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milton-satellite-oct-9-960-300x200In the aftermath of two powerful hurricanes the process of assessing the damage and rebuilding begins. Businesses suffered billions of dollars in losses during hurricanes Helene and Milton, both in physical property damage and disruption of their business (i.e., lost profits). That is precisely why businesses purchase property and other commercial insurance—to indemnify them when disaster strikes. However, it is not uncommon for businesses to be unpleasantly surprised when they present a claim to discover that their insurers are unwilling to stand behind the full insurance coverage they promised. This is particularly so in the case of a substantial loss, and even more so in the aftermath of a wide-area catastrophe—such as a hurricane or other natural disaster—because such catastrophes have negative repercussions on insurers given the number of impacted policyholders.

This article highlights eight property adjustment and coverage issues. Understanding and being thoughtful about these issues now, including working with coverage counsel as appropriate, is critical to maximizing insurance recovery.

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Hurricane Helene struck Florida’s Big Bend region as a category 4 hurricane on September 25, 2024, and continued to move northeast. The storm caused widespread power outages and catastrophic damage across Florida, the Carolinas, Tennessee, Georgia and other states. It has brought life-threatening storm surges in its aftermath. Now, less than two weeks later, Hurricane Milton is making its way toward Florida’s western coast and threatens to cause additional catastrophic damage.

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The below checklist includes essential considerations and steps to take for property owners and businesses that stand to be affected by hurricanes.

  1. Make an inventory of risk pathways that could affect your business.
    • Identify essential supply chains, raw materials or parts providers and service providers to assess impact of potential disruptions.
      • Stress-test what would happen if each supply chain were interrupted.
      • Identify markets and customers whose disruption could affect your business.
    • Identify potential sources of liability if your business was impacted by the hurricanes.
      • Failure to meet contracted-for requirements
      • Failure to take adequate measures to protect customers from harm
      • Management failure to train employees to plan adequately for impacts, with concomitant claims by shareholders, regulatory authorities, customers, third parties
      • Other?
    • Identify other constituencies that might be affected by disruption to your business and risks associated with such disruption.
  2. Before any disruption occurs, identify and review insurance products that may respond.
    • First-party Property and Business Interruption insurance—for stoppage or slowdown of your own business, typically due to physical loss or damage to property
    • Contingent Business Interruption (CBI) or Supply Chain Risk insurance—for disruption of supply chains and, potentially, markets
    • Commercial General Liability (CGL) insurance—for liability to third parties arising from bodily injury or, potentially, personal injury or property damage
    • Directors & Officers (D&O), Management Liability, Errors & Omissions (E&O), and Professional Liability insurance—for claims that management personnel failed to take appropriate measures to protect the business or third parties
    • Event Cancellation insurance
    • Travel insurance
    • Workers’ Compensation insurance—adopt protocols and procedures to help employees make a record establishing work-relatedness in submitting claims
  4. Review business contracts to assess whether you are obligated to provide coverage to customers/clients, joint venture partners, contractors or others for risks outlined above.
  5. Review customer contracts to assess whether you are entitled to coverage provided by customers/clients, joint venture partners, contractors or others for risks outlined above.
    • If so, request copies of relevant insurance policies (not just certificates of insurance) and review them to assess potential coverage.
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A recent decision by a California appellate court in Practice Fusion, Inc. v. Freedom Specialty Insurance Company, denying the policyholder more than $118 million in Directors & Officers liability coverage based on an expansive professional services exclusion, is a sobering reminder that this nettlesome exclusion—when over-broadly applied, as was the case here—may render your D&O coverage worthless. The mere fact that Practice Fusion’s insurers asserted this exclusion in the circumstances of this claim should remind brokers and risk managers of the importance of eliminating, or at least narrowing, professional services exclusions where there is any potential argument that the insured is engaged in providing any form of “professional services.” Although it is of course appropriate to fill any gaps created by the exclusion with commensurate Errors & Omissions coverage, E&O policies do not provide the same scope of coverage, or even limits, that are available under D&O policies.

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GettyImages-1266969516-300x200In what was likely a shock to coal-fired electric utilities, the U.S. Court of Appeals for the District of Columbia Circuit held on June 28, 2024, that proposed decisions by the U.S. Environmental Protection Agency in January 2022—prohibiting coal-fired power plants from closing coal ash impoundments where coal ash is in contact with groundwater—were a “straightforward application” of a previously promulgated agency rule. In Electric Energy, Inc. v. Environmental Protection Agency, the appeals court validated EPA’s actions as a proper exercise of authority. This ruling ends (at least for now) a regulatory odyssey that began in 2015.

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GettyImages-1410816038-e1717616912796-293x300When is a claim “brought” against an insured?

A Delaware bankruptcy court’s answer to this seemingly innocuous question turned into a nightmare for the estate of a bankrupt insured. The insured was deprived of coverage under a claims-made D&O policy for a claim filed three years after the retroactive date of the policy, on the basis that the claim arose from the same facts as an earlier False Claims Act suit that was filed before the policy’s retroactive date but never served upon the insured.

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In a recent win for policyholders, the Supreme Court of Colorado handed down a pair of decisions that extended the notice-prejudice rule to first-party property policies. Colorado law now requires an insurer to demonstrate that it was prejudiced by the insured’s late notice of a claim before it can deny coverage based on untimeliness in both property and liability policies.

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GettyImages-1363364623-300x169In the early morning of March 26, 2024, a cargo ship estimated to weigh more than 100,000 tons catastrophically struck the 1.6-mile-long Francis Scott Key Bridge while departing the Port of Baltimore. This led to fatalities and interruptions to the major maritime artery into and out of the port city. Not only did 31,000 vehicles cross this bridge each day, the now blocked Baltimore port handled 52.3 million tons of foreign cargo worth nearly $81 billion in 2023 and is responsible for more than 15,000 jobs.

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Red-sea-1500797449-300x169Yemeni-based Houthi forces have attacked more than two dozen vessels transiting the Red Sea since the October 7, 2023, start of the current Israel-Hamas conflict, leading to a surge in marine war insurance premiums. Houthi elements have attacked commercial shipping with the stated goal of destroying America and Israel, although non-American and non-Israeli vessels have been fired upon, too, since the U.S. and its allies have been carrying out strikes against the Houthi elements in response to their attacks. The resulting increased risks of sailing through the Red Sea have led some vessels to avoid the Red Sea and divert to the Cape of Good Hope, including those operated by Maersk.

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close-up view of camera lens on a smartphoneResolving an issue of first impression, the California First District Court of Appeal recently decided that property policyholders required to submit to an examination under oath (EUO) have a right to record the entire examination proceeding, including by capturing the insurers’ representatives and adjusters on video.

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