The recent severe winter weather left behind legal and financial problems even deeper than the snow. But it may also have presented you with resources for help that you weren't previously aware of. Businesses may wish to act on these issues by doing the following:
Check your insurance coverage.
Carefully review your property insurance policy. Besides the obvious property, business interruption and extra expense coverages, you should look for coverage for contingent business interruption and extra expense to pay for loss arising from the inability of your customers or suppliers to take or make delivery. In addition, many policies include extensions of coverage where government orders impair your ability to conduct business or physical impediments prevent "ingress or egress" to your facilities.
Maximize your recovery.
You should also note the requirements for making a claim, such as notice and duties of preservation and cooperation, as well as the proofs that will be needed to make the claim on both the property and the economic losses.
Check the regulations and insurance affecting your business.
You should review permits and other regulatory requirements with respect to hazardous substances that are stored at your facilities. Regulatory and permit requirements may govern and impose obligations concerning releases that result from storms. An unexpected release that causes damages following a storm may be covered by your insurance. In particular, specialized PLL policies may pick up these costs.
Under construction? Review your contracts.
If the storm damaged your construction site or caused a delay, review your construction contract terms to ensure they are well defined and not left to the discretion of the contractor. Performance time should be either a specified number of consecutive calendar days after your written notice to start work or a specific completion date.
Avoid getting stuck in the middle.
You should review terms and confirm that the contractor will accept payment in full by assignment from its insurer and confirm that your business will not be liable for balances unpaid by the insurer.
Check termination clauses and disputes.
You should also review contracts to see whether you have the right to terminate them if the contractor breaches any of the terms. Check to see whether they allow you to resolve disputes in arbitration instead of litigation. Should a dispute arise, arbitration is generally cheaper and not as lengthy or involved a process as litigation.
Consider the tax implications.
If you own property, you may be entitled to claim a deduction for federal income tax purposes for the loss, destruction or damage resulting from a natural disaster, to the extent not reimbursed by insurance. This deduction may be available for personal-use property (such as a home) as well as for business-use or income-producing property, in each case subject to various technical limitations. However, if insurance proceeds exceed your tax basis in the damaged property, taxable gain generally will be recognized unless the damage to the property constitutes an "involuntary conversion" and the proceeds are reinvested in qualifying replacement property within a specified time period.
Review your time-off policies.
You may contractually obligate both exempt and nonexempt employees to use paid-time-off benefits to cover weather-related emergencies. You should review your policies and employee handbook to make sure they address the payment of wages during emergency events.
Check payroll costs and lost productivity.
An exempt employee must receive his or her full salary for the week unless absent for a full day or more for a personal reason. If you remain open during inclement weather but the exempt employee stays home due to weather or personal reasons, you can deduct from the employee's pay unless the employee performs compensable services remotely. Your nonexempt employees are paid only for hours worked, with the exception of those paid a fixed rate for a fluctuating workweek.
Check your retirement plan language.
You should review your 401(k) plan and consider whether to permit employees increased access to funds to cover storm damage and other disaster-related losses through "hardship distributions." The IRS temporarily liberalized access to those funds after Superstorm Sandy and may do so again following future natural disasters. Even if the IRS does not liberalize access, the terms of the 401(k) plan may already permit property owners to access those funds when necessary or possibly can be amended to permit access to those funds.