Businesses lucky enough to be located outside of Katrina’s wrath still are exposed to losses from the hurricane: while they may not have suffered physical losses to their assets, their suppliers or customers, or both, may have been damaged. As a result, these “unaffected” businesses may have coverage for their own economic losses stemming from Katrina.
An increasingly common add-on to coverage in recent years has been “contingent” business-interruption coverage (or contingent business-income coverage). These policies are limited in what types of event triggers their coverage: typically, only those hazards that are insured against with respect to the insured’s own assets qualify as covered events when they befall the insured’s supplier or the insured’s customer.
In general, there are certain steps that companies should now be taking:
1. Check to see if your property policies include coverage for contingent business-interruption losses (or trade-disruption losses).
2. Give notice NOW to your insurance company of the possibility of a covered loss.
3. Carefully and contemporaneously document the lost sales or increased costs that may be attributable to Katrina. The more contemporaneous documentation, including memorializing memoranda to file, the better in the event of a coverage dispute.
4. Consider engaging counsel, forensic accountants, or a public adjuster to assist you in gathering the financial material needed to prove your claim.
5. Beware that many policies include a time period within which a suit for coverage must be brought or within which notice or proof of loss must be provided. If there is any possibility that the time period is about to expire, ask the insurer for an extension of the period and obtain the insurer’s written agreement. It is vastly easier to obtain an extension than to litigate questions of the tolling of the period.