The beginning of 2016 brought floods to the Midwest—and, tragically, loss of life and extensive property damage. With the floodwaters now receding and cleanup underway, affected businesses should consider obtaining insurance proceeds and FEMA assistance as critical and immediate steps to their recovery. These business policyholders might consider the following guidance to maximize that recovery.

1. Review Your Insurance Policies and Calendar Deadlines

As a first step, review and evaluate all potentially applicable insurance policies for coverage. Understanding both your available coverage and your obligations requires a thorough review of the policies to determine what coverages may apply. Property insurance is the most obvious source of coverage, but do not overlook auto, marine cargo, pollution and—for those facing potential third-party claims—liability policies.

When reviewing your insurance policies, calendar any deadlines and set reminders several weeks before the deadline. Initial deadlines typically include the date by which you must give notice, file a sworn proof of loss, and file suit if you disagree with the insurance company’s coverage determination. Most property policies require that the policyholder submit a sworn “proof of loss” to catalogue the damages. Although this is usually done after reaching agreement with the insurance company on the amount of the insured claim, occasionally policies require the policyholder to submit a proof of loss within a fairly short time after the event. Insurance companies are usually amenable to extending these deadlines if requested, but make sure that any extensions are memorialized in writing. Certain state laws and insurance regulations may also impact your rights and obligations under the policies. It is therefore equally important to know the law and these insurance regulations.

Because understanding your policy and obligations can be challenging, and because missing deadlines can be fatal to an insurance claim, retaining an experienced insurance coverage lawyer during these initial stages might be a good idea. Counsel may work in the background without revealing their involvement to insurance companies. (Insurance companies typically do the same thing).

2. Place All Insurance Companies on Notice

Even if you have not yet identified all of your losses, or are unsure if you have coverage under a certain policy, provide notice that you might have a claim to any insurance company under whose policy you might conceivably seek coverage, and do so as soon as possible. Do not rely on coverage advice from brokers or assume your policy is not applicable. Notice need not, at the initial stage, be very detailed or specify the cause or extent of your loss, so there is no reason to delay in providing notice. Be sure to precisely follow the directions in each insurance policy regarding notice, and be aware that notice instructions might differ from policy to policy.

3. Assess All Possible Coverages

With respect to storm-related damages, a threshold question is whether and to what extent the policy insures against the peril of flood. Under all-risk (as opposed to named-peril) policies, flood is covered except to the extent there is an applicable flood sub-limit or exclusion. Named-peril policies may or may not provide coverage for flood, depending on whether flood is named or excluded, how “flood” is defined, and how flood exclusions are worded. Even when flood is not an insured peril, there may be coverage when another, covered cause (such as wind, power outage, a construction defect or faulty workmanship) precedes, contributes to, or causes the loss.

Assuming the cause of loss is covered, the next question is whether the policy insures the specific types of losses incurred. Commercial “first-party” property policies are designed to insure losses sustained to the policyholder’s property damaged by the occurrence and the business income losses associated with the inability to utilize that property (often called business interruption or time element coverage), as well as extraordinary expenses incurred. In addition, commercial policies typically include a wide range of coverage extensions, including “contingent” coverages that apply even when the policyholder’s own property is not physically damaged. Contingent coverages apply when the policyholder sustains losses as a result of damage to third-party property (such as the property of critical suppliers of goods and services, utility providers, or the policyholder’s customers or employees) that prevents the supplier or customer from supplying or accepting the policyholder’s goods or services. These extensions include coverages for contingent business interruption, contingent extra expense, service interruption (e.g., disruption of power and other utilities), loss of ingress/egress, and losses due to orders of civil authority (e.g., curfews, prohibitions against entry). These coverage extensions are often poorly understood and are therefore a common source of disagreement with insurance companies.

One case involving Mississippi River flooding in 1993 is illustrative. In Archer-Daniels-Midland Co. v. Phoenix Assur. Co., 936 F. Supp. 534 (S.D. Ill. 1996), Archer-Daniels-Midland (ADM), a processor of farm products for domestic and international consumption, sought coverage under its first-party property insurance policy for the increased costs it incurred as a result of the flooding. ADM argued that the contingent business interruption and extra expense provision in its policy provided coverage for its losses because ADM was no longer able to receive services provided by the US Army Corps of Engineers, the United States Coast Guard, or Midwestern farmers due to the flooding. That provision included this language:

This policy covers against loss of earnings and necessary extra expense resulting from necessary interruption of business of the insured caused by damage to or destruction of real or personal property, by the perils insured against under this policy, of any supplier of goods or services which results in the inability of such supplier to supply an insured locations [sic].

Download: First Floods of 2016: Insurance Recovery Tips for Midwestern Businesses

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