Key Insurance Coverage Considerations in the Wake of Superstorm Sandy

Following Sandy, the regrettable but inevitable question is not whether, but where and when, the next costly natural disaster will strike ' be it a hurricane, typhoon, cyclone, tornado, earthquake, tsunami or other natural disaster. Insurance can play an important role in helping businesses and individuals weather the financial storm that inevitably follows the natural one. Much of the property damage and business interruption loss suffered on account of Sandy and other natural disasters is insured. Importantly, businesses often have insurance not only for property damage losses, but also for economic losses arising from business interruption, including interruption incurred as a result of actions of civil authorities (such as the evacuations, mass transit suspensions and airport closures) and for extra expenses incurred to minimize or avoid business interruption. Even if the storm did not damage their own property, many businesses will have sustained losses because of damage to the property of others, including important suppliers, customers and other business partners, damage to infrastructure, transit interruption, power outages, interrupted gas and water services and/or disruption of various other forms of production and support systems. Many businesses also will incur substantial expenses to return to normal operations. Even businesses located in areas far outside the storm's path have likely suffered losses that may be covered by insurance given that the storm conditions impacted such a broad area and affected goods traveling by sea and other halted means of transportation.

Businesses affected should seek to maximize insurance recoveries. Careful and proactive attention to insurance coverage considerations could be the key to restoring business operations and recouping losses. Businesses that have suffered losses related to the storm are therefore advised to carefully assess and document their losses, maintaining detailed loss information, and to review all potentially applicable insurance policies promptly, including excess-layer and “umbrella” policies, to determine if such policies may afford coverage. A careful insurance program review will be an important component of a company's efforts to recover from Sandy and other natural disasters. In addition, early identification, characterization and presentation of loss information in light of potentially applicable insurance coverage law can help to maximize coverage and ultimately could make a substantial difference in a company's recovery.