<b><i>In the Spotlight:</i></b> Winter Storm Perils

The winter of 2014-2015 brought record amounts of snow to the Greater Boston area in a very condensed period of time. From Jan. 24, 2015 to Feb. 22, 2015, a record 94.4 inches of snow fell in Boston, with heavier amounts in many suburban areas. The previous record snowfall (58.8 inches) in a similar period was recorded from Jan. 9, 1978 to Feb. 7, 1978.

Two factors aggravating the situation were a lack of melting, and more volume due to the drier snow, all caused by very low temperatures (19 degrees on average during the month of February).

Not realizing what was to come, Bostonians watched in disbelief the reports from Buffalo, NY, earlier in the winter ' 88 inches of snow from a single snowstorm caused roof collapses, extensive property damage and lost lives. The lessons from those storms went unheeded by building and property owners and municipal governments in Greater Boston. In total, Boston received during this past winter a record 108.6 inches of snow (through March 15, 2015).

Preparing for the Worst

With the unprecedented amounts of snowfall, leaking and collapsing roofs and skylights became all too common, and led to unfortunate human and animal tragedies. Just dealing with the daunting tasks of snow removal and cleanup also caused major disruptions in public services, including trash removal and public transportation. These costs have yet to be finalized, but are anticipated to be “budget busters.” The costs to employers for missed/delayed days of work, missed shipments/deliveries, lost business and employee absenteeism/illnesses have yet to be determined, but are estimated in the millions ' most of which is unrecoverable through insurance.

With the roof buildup of snow and ice dams, many buildings required swift action to prevent leaks and collapses. The removal of snow off roofs was complicated by the inability to find competent contractors (or in some cases, any contractor) and locating places to put the snow after removal. Normal risk management concerns regarding competency and adequate insurance coverage were frequently ignored, and house painters, landscapers and just about anyone willing to go up on a roof was hired to remove snow from roofs.

With this in mind, here are issues to keep in mind before the wrath of winter descends this year.

Delegate Responsibility Clearly in the Lease

Weather conditions create many issues that need to be addressed. Make sure that the parties responsible for snow removal on parking lots, sidewalks and roofs have been clearly identified in the lease. While leases are usually fairly clear regarding parking lots and sidewalks, they are often silent about roof snow removal.

Is snow removal defined as “maintenance” in the lease? Who is responsible for roof maintenance, repairs and replacement? The risk of roof collapse due to improper removal of snow may create an “emergency” for persons and property, allowing extraordinary actions that are often permitted in retail leases for large stores and sometimes permitted for smaller ones.

If a tenant engages in “self-help” and damages the roof, is the tenant responsible? For example, the damage to the roof could be either from running a snow blower on the roof, or from the use of metal shovels. Furthermore, if a member of the public is injured during the snow removal operations, who is responsible?

If the snow is not removed from the roof and the roof collapses, is the cause of the roof collapse the “weight of snow and ice” or an act of God? How soon after the snowstorm did the roof collapse and who had “knowledge”?

Depending on the answers to these questions, there may be exposure to civil liability, violations of lease obligations and unknown or ambiguous insurance coverage. Property insurance policies generally cover a roof collapse caused by the weight of snow and ice, but coverage may be decided or affected by factors of policy language, knowledge, time span between snowfall and collapse and an investigation into building design and maintenance.

Insurance Issues

Property insurance policies can be structured in various ways, depending on the business being insured. In a single-location business, the insurance will apply to that location only. For a multi-location business, insurance coverage can be provided with a specific limit for each location or on a “blanket basis” with a limit that can be applied for any location.

There are advantages and disadvantages to either scenario. The issues that are of concern include the sufficiency of policy limits for a single location and the sufficiency of blanket limits to cover all of the damaged structures from a severe loss in a large geographic area.

A further complication involves the decision about deductibles. With a policy limit specific for each location, the deductible must be appropriate for the location. For “blanket-basis” policies, the deductible is calculated based on a “per-event” consideration. Usually, there is a single event if the damage to the locations in a geographic area occurs within a 72-hour period. Successive snowstorms would each be a different event if the time period between storms is greater than 72 hours. Given the successive storms in the Boston area discussed above, multiple deductibles may be imposed if there was more than 72 hours between storms. Strange and complicated factors for certain.

Premiums and Deductibles

Premium and deductible amounts vary. Generally, the higher the deductible in the insurance policy, the lower the premium for such policy. This must be balanced with the buyer's ability to pay premiums and cover any deductible losses.

It is suggested that business owners, landlords and tenants consult with professional insurance agents, brokers, and advisers for discussions on these topics. Additionally, a consultation with legal counsel is recommended to determine whether lease and contract language adjustments may be needed.

