As you assess the impact of the February winter storm, Jackson Walker attorneys can help advise you on the legal implications for your business. For additional insights and resources, visit our Winter Storm Recovery site.
As Texas businesses deal with property damages following the winter storm, Jackson Walker insurance litigation partner Chris Thompson discusses what business owners should consider when beginning the process of filing insurance claims to help cover the cost of repairs.
Related Insights: Frequently Asked Questions: Insurance Claims for Winter Storm Damage »
Greg Lambert: Hi, everyone. I’m Greg Lambert, and this is Jackson Walker Fast Takes. Last week’s winter storms wreaked havoc across Texas and, as a result, many businesses sustained damages which may require filing insurance claims. I asked Jackson Walker’s insurance litigation partner Chris Thompson to discuss the issues around what businesses need to think about as they recover from the storms.
Hey, Chris, thanks for taking the time to talk with me.
Chris Thompson: Thanks for having me.
Greg Lambert: Well, Chris, practically the entire state was affected by the storms, whether it was power outages, water issues, and cold temperatures. Many business owners returned to their buildings to find some form of damages, and one of the first thoughts that may have crossed their mind was how will their insurance help them pay for the repairs. So, what are some of the issues that they should consider as they assess the damages and potentially file claims against their insurance carriers?
Chris Thompson: Sure. Thanks, Greg. Well, I think the first place I would start is your insurance policy. If you have a copy of your insurance policy—you don’t have to be an insurance expert to understand a lot of the provisions relating to coverage—but there are a lot of things that you can read in your policy and understand, such as how much is my deductible, or sometimes called a self-insured retention. If you have a minor amount of damage and it may be below your deductible, you may choose not to file a claim. But if you have any question about that or if it’s a close call or it’s certain that it’s above your deductible, then I would promptly put your insurance carrier on notice of the claim.
Another thing you’re going to want to look at when you review your policy are what are the limits of coverage. How much coverage do you have for your building? How much coverage do you have for any personal property or equipment? How much coverage do you have for other types of benefits and losses such as business interruption?
The third thing that you would want to look at is what type of property is covered, and what are the conditions and provisions that relate to that coverage? For example, your policy will likely have a vacancy provision, or vacancy clause, and you’ll want to know whether that type of clause is potentially triggered. Not going to be really an issue if you have an ongoing operation at your business, but if you are a landlord and you have a certain number of vacant parts of your property, you’ll want to pay attention to that.
One of the things to keep in mind, Greg, is when you’re reading your policy, there may be additional types of coverages beyond just coverage for property damage itself. For example, business interruption coverage, which a lot of businesses are familiar with. You’re going to want to know what kind of coverage you have, what waiting period you have, which is how much time has elapsed between the beginning of the loss and the time period that the business interruption coverage kicks in. It’s kind of like the deductible for business interruption coverage. You may have direct business interruption—so, your own business has been interrupted because of a property loss—or you may have customers or suppliers who have had losses, and that results in a loss of income to you. That’s something called contingent business interruption. So, there could be a number of other types of coverages that could provide additional benefits. You’re going to want to read your policy and have an understanding, or have somebody read your policy and have an understanding, of what coverages you have and what benefits you may be entitled to for your loss.
If you don’t have a copy of your policy, I would call your broker, call your agent, and get him or her to maybe run through those things with you and give you some good advice. That’s what they’re there for in addition to obviously selling you the policy, they should have the ability to give you some general advice and information about the policy that you did purchase. And then as I said, either way, if you think that you have a claim that is above your deductible, promptly tell your insurance carrier, put them on notice of the claim. A couple of reasons for that one, it gets you in line – the longer you wait, the longer the line is going to be in front of you. This is going to be a very, very busy few months for insurance companies and adjusters, so you want to get as close to the front of the line as you can. Second, it allows the insurance company to give you advice about what types of mitigation or temporary repairs they expect you to do. That early communication with your insurance company just helps level set everyone’s expectations and understandings going forward.
Greg Lambert: Speaking of the insurance companies themselves, what are some of the common actions that they’re going to request of the business before, during, and after filing a claim?
Chris Thompson: The first thing is, again, there’s usually a requirement that you promptly notify your carrier. Once you discover damage, there’s no reason to really delay reaching out either through your agents or directly to the insurance company to put them on notice of a claim. Second, I would say it’s really important to preserve evidence, anything you think might have been relevant to the cause of loss. So, if you have a busted pipe from freezing, if you have any damaged property, you’d want to retain that if feasible and if safe, so that the insurance company can inspect that and determine that, yes, indeed, it is damaged and it needs to be replaced or repaired.
Next, you’d want to document your losses. When I mean document, I mean photos, videos, obviously copies of invoices and notes of telephone conversations that you have. Emails are always a great way to communicate with your insurance company so that, again, they know what you’re doing and you have a clear record of what you have told them, and then you have clear record of what they have told you.
I would say the last thing that’s really important is cooperate. Allow the insurance company the opportunity to inspect and have people come onto the property so that they can document their own file and determine how much your covered loss is. If they ask for information, promptly provide that information, because the quicker you respond to their requests for inspections and information more quickly, you’re going to get coverage decision and, more quickly, you’re going to get paid for any covered loss that you have.
Greg Lambert: Looking beyond this storm and the insurance needs here. What types of things should businesses think about for their future insurance needs?
Chris Thompson: You’re gonna learn a lot through this claims process. So you’re going to know if there were any issues with respect to the amount of coverage you have. If you have too much or too little, you may want to adjust that, because if you have too much coverage for your property, then you’re paying premiums on things that you shouldn’t be paying premiums on. If you have too little, then obviously, if you have a catastrophic loss, there’s not enough insurance coverage to pay for that loss.
Second, you may want to look at your deductible or your self-insured retention. This is the amount of risk that you feel comfortable with taking on, and the higher your deductible, the lower your premiums, but the more you’ll have to pay. So if $10,000 is your comfort level, then that should be your deductible or your self-insured retention. If it’s higher than that, it’s higher, and if it’s less than, it’s less. Your premiums and your deductibles are going to have an inverse relationship to each other. So, how much do you want to pay now in premiums and how much do you want to potentially pay if there’s a covered loss?
Greg Lambert: Chris Thompson, thank you very much for taking the time to talk with me.
Chris Thompson: Thank you.
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This podcast is made available by Jackson Walker for informational purposes only, does not constitute legal advice, and is not a substitute for legal advice from qualified counsel. Your use of this podcast does not create an attorney-client relationship between you and Jackson Walker. The facts and results of each case will vary, and no particular result can be guaranteed.
Please note: This article and any resources presented on the Jackson Walker Winter Storm Recovery site are for informational purposes only, do not constitute legal advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Jackson Walker. The facts and results of each case will vary, and no particular result can be guaranteed.