The U.K. High Court last week issued a ruling involving business-interruption claims against policies issued by eight insurers. Jason Schupp of the Centers for Better Insurance says the ruling is a “mixed bag” for U.K. insurers and policyholders and has little relevance for their U.S. counterparts.
In the U.K. case, Schupp writes, “the fundamental theme running through the insurers’ defense was that the policies only covered localized outbreaks, not global pandemics.”
“More to the point for U.S. property/casualty insurers,” says Michael Menapace, a professor of insurance law at Quinnipiac University School of Law and a Triple-I non-resident scholar, the U.K. case involved disease coverage – “an affirmative coverage not included in most U.S. commercial property policies.”
U.S. business interruption disputes so far have turned on two key policy features:
U.S. business-interruption coverage almost always requires property damage to trigger a payout.
Nearly all U.S. COVID-19-related court cases have involved policies that specifically exclude viruses.
“The U.K. court did not address either the question of property damage or the applicability of a virus exclusion,” Schupp writes.
As Menapace put it in a recent blog post about U.S. business-interruption cases, “Policy language controls whether COVID-19 interruptions are covered…. The threshold issue [for U.S. insurers] will be whether the insureds can prove their business losses are caused by ‘physical damage to property’.”
On September 24 a virtual discussion hosted by the Department of Homeland Security’s Science and Technology Advisory Committee will inform community leaders about how new science and technology applications are enhancing resilience and protecting lifeline systems and networks.
During the discussion experts will describe how technologies can inform risk-based decision-making in areas of neighborhood health monitoring, supply chains, evacuation planning, crisis communications, and information sharing among frontline responders. Innovation in predictive analytics, modeling and simulation, and mobility offer new solutions to tackle immediate challenges and prepare for emerging threats.
The panel will also cover how new public-private partnerships are accelerating new solutions and business models to prepare for day-to-day emergencies.
The discussion will include Michel Léonard, PhD, CBE, Vice President & Senior Economist, Insurance Information Institute; and Richard Seline, Managing Director, ResilientH20Partners.
David Maurstad, Deputy Associate Administrator, FEMA
Duane Caneva, Chief Medical Officer, DHS Countering WMD Office
Ted Smith, Ph.D., Wastewater Based Epidemiology, Professor of Environmental Medicine, University of Louisville and Advisor to Louisville Mayor, Greg Fischer
Catherine Cross, Deputy Under Secretary, DHS Science and Technology Directorate (S&T)
David Corman, Program Director, Cyber-Physical Systems and Smart and Connected Communities, National Science Foundation
Michel Léonard, Vice President and Senior Economist, Insurance Information Institute
Moderator: David Alexander, Director of Resilience Research and Partnerships, DHS S&T
The Insurance Information Institute’s Resilience Accelerator was created to build awareness and adoption of insurance as a frontline defense against the impact of extreme weather events on households, businesses and communities.
September is National Preparedness Month, and this years’ theme of “Disasters Don’t Wait. Make Your Plan Today” could not be more timely as many areas of the country experience record-breaking wildfires and storms.
The webinar showcased two small businesses’ stories of preparation and recovery from disaster. The webinar also covered small business loans that are available after a disaster, tools are available to help businesses prepare, and what you need to know about insurance coverage.
Alex Contreras, Director of the Office of Preparedness, Communication and Coordination in the SBA’s Office of Disaster Assistance (ODA), was the first speaker. The SBA offers low-interest disaster loans to businesses of all sizes, as well as to homeowners and renters. These loans are the primary source of federal assistance to help private property owners pay for disaster losses not covered by insurance. Borrowers are required to obtain and maintain appropriate insurance as a condition of most loans.
The SBA can also fund disaster mitigation efforts, such as installing fire-rated roofs, elevating structures to protect from flooding or relocating out of flood zones.
Janice Jucker, co-owner at Three Brothers Bakery in Houston, TX is the 2018 Phoenix Award Winner for Outstanding Small Business Disaster Recovery. After Hurricane Harvey, the bakery had five feet of water. Thanks to a business recovery plan, the business was fully operational after six weeks.
According to Jucker, part of an effective recovery plan is building a recovery team that includes a restoration company (find one now, don’t wait) an accountant, a contractor, an SBA loan officer and an insurance agent. Another important recovery team member is your local lawmaker – know who they are and make sure they know you, regardless of whether you agree with their politics. They can play a key part in making sure you get what you need to recover from a disaster.
Gail Moraton, business resiliency manager at IBHS, talked about the free business continuity planning tool called OFB-EZ (Open for Business E-Z) available from the IBHS. The first step to planning is to know your risk – both the likelihood of each type of disaster for your location and the amount of damage it could cause your business. Another step is having an up-to-date list of all your employees, vendors and other important contacts. A training exercise is also included with the planning tool.
