22 | DECEMBER 2018 | Claims Magazine | PropertyCasualty360.com
What’s the damage?
BI policies typically provide coverage
from the time physical damage to a property occurs until it is repaired or restored,
known as the period of restoration. Many
BI policies also provide coverage for loss
of income during a specific period of time
after physical damage is repaired, but
before revenues and earnings return to
pre-loss levels. This period, known as an
extended period of indemnity, can range
from 30 days to one year.
If a business suffered physical damage
from both Florence and Michael, it could
raise questions about how coverage
should respond. If damage from Florence
resulted in a six-month projected period
of restoration for an organization but ad-
ditional damage from Michael resulted
in a projected period of restoration of
nine months, then property owners and
their insurers will need to consider two
• Was the six-month projection for
•Did Michael actually cause an
additional three months in repair and
To complicate matters, some affected
businesses may have renewed their
property and business interruption
policies on October 1, 2018, meaning
that losses from Florence would be cov-
ered under one policy, while losses from
Michael would be covered under another.
If an insurance buyer also changed car-
riers at that time, a dispute could arise
between insurers about the allocation of
losses between the two policies.
Collaborating with adjusters
By now, many businesses and their
insurance advisers should be able to
calculate their periods of restoration for
losses from Florence. However, there’s
no single formula to make these calculations, and they’re rarely considered final.
Typically, businesses do not truly know
whether these estimates were accurate
until repairs are complete.
Every method, however, requires
businesses to work closely with their insurers’ claims adjusting team, especially
when faced with losses from multiple
events within a short period of time. Risk
professionals should be in regular contact
with adjusting teams and their experts,
making sure they’re aware of new developments and information that could be
useful to calculating the damage caused
by each event.
As with any typical BI claim, it is important to document all damage, establish a clear timeline of events, and provide insurers with the right information
to calculate the scope and quantum of
damage and allocate losses between the
two events in order to determine how
coverage should apply.
Calculating losses and recovering from
multiple storms can be complex, making
close collaboration with insurers and risk
advisers essential as companies seek to
get back on their feet.
Robert W. O’Brien (Robert. W.OBrien@
marsh.com), managing director of Marsh
USA, Inc. is a senior property claims
officer of Marsh’s National Property
Claims practice. This article
first appeared on Marsh’s Risk in
Context blog and is reprinted here
Many businesses affected by Hurricane Michael had only recently started to recover from September’s Florence. For organizations that will soon have to file additional claims,
it is vital to identify and differentiate specific losses stemming from
each event, as that will dictate how property and business interruption
(BI) coverage will respond. However, that is easier said than done.