October 2022 Business Litigation Update

Hurricane Season for Texas Ended On October 1, But Now is the Time to Prevent a Coverage Dispute Next Year
Last week, Hurricane Ian caused significant damage across Florida and South Carolina – just the most recent natural disaster to hit the United States.  With the intensity and frequency of major weather events seemingly increasing – notwithstanding the fact that Houston did not see a hurricane this year – it’s helpful to look at the insurance coverage issues that typically arise for a business following a major storm and how to prevent them from turning into an insurance coverage dispute or lawsuit.

Below are three key points to try to mitigate the risk of coverage dispute litigation if you find your business impacted by a hurricane or other severe storm.

1. Was it wind damage or water damage? This not as cut and dry as it seems.  Assess your policy closely to see how “damage” is defined and covered.  Some policies that do not include flood coverage will only cover interior water damage if it was the result of additional damage from wind – e.g., if your business’s roof was damaged due to wind, and the water damage was a result of that.  Take a careful look at this language in your policy.
2. Do you have flood coverage?  Flood damage is not automatically included in most insurance policies.  Unfortunately, this is something that many business owners learn the hard way.  It can be expensive to add flood coverage, meaning many people do not, especially in areas where flooding is unlikely.  Therefore, you could end up in a lengthy insurance dispute over damage from a flood or storm surge if it is not covered in your policy.  You might not think you need it, but we have seen some intense flooding over the past few months in unexpected areas. An ounce of prevention ….
3. What kind of coverage do you have for loss of income? This is extremely important if your business is faced with shutting down due to storm damage.  Carefully look at how your insurance policy handles business interruption including what period of time the policy allows for restoration of the business.  If your business is forced to rebuild or shut down for major repairs, how long is the period of time for calculating income loss? How much time do you have to complete the work?  Knowing this information upfront can help you to plan ahead so that you don’t end up in litigation over coverage.

Weather disaster insurance coverage is not something any business owner wants to think about, but the risk is very real.  Storm, wind, and water damage can be devastating for a business, and finding yourself in the middle of an insurance coverage dispute or lawsuit after the fact will only compound the negative impact to your business.

Make sure you fully understand your insurance policies, know what is covered, and make adjustments as needed.  Doing the work upfront can prevent serious problems down the line.