A week after Hurricane Sandy/Super Storm Sandy, businesses and homeowners are working to figure out the impact of the storm on their property and their income. There will be many questions regarding what losses are and are not covered.
Two areas of potential uncovered claims include Flood Damage and Loss of Business Income.
An article in the NY Times answers some basic questions that homeowners may have regarding Flood Insurance and other potential loss drivers. Businesses may have similar questions.
Homeowners and Business Owners have the ability to purchase Flood Coverage through the National Flood Insurance Program or coverage may be available from your insurance carrier.
Businesses have an added impact to consider, the Loss of Business Income loss and possibly the Loss of Income due to damage at a non-owned location (Contingent Business Income).
For Business Income Coverage and Contingent Business Income Coverage, the insurance policy that is in force must include these coverage's as well as the Covered Cause of Loss.
What is Covered Cause of Loss?
A business or homeowner must purchase the coverage's they want to insure. In the case of Sandy, if the business or homeowner did not purchase Flood Coverage, then any damage caused by Flood, Surface Water, or water inundation would not be covered. Some policies may also exclude the additional damage caused by Mold.
How does this apply to Business Income / Contingent Business Income?
If the business did not buy Flood coverage and Flood drove the loss, then any losses from the Flood are most likely excluded.
If you are a manufacturer in Wisconsin and you rely on a supplier (or major customer) in the storm affected area, you can purchase Contingent Business Income Coverage to protect you from a loss to your supplier or customer. Remember to protect from a Flood loss you must purchase Flood Coverage and Contingent Business Income Coverage on your insurance policy.
I have posted a number of documents related to business income, business continuity planning within my LinkedIn profile. For more details. If you have questions on how your business could be affected by disasters occurring in a supply or customer scenario, please contact Scott Brookes or call 262-953-7180. I have taught courses in business income including how to evaluate your exposures, develop a limit, and possible risk management solutions to minimize the exposure.
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