Alison Bishop, internal operations manager at Spry Health Inc., talked about her company’s use of OFB-EZ. “It takes an overwhelming concept and makes it accessible and achievable,” she said.
Loretta Worters – vice president, media relations at Triple-I, went over different business insurance coverages that are available and pointed out that having the right coverage is a crucial part of disaster recovery, as well as an essential element of an overall business plan.
Like the other speakers, Ms. Worters said having a thorough inventory of all your business assets is of paramount importance. She listed different types of business policies that are available, including: property, business income interruption, extra expense, flood and civil authority. Separate coverage is also available for items that are frequently damaged in a storm, such as fences and awnings.
Click here to listen to a recording of the webinar, which offers many more useful tips for seeing your business through a disaster.
Tropical Storm #Beta is forecast to make landfall in TX by tonight. If it does so, it will be 9th named storm (tropical storms and #hurricanes) to make landfall in continental US this year, tying 2020 w/ 1916 for most continental US landfalling named storms in a season on record pic.twitter.com/VM65BhdqvY
The outer bands of Tropical Storm Beta are lashing the Texas coast but official landfall is forecast to be late this evening. Beta is also bringing tropical storm conditions to parts of the southwestern Louisiana coast where 2 to 4 feet of storm surge is possible.
The storm is going to bring heavy rainfall to areas that were hit by Hurricane Laura.
High tide on Tuesday could bring “life-threatening storm surge” in areas of Texas and Louisiana, according to the National Hurricane Center (NHC). “Persons located within these areas should take all necessary actions to protect life and property from rising water and the potential for other dangerous conditions,” NHC said. “Promptly follow evacuation and other instructions from local officials.”
The storm could also create tornadoes near the middle-to-upper Texas coast or the southwestern Louisiana coast, NHC said.
Please click on the links below for Triple-I’s hurricane preparedness guides:
The Earthquake Country Alliance will host a webinar on how to be financially prepared for an earthquake as part of its Seven Steps to Earthquake Safety series.
The webinar will focus on Step 4 – Minimize Financial Hardship. It will include tips on organizing important documents, strengthening your property and insurance. Experts listed below will discuss each of these elements, along with “live” demonstrations.
Date: Wednesday, September 23, 2020 Time: 11am – 12pm PDT
Presenters:
Janet Ruiz (Director – Strategic Communications, Insurance Information Institute)
Dante Randazzo (Federal Preparedness Coordinator, FEMA Region 9)
Janiele Maffei (Chief Mitigation Officer, California Earthquake Authority)
Glenn Pomeroy (Chief Executive Officer, California Earthquake Authority)
Randy Braverman (Project Manager Earthquake Brace + Bolt Program, Safe-T-Proof)
Tim Kaucher (Engineering Manager Southwestern U.S., Simpson Strong-Tie)
Rivers swollen by Hurricane Sally’s rains have devastated parts of the Florida Panhandle and south Alabama, and the storm’s remnants are forecast to spread the flooding to Georgia and the Carolinas.
Many of the properties damaged will doubtless be found to be uninsured, compounding homeowners’ misery.
A well-known coverage gap
The flood insurance protection gap has been well documented. A recent Triple-I paper – Hurricane Season: More Than Just Wind and Water – states that “about 90 percent of all natural disasters in the United States involve flooding” and cites experts strenuously urging everyone to buy flood insurance.
“Any home can flood,” says Dan Kaniewski — managing director for public sector innovation at Marsh & McLennan and former deputy administrator for resilience at the Federal Emergency Management Agency (FEMA). “Even if you’re well outside a floodplain…. Get flood insurance. Whether you’re a homeowner or a renter or a business — get flood insurance.”
Dr. Rick Knabb — on-air hurricane expert for the Weather Channel, speaking at Triple-I’s 2019 Joint Industry Forum — is similarly emphatic.
“If it can rain where you live,” he said, “it can flood where you live.”
Despite such warnings, even in designated flood zones, the protection gap remains large. A McKinsey & Co. analysis of flood insurance purchase rates in areas most affected by three Category 4 hurricanes that made landfall in the United States — Harvey, Irma, and Maria — found that as many as 80 percent of homeowners in Texas, 60 percent in Florida, and 99 percent in Puerto Rico lacked flood insurance.
To make matters worse, a recent analysis by the nonprofit First Street Foundation found the United States to be woefully underprepared for damaging floods. The report identified “around 1.7 times the number of properties as having substantial risk,” compared with FEMA’s designation.
“This equates to a total of 14.6 million properties across the country at substantial risk, of which 5.9 million property owners are currently unaware of or underestimating the risk they face,” the foundation says.
A more recent Triple-I analysis, conducted in advance of Hurricane Sally, found that flood insurance purchase rates in the counties most likely to be affected by the storm were “remarkably low.”
“In Taylor County, Ga., for example, just 0.09 percent of properties are insured against flooding,” Triple-I wrote.