During the snow removal crisis, one very clear lease provision to consider as a starting point states:

3.4 Removal of Snow, Ice and Debris.

3.4.1 Tenant shall keep the sidewalks abutting the Premises and Building entrances free and clear of snow, ice, debris, and obstructions of every kind. Tenant shall keep the roof and drains leading from the roof free and clear of snow, ice, debris, or other obstruction which might overload or endanger the roof or adjoining premises, sidewalks, or streets. In performing such work, Tenant shall take all reasonable precautions to avoid damage to the roof. As used herein, the word “roof” shall mean that portion of the roof of the [name of] Building which is over the portion of the Building leased by Tenant.

3.4.2 Landlord shall keep all sidewalks, parking areas, access and the remainder of the [name of] Building free and clear of snow, ice, debris and obstructions of every kind.

In this provision, the Landlord delegates to the Tenant the responsibility to clear the snow off the roof and sidewalks ' and to do it carefully.

Liability Policies

Liability policies generally exclude Acts of God and respond to the allegations of negligence of the insured. But the issue is whether the lack of snow removal in “a reasonable period of time” amounts to negligence.

Generally, there is no business interruption coverage unless the particular business suffered a “direct physical loss” to their property, and then only for lost profits (not lost sales). Payroll is not included in the coverage unless it is reported as part of the values being insured; there would most likely be a premium increase for such payroll coverage. (Usually, hourly employees would not get paid if they do not work either because the store is closed or the employee cannot get to the store to work.)

Optional Business Interruption Coverage

There are two optional business interruption coverages, but there generally is a 48-72-hour waiting period before coverage commences, which means that there would be no insurance coverage if the store is able to reopen after two days.

The first optional coverage is triggered when there is no available access to the business, e.g., due to excessive snow or flooding surrounding the store. In this case the store need not be damaged; the policy covers a situation in which customers cannot get to the store.

The second optional coverage is triggered when a government authority prohibits access to the store. Such a prohibition occurred for a very limited area on and near Boylston Street in Boston after the Boston Marathon bombing. Only stores and restaurants within that crime scene were able to collect once the waiting period in their insurance policy expired. Being a nearby business was not sufficient to trigger insurance coverage.

A government-ordered travel ban that lasts long enough could also trigger this optional coverage, such as when the travel ban lasted for several days after the Blizzard of 1978 in Greater Boston.

Weather-Related Injuries

During one of the snow removal episodes, a contractor's employee fell through an unmarked skylight. As of this writing, the employee is lucky to be alive and is recovering from some severe injuries. However, one municipal employee died as a result of falling through a skylight in a municipal building in a community south of Boston. Should the building owner or tenant have warned the snow removal contractor about the location of the skylight? Should the municipality have allowed the employee to go up to the roof? Who, if anyone, has this obligation?

Lessons to Be Learned

With these and other issues facing the Boston area this winter, questions remain regarding what should have been done; what could be done better and what should other areas of the country learn from this unprecedented winter season.

First, prepare, prepare and prepare again. Anticipate that an emergency condition can happen in almost any part of the country ' if not snow, other natural disasters can be anticipated.

Second, owners and tenants should clarify lease language regarding responsibilities, maintenance and emergency situations. Detailed and specific documentation and writing is always better.

Third, review insurance policies to verify that coverage is as broad as possible and obligations imposed by Leases and other contracts related to premises responsibilities are addressed with appropriate insurance.

Fourth, owners and tenants ' especially remote owners and large corporate tenants with multiple locations ' should make sure that specific responsibilities and control measures are in place to address emergency situations at each location. Local management should have emergency response information and communication systems in place.

Fifth, understand that state and local governments may not be able to respond in an emergency situation due to conditions as unprecedented as the storms recently experienced in Buffalo, NY, and Boston. Municipal services are just as vulnerable as private enterprises.

Sixth, with the magnitude of these situations, insurance companies may not be able to respond in a timely manner. Verify all damage with pictures, professional estimates, written documentation of all mitigation activities and all related expenses.

Conclusion

Unprecedented severe weather situations require significant preplanning, disaster preparedness, review of legal documents to reflect appropriate responsibilities and rehearsed response to mitigate damages and allow for a reasonable recovery.

Jo-Ann Marzullo is a Partner at the Boston law firm of Posternak Blankstein & Lund LLP. She represents landlords and retailers with lease negotiation and administration, including how to respond to threatened or actual perils. Edward Katersky is a risk management consultant with Katersky Consulting. He previously was an in-house risk manager for various retailers, and was involved with negotiation of lease provisions involving risk management.

