Sparked by both lightning storms and a “gender reveal” gone wrong, this year’s devastating wildfires had claimed more than five million acres on the West Coast of the United States by mid-October, causing substantial damage and contaminating the air with dangerous amounts of smoke from California to Washington State. Experts anticipate that the fires will keep burning throughout the year and into 2021. Accuweather founder and CEO Dr. Joel N. Myers called 2020 “the worst fire season in history,” estimating that the total damage and economic loss would be between $130 billion and $150 billion.
Fortunately, many businesses are fully insured, and insurance companies will work with policyholders to process claims and help get companies back up and running. However, it does not always work that way for every insured. Property insurance may cover most of the losses from a fire, but when and how to present a claim can materially affect how much a company can recover and when. This can be extraordinarily difficult at any time, but especially when a fire has destroyed everything.
Policyholders need a focused plan for filing insurance claims and determining what to do next. While coverage terms may differ, the following tips can help a wide array of businesses file claims under commercial property or business interruption policies.
Preparing Evidence Ahead of Time
Any insurance claim requires a detailed inventory of the damaged/destroyed property. This is the last thing anyone wants to do when dealing with a tragedy, and it is extraordinarily difficult to prepare anything comprehensive after a fire.
Before disaster strikes, take extensive video of the business property—you can decide what to submit if and when the need arises. Prepare a detailed inventory, including photos of the insurance policy’s declarations page, then save everything in the cloud platform of your choice. This way, if there is a disaster, you can focus on the health, safety and other needs of your employees and customers rather than worrying about the documentation you need to promptly submit a comprehensive claim. This will help expedite and maximize payment.
Securing and Understanding the Policy
If you do not have a copy of your insurance policy in your go-bag or another safe, accessible place, request a copy from the insurer. The policy is a contract, delineating what the insurance company agreed to cover and their limits and deductibles. Even if your business has not been affected, talk with your broker about available coverage extensions that might enhance your coverage and avoid post-fire surprises.
You do not need to know whether your policy covers specific types of damage before submitting your claim. Wildfires cause a wide variety of damages, with the actual property damage most often caused by fire, ash or smoke. Businesses incur many other types of losses that may be covered, however. These could include bills from the fire department for the cost of responding; expenses to move property to avoid the fire; and business interruption losses arising from property damage/destruction, blocked access or damage to the supply chain. These are just examples—the coverage is broad and you should consult your policy regarding all losses.
Talking to others in the community can help with some questions, but keep in mind that policies differ and it is important to understand what your specific policy covers and its limits. Having full knowledge of the policy is critical to assessing your rights and insurers’ responses.
Preparing a Claim
Policyholders often ask when they need to submit a claim. While the policy will often contain specifics, and different policies will provide different timelines, it is best to submit your claim as soon as possible. Note that insurers commonly cite late submission as a basis for denial.
Insurers have a right to reasonable documentation of a claim before paying. The sooner they have it, the sooner they can consider your claim on its merits. The policy will specify whether to submit a hard copy or file online, but either way, keep a copy.
Different insurers have different requirements of what you need to submit. It is good practice to provide as much information as you have available at the time you submit your claim, including details of the items destroyed or damaged (photos and videos are helpful), estimates and other documentation.
While some supplementation can be expected, back-and-forths associated with repeated insurer requests for more information take time, which you may not have as you try to rebuild your business. The sooner the insurer has the information it really needs, the sooner you will be in a position to settle. Talk with the insurer about staging payments—paying where they have sufficient information while you gather additional information for other areas.
Your credibility is vitally important for achieving the best possible settlement, so only claim what you are entitled to. Do not overstate or pad with the expectation the insurer will take an unreasonable position. When you or the insurer discover mistakes, correct them as soon as possible.
Interacting with Adjusters Post-Claim
Assume the best about the insurer—that they want to be your partner in the process. Give them a chance to do the right thing, but do not confuse their being friendly for having your best interests at heart.
Many claims adjusters will try to help, but even the best are dealing with thousands of claims from people facing the same horrible situation. It can be a blur for them too, so take careful notes of every communication. To build and support this relationship, be empathetic and treat them with respect, understanding the number of claims they are handling. Respond to reasonable requests for information as quickly as possible.
Some actions just will not wait: Businesses will want to get up and running again by hiring contractors and starting repairs or rebuilding. Insurers typically will understand and reimburse as required by the policy. But when it comes to non-immediate actions, give insurers a reasonable opportunity to participate in the process—after all, you are looking to them to pay. However, many policies state the insured must seek the insurer’s approval to repair or replace anything. Without its consent, the insurer may refuse to pay for expenses “voluntarily” incurred.
Reading the Insurer’s Coverage Position
The first response you receive after submitting your claim is typically the insurer’s acknowledgement of receipt of your claim. Shortly thereafter, the insurer will provide a longer response identifying any additional information it needs to further evaluate your claim, and/or its position on whether your claim is covered. Read this communication carefully. What is the insurer agreeing to pay? What is it rejecting? Is it leaving the door open for further payment upon receipt of more information?
Try to provide as much of the requested information as reasonably possible. That said, sometimes insurers request more information than they legitimately need. Reach out to discuss their requests and the burdens associated with compliance. Be sure to confirm agreements in writing.
If the insurer denies coverage for your claim or does not pay what you believe it should, you may want to seek the opinion of a lawyer specializing in insurance recovery. They can review the insurer’s position, provide advice on your rights and help you negotiate with the insurer.
At some point in the claims process, the adjuster will make an offer. Sometimes, this will be to fully compensate you for the loss. Other times, the insurer will offer less, hoping you will take its word regarding the claim value, or accept the offer because you need the money. While it may seem inappropriate, recognize this is part of the process for many insurers. As difficult as it will be, think of it as a business negotiation—which it is for them. Often, they may have missed something, in which case, determine what that is and respond in a balanced fashion—acting out of anger can be counterproductive. Policyholders’ lawyers can be helpful in this process.