In the aftermath of this weekend’s earthquake, we at Farella Braun + Martel would like to offer our insights. If you have a business that was affected by the earthquake, now is the time to look at your insurance policies, even as you are still sweeping up the debris and wondering what the extent of the damage will be. Based on our thirty years of experience in the insurance industry, we recommend asking yourself five questions about your property insurance coverage.
Do I have earthquake coverage and what’s my deductible?
Standard property insurance policies do not typically include earthquake coverage, but you may have purchased it. Check your policy!
If you do have coverage, the next step is to check your deductible, which may be fairly high. At the same time, if you think there is any chance that your claim will approach the deductible amount, you should report it in order to preserve your rights.
Do I have a time limit to report my claim?
Many property insurance policies impose a “proof of loss” requirement, under which the insured must submit its initial claim within a specific period of time, and include very specific information. The time limit to submit a proof of loss could be as short as 60 days. And even if your policy doesn’t require proof of loss, the statute of limitations for making a claim may be as short as one year. Thus, even if you don’t yet know the full extent of the damage or the precise value of your loss, the time to report your insurance claim is now.
Do I have business income loss?
Property insurance policies often cover more than just direct physical damage to your property. They may also cover “business interruption” or “business income” losses – i.e., profits that your business lost because it was not able to operate during the post-earthquake period.
Business income policy language varies widely, and should be checked very carefully so that you can maximize your legitimate recovery. In an area such as the Wine Country, replete with wineries and specialty boutiques, restaurants and businesses, coverage disputes may arise over the value of business income losses.
Am I prepared to support my claim?
The burden of proof is on you, the insured, to prove the magnitude of your loss. Accounting records, budgets, invoices and receipts, inventory records, sales projections and payroll records are all relevant to your claim. Gathering this information could be an essential part of processing your claim.
Valuation clauses in these policies can also be very complex, particularly when it comes to losses of high-value consumer goods or stock-in-process. In the case of wine, there may be disputes about valuation, particularly if the policy entitles you to retail value.
What about mitigating my losses?
Use your best business judgment to minimize and cut off your losses – not only is it the right thing to do, but your property insurance policy will require it. The good news is, the insurer will generally pay for it. Property insurance policies usually cover expenses the insured incurs to preserve damaged property, avoid further damage, and expedite repairs.