Property Insurance And Disaster Recovery

Originally published in Risk Management Magazine 2012

Whether man-made or naturally occurring, a disaster can imperil even the most rock-solid business. Not shockingly, the very survival of a business often hinges on how quickly and how completely it is able to recover from the catastrophe. As such, developing a disaster recovery plan and assembling a team to implement that plan, before the loss occurs, is invaluable. While generally no single disaster recovery plan will be right for every business, below are some insurance and property considerations that require prompt action when a disaster occurs.

Insurance Concerns

The vast majority of businesses purchase commercial property insurance. Depending upon the type of coverage bought, this insurance can cover loss or damage to insured property, time element losses, research and development, public relations costs, loss adjustment expenses, loss mitigation and many other items. To both preserve and maximize this coverage, develop a checklist of certain action items to address with your property insurance companies (including your excess insurance companies):

Notice: Provide timely notices of claim to all insurance companies.

Proofs of Loss: Schedule and meet deadlines to file proofs or statements of loss. If the proof of loss deadline appears unrealistic, be proactive and get extensions (in writing). If there is not enough time to do so, file a partial proof of loss reserving the right to amend/supplement the proof.

Suit Limitation: If your policy contains a suit limitation clause (and almost all do), this date must be conservatively calendared, no matter how friendly your local underwriter seems to be while handling your claim.

Election of valuation method: Check your insurance policy to see if there is any deadline on the date by which the insurance policy seeks to have you elect the valuation method for the loss claimed.

Time requirements to rebuild or replace: Similar to the point above, see if there is a deadline by which policy seeks to have the rebuilding or replacement of the affected property completed.

Preservation of evidence: Sort out in writing how evidence is to be preserved if destructive testing or immediate remedial work needs to be undertaken.

Loss mitigation: Address in writing the loss mitigation steps you intend to take. If there is no time to do this in advance, then address it in writing soon thereafter, memorializing the urgent conditions that required you to act...