The winter of 2014-2015 brought record amounts of snow to the Greater Boston area in a very condensed period of time. From Jan. 24, 2015 to Feb. 22, 2015, a record 94.4 inches of snow fell in Boston, with heavier amounts in many suburban areas. The previous record snowfall (58.8 inches) in a similar period was recorded from Jan. 9, 1978 to Feb. 7, 1978.

Two factors aggravating the situation were a lack of melting, and more volume due to the drier snow, all caused by very low temperatures (19 degrees on average during the month of February).

Not realizing what was to come, Bostonians watched in disbelief the reports from Buffalo, NY, earlier in the winter ' 88 inches of snow from a single snowstorm caused roof collapses, extensive property damage and lost lives. The lessons from those storms went unheeded by building and property owners and municipal governments in Greater Boston. In total, Boston received during this past winter a record 108.6 inches of snow (through March 15, 2015).

Preparing for the Worst

With the unprecedented amounts of snowfall, leaking and collapsing roofs and skylights became all too common, and led to unfortunate human and animal tragedies. Just dealing with the daunting tasks of snow removal and cleanup also caused major disruptions in public services, including trash removal and public transportation. These costs have yet to be finalized, but are anticipated to be “budget busters.” The costs to employers for missed/delayed days of work, missed shipments/deliveries, lost business and employee absenteeism/illnesses have yet to be determined, but are estimated in the millions ' most of which is unrecoverable through insurance.

With the roof buildup of snow and ice dams, many buildings required swift action to prevent leaks and collapses. The removal of snow off roofs was complicated by the inability to find competent contractors (or in some cases, any contractor) and locating places to put the snow after removal. Normal risk management concerns regarding competency and adequate insurance coverage were frequently ignored, and house painters, landscapers and just about anyone willing to go up on a roof was hired to remove snow from roofs.

With this in mind, here are issues to keep in mind before the wrath of winter descends this year.

Delegate Responsibility Clearly in the Lease

Weather conditions create many issues that need to be addressed. Make sure that the parties responsible for snow removal on parking lots, sidewalks and roofs have been clearly identified in the lease. While leases are usually fairly clear regarding parking lots and sidewalks, they are often silent about roof snow removal.

Is snow removal defined as “maintenance” in the lease? Who is responsible for roof maintenance, repairs and replacement? The risk of roof collapse due to improper removal of snow may create an “emergency” for persons and property, allowing extraordinary actions that are often permitted in retail leases for large stores and sometimes permitted for smaller ones.

If a tenant engages in “self-help” and damages the roof, is the tenant responsible? For example, the damage to the roof could be either from running a snow blower on the roof, or from the use of metal shovels. Furthermore, if a member of the public is injured during the snow removal operations, who is responsible?

If the snow is not removed from the roof and the roof collapses, is the cause of the roof collapse the “weight of snow and ice” or an act of God? How soon after the snowstorm did the roof collapse and who had “knowledge”?

Depending on the answers to these questions, there may be exposure to civil liability, violations of lease obligations and unknown or ambiguous insurance coverage. Property insurance policies generally cover a roof collapse caused by the weight of snow and ice, but coverage may be decided or affected by factors of policy language, knowledge, time span between snowfall and collapse and an investigation into building design and maintenance.

Insurance Issues

Property insurance policies can be structured in various ways, depending on the business being insured. In a single-location business, the insurance will apply to that location only. For a multi-location business, insurance coverage can be provided with a specific limit for each location or on a “blanket basis” with a limit that can be applied for any location.

There are advantages and disadvantages to either scenario. The issues that are of concern include the sufficiency of policy limits for a single location and the sufficiency of blanket limits to cover all of the damaged structures from a severe loss in a large geographic area.

A further complication involves the decision about deductibles. With a policy limit specific for each location, the deductible must be appropriate for the location. For “blanket-basis” policies, the deductible is calculated based on a “per-event” consideration. Usually, there is a single event if the damage to the locations in a geographic area occurs within a 72-hour period. Successive snowstorms would each be a different event if the time period between storms is greater than 72 hours. Given the successive storms in the Boston area discussed above, multiple deductibles may be imposed if there was more than 72 hours between storms. Strange and complicated factors for certain.

Premiums and Deductibles

Premium and deductible amounts vary. Generally, the higher the deductible in the insurance policy, the lower the premium for such policy. This must be balanced with the buyer's ability to pay premiums and cover any deductible losses.

It is suggested that business owners, landlords and tenants consult with professional insurance agents, brokers, and advisers for discussions on these topics. Additionally, a consultation with legal counsel is recommended to determine whether lease and contract language adjustments may be needed.