NOT covered by homeowners insurance
Flood damage is excluded under standard homeowners and renters insurance policies. However, flood coverage is available as a separate policy from the National Flood Insurance Program (NFIP), administered by FEMA, and from a growing number of private insurers, thanks to sophisticated flood models that have made insurers more comfortable writing this once “untouchable” risk.
Invest in resilience
If it seems as if you’ve heard me beat this drum before, you’re right. I take flood and flood insurance very personally.
After Hurricane Irene flooded my inland New Jersey basement in August 2011, destroying many irreplaceable items, it was my flood insurance that enabled me to have a French drain and two powerful pumps installed that have since kept my historically damp basement bone dry – even during Superstorm Sandy the following year.
The 2020 Triple-I Consumer Poll found that homeowners are protecting their properties against disasters like flooding and hurricanes at a higher rate than previously reported, a welcome development as the 2020 Atlantic hurricane season got off to an early start and is expected to produce a higher-than-average number of storms.
“The insurance industry’s focus on resilience is starting to pay dividends as more Americans recognize the very real risks their residences face from floods, hurricanes, and other natural disasters,” said Sean Kevelighan, CEO, Triple-I. “There is still time to act. Hurricane Sally today became the eighth named storm to make landfall in 2020 but the Atlantic hurricane season continues through the end of November.”
However, the poll also found that greater consumer understanding on insurance coverage is still needed.
In something of a surprise, 27 percent of homeowners surveyed reported they have flood insurance, the highest level of flood coverage reported since the Triple-I began asking Americans this question in 2007. Most insurance industry and FEMA National Flood Insurance Program (NFIP) sources estimate anywhere from 10 to 15 percent of U.S. residences are covered under a flood insurance policy.
It is possible a number of Triple-I Consumer Poll respondents with homeowners insurance believe they have flood coverage when they actually do not. The discrepancy between those who have flood insurance and those who think they do gives insurers an opportunity to inform their customers about the need to purchase flood insurance, either from the NFIP or a private insurer, according to the Triple-I.
In addition to floods and hurricanes, the poll looked at how Americans assessed their risks from wildfires and earthquakes and surveyed the percentage of U.S. drivers who received auto insurance premium relief this year after the pandemic reduced miles driven nationwide.
The poll was conducted in July and is available here.
As Hurricane Sally slowly moves over the Gulf Coast in the next few days, historical flooding is predicted from rainfall for parts of Alabama, Georgia, Mississippi, Louisiana, Florida and the Carolinas.
National Weather Service published a map of areas in Gulf Coast states most at risk for flash floods. Triple-I estimated the percentage of properties in these counties that are covered by flood insurance and found that purchase rates are remarkably low in some areas. In Taylor County, GA for example, just 0.09 percent of properties are insured against flooding.
Standard homeowners and renters insurance policies do not cover flooding. The National Flood Insurance Program (NFIP) and a growing number of private companies sell the coverage. However, NFIP policies purchased now would take 30 days to take effect. Private companies have shorter waiting periods, about 14 days.
Hurricane Sally made landfall this morning near Gulf Shores, Alabama, as a Category 2 storm with sustained winds of 105 mph and higher gusts. The storm threatens extremely heavy rainfall and catastrophic floods for miles. Dr. Philip Klotzbach, Triple-I non-resident scholar and Colorado State University atmospheric scientist, gives an update on the storm in the video above.
This year’s National Preparedness Month theme of “Disasters Don’t Wait. Make Your Plan Today” has never been more appropriate. Join the Insurance Institute for Business & Home Safety (IBHS), the Small Business Administration (SBA), and the Insurance Information Institute (Triple-I) during National Preparedness Month for a live webinar on how to prepare for severe weather, COVID-19 interruptions, and other forms of disaster that can have a significant impact on small businesses.
The webinar will showcase small businesses as they share their stories of preparing for and successfully recovering from disaster. In addition to these stories, the webinar will also cover what small business loans are available after a disaster, what tools are available to help businesses prepare, and what you need to know about insurance coverage.
SPEAKERS
Gail Moraton, CBCP – Business Resiliency Manager at IBHS
Alison Bishop, Internal Operations Manager at Spry Health, Inc. (https://spryhealth.com/)
Alejandro Contreras – Director of the Office of Preparedness, Communication and Coordination in the U.S. Small Business Administration’s (SBA) Office of Disaster Assistance (ODA)
Janice Jucker – Co-Owner at Three Brothers Bakery, Houston, TX – 2018 Phoenix Award Winner for Outstanding Small Business Disaster Recovery (https://3brothersbakery.com/)
Loretta Worters – Vice President, Media Relations at Triple-I
From hurricanes to wildfire, tomorrow’s webinar with IBHS, Triple-I and Small Business Administration will cover all disasters and how you can prepare your business.
