that apply to particular perils, like flood, Named Storm or earthquake; and (2) sublimits that apply to a type of damage or cost, like debris removal or preservation of property. There are many different perils and costs that a policy may sublimit, and sublimits appear in many types of policies (including, for example, sublimits for coverage for wage and hour claims under an employment liability policy). However, this blog will focus on property policy sublimits. Because many property policies include sublimits that apply to storm-related losses, they may particularly be an issue for companies damaged by hurricanes like 2017’s Harvey, Irma, Jose and Maria.

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In the wake of Hurricanes Harvey and Irma, policyholders can expect insurers to put forward strong objections to some of the most consequential claims asserted by insureds. In a recent client alert, our colleagues Joe Jean, Geoffrey Greeves and Vince Morgan provided insight into business interruption insurance and dealing with the aftermath of wide-impact catastrophes.

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An unexpected or catastrophic loss can force any company out of business, even if it is insured.  You must understand your company’s risks and how your insurance policies cover those risks in order to manage them and maintain stability.

Having the correct insurance in place is only the first step. Property and business interruption insurance policies are often complex, and your suppliers, customers and other business partners’ insurance situation may have a direct impact on you as well.  Even if your business doesn’t suffer any direct physical damage to its facilities following a natural disaster or other loss, your customers or suppliers may have, and that could result in what is known as a “supply chain” or “contingent business interruption” loss of revenue and sales.  If you are unprepared when a disaster strikes, you may miss out on substantial amounts of insurance coverage to which you may be entitled.  The time to prepare is before a disaster occurs.  Take the time now to understand your insurance coverage and other risk transfer methods and opportunities.  Know your rights.  And put a plan in place to protect yourself, your employees, and your property before the loss occurs.  Then, if disaster strikes, you’ll be in a better position to make it through and to access your insurance coverage to help restore operations.

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As the powerful storm that is Hurricane Harvey looms in the Gulf of Mexico, Houston attorneys Vince Morgan and Tamara Bruno discuss what businesses and other organizations in the affected area should do immediately in order to maximize insurance recovery.

Key Takeaways:

  • Category 3 Hurricane Harvey is projected to have sustained winds of 120 m.p.h. and disastrous amounts of rain, with a possible storm surge.
  • Business interruptions are already happening in advance of Harvey’s landfall.
  • Policyholders should take key steps to maintain and maximize insurance coverage for Harvey-related losses.
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A panda is sitting in a bar, polishing off his dinner. He pulls out a gun, fires a shot in the air, and heads toward the exit. A stunned waiter demands an explanation. The panda pauses at the door and tosses the waiter a badly punctuated wildlife manual. “I’m a panda—look it up.” The waiter turns to the appropriate entry: “Panda. Large black-and-white bear-like mammal, native to China. Eats, shoots and leaves.” [1]

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Beware the missing Oxford comma!

That was the lesson of a recent decision by the First Circuit Court of Appeals, which held that the omission of an Oxford comma in a Maine employment statute created an ambiguity that must be resolved in favor of dairy delivery drivers. For want of a comma, the dairy is out $10 million.

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We’ve come a long way since the days of Timothy Leary—both in terms of marijuana legalization, and in the diversity of business insurance products that have reached the market to insure marijuana-related risks. As of this blog post, more than 20 states have legalized marijuana for medical use, including eight states that have also legalized it recreationally. At the federal level, however, marijuana continues to be a Schedule I controlled substance, making it illegal for any purpose. Whether and to what extent the federal prohibition will be enforced by the Trump administration is not yet known. As the legal marijuana industry continues to grow apace, industry participants would do well to consider the insurance products available to them and potential pitfalls for the unwary.

Hand Holding Small Marijuana Leaf with Cannabis Plants in Background

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In 1173, builders broke ground in Pisa, Italy, on the Torre de Pisa (that is, the Tower of Pisa). At over 183 feet, it was to be a grand statement—remember, this was 1173, not 2016.

Torre Inclinada de Pisa

But the story is not all roses. The tower began immediately to tilt—by the time they started laying just the second floor of the tower, it was leaning. Thus, it earned the name we all now know (and love?), “Torre pendent di Pisa”—the Leaning Tower of Pisa. Wikipedia explains, “[t]he tower’s tilt began during construction, caused by an inadequate foundation on ground too soft on one side to properly support the structure’s weight. The tilt increased in the decades before the structure was completed, and gradually increased until the structure was stabilized (and the tilt partially corrected) by efforts in the late 20th and early 21st centuries.” The tower now leans over 12 feet from the vertical axis.

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After tearing through the Caribbean, Hurricane Matthew’s path brought it north to the southeastern coast of the United States, bringing evacuations, business closures and damages to the region. In the storm’s aftermath, colleagues Tamara Bruno, Colin Kemp, Peter Gillon, Vince Morgan and Joe Jean discuss important steps to take to maximize insurance recovery following such an event.

 

 

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Business Interruption insurance provides the policyholder with important peace of mind—it covers lost business arising from unexpected damage to the policyholder’s property. But what if the damage isn’t to the policyholder’s own property—what if the losses arise because of damage a supplier or customer suffers? When a link in your supply chain breaks, Contingent Business Interruption or “CBI” coverage can step in to replace it.Weak Link

CBI coverage, like Business Interruption coverage, is a property insurance extension that addresses lost income suffered due to an interruption of business. Instead of focusing on loss or damage suffered by the insured on its own property, however, CBI coverage addresses “contingent” losses, or losses that involve suppliers or customers. A CBI loss is a loss that results from damage to a supplier or customer that prevents the supplier from providing its goods or services to a policyholder or prevents a customer from receiving the policyholder’s goods or services. This coverage is crucial for policyholders whose business depends upon supply chains, customers or other “streams of commerce” for commercial success. Over the past few years, we’ve seen a spike in the number of CBI claims made by policyholders. During the same timeframe, however, we’ve also seen an increase in the number of coverage disputes related to CBI coverage. Although the concept is fairly straightforward, recovering for CBI losses often isn’t.

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Spring brings warmer weather and a welcome return to green after winter gray. But spring can sometimes go too far, with rain that escalates into destructive floods. As floodwaters recede and cleanup begins, small-floodobtaining insurance proceeds and FEMA assistance are critical and immediate steps to recovery. The following practices can help maximize your recovery. Continue reading →