During the snow removal crisis, one very clear lease provision to consider as a starting point states:

3.4 Removal of Snow, Ice and Debris.

3.4.1 Tenant shall keep the sidewalks abutting the Premises and Building entrances free and clear of snow, ice, debris, and obstructions of every kind. Tenant shall keep the roof and drains leading from the roof free and clear of snow, ice, debris, or other obstruction which might overload or endanger the roof or adjoining premises, sidewalks, or streets. In performing such work, Tenant shall take all reasonable precautions to avoid damage to the roof. As used herein, the word “roof” shall mean that portion of the roof of the [name of] Building which is over the portion of the Building leased by Tenant.

3.4.2 Landlord shall keep all sidewalks, parking areas, access and the remainder of the [name of] Building free and clear of snow, ice, debris and obstructions of every kind.

In this provision, the Landlord delegates to the Tenant the responsibility to clear the snow off the roof and sidewalks ' and to do it carefully.

Liability Policies

Liability policies generally exclude Acts of God and respond to the allegations of negligence of the insured. But the issue is whether the lack of snow removal in “a reasonable period of time” amounts to negligence.

Generally, there is no business interruption coverage unless the particular business suffered a “direct physical loss” to their property, and then only for lost profits (not lost sales). Payroll is not included in the coverage unless it is reported as part of the values being insured; there would most likely be a premium increase for such payroll coverage. (Usually, hourly employees would not get paid if they do not work either because the store is closed or the employee cannot get to the store to work.)

Optional Business Interruption Coverage

There are two optional business interruption coverages, but there generally is a 48-72-hour waiting period before coverage commences, which means that there would be no insurance coverage if the store is able to reopen after two days.

The first optional coverage is triggered when there is no available access to the business, e.g., due to excessive snow or flooding surrounding the store. In this case the store need not be damaged; the policy covers a situation in which customers cannot get to the store.

The second optional coverage is triggered when a government authority prohibits access to the store. Such a prohibition occurred for a very limited area on and near Boylston Street in Boston after the Boston Marathon bombing. Only stores and restaurants within that crime scene were able to collect once the waiting period in their insurance policy expired. Being a nearby business was not sufficient to trigger insurance coverage.

A government-ordered travel ban that lasts long enough could also trigger this optional coverage, such as when the travel ban lasted for several days after the Blizzard of 1978 in Greater Boston.

Weather-Related Injuries

During one of the snow removal episodes, a contractor's employee fell through an unmarked skylight. As of this writing, the employee is lucky to be alive and is recovering from some severe injuries. However, one municipal employee died as a result of falling through a skylight in a municipal building in a community south of Boston. Should the building owner or tenant have warned the snow removal contractor about the location of the skylight? Should the municipality have allowed the employee to go up to the roof? Who, if anyone, has this obligation?

Lessons to Be Learned

With these and other issues facing the Boston area this winter, questions remain regarding what should have been done; what could be done better and what should other areas of the country learn from this unprecedented winter season.

First, prepare, prepare and prepare again. Anticipate that an emergency condition can happen in almost any part of the country ' if not snow, other natural disasters can be anticipated.

Second, owners and tenants should clarify lease language regarding responsibilities, maintenance and emergency situations. Detailed and specific documentation and writing is always better.

Third, review insurance policies to verify that coverage is as broad as possible and obligations imposed by Leases and other contracts related to premises responsibilities are addressed with appropriate insurance.

Fourth, owners and tenants ' especially remote owners and large corporate tenants with multiple locations ' should make sure that specific responsibilities and control measures are in place to address emergency situations at each location. Local management should have emergency response information and communication systems in place.

Fifth, understand that state and local governments may not be able to respond in an emergency situation due to conditions as unprecedented as the storms recently experienced in Buffalo, NY, and Boston. Municipal services are just as vulnerable as private enterprises.

Sixth, with the magnitude of these situations, insurance companies may not be able to respond in a timely manner. Verify all damage with pictures, professional estimates, written documentation of all mitigation activities and all related expenses.

Conclusion

Unprecedented severe weather situations require significant preplanning, disaster preparedness, review of legal documents to reflect appropriate responsibilities and rehearsed response to mitigate damages and allow for a reasonable recovery.

Jo-Ann Marzullo is a Partner at the Boston law firm of Posternak Blankstein & Lund LLP. She represents landlords and retailers with lease negotiation and administration, including how to respond to threatened or actual perils. Edward Katersky is a risk management consultant with Katersky Consulting. He previously was an in-house risk manager for various retailers, and was involved with negotiation of lease provisions involving risk management.