Post Irma Potpourri II

Business Interruption Insurance: follow up

We now have confirmation that some carriers will consider the mandatory evacuation in many Florida counties as a trigger for the civil authority provision, which is common on most policies.  When business interruption is included in the property policy, proven loss of income during the evacuation period may be considered for claims payment.  Proper documentation includes the county emergency resolutions citing the evacuation date and repeal date. For example, in Lee County, Zone A was under mandatory evacuation on Sept 7 and Zone B on Sept 9. The ordinance was repealed on Sept 15, making the time between Sept 7 or 9 and Sept 15 eligible for loss of income protection if the insured provides documentation showing an income loss during this time period.  There is usually a 72-hour waiting period before payment is made. Please contact your Lykes advisor for assistance in filing a claim under this provision if your business was located in a mandatory evacuation zone.  

Coverage for Downed Trees and Debris Cleanup

Policy wording in many business property policies provide an extension of coverage for outdoor property, trees, shrubs, (not stock) including debris removal, resulting from the following causes of loss: Fire, lightning, explosion, riot, and aircraft.  Note wind is NOT a covered peril for outdoor property, so downed trees and their removal are usually not covered under the business policy unless they fall on a covered property and cause damage. 

Wind-Driven Rain

Wind-driven rain can cause significant damage due to age or gaps between the building and doors or windows. This causes problems as wind-driven rain is typically excluded in a commercial property policy and does not meet the definition of flood (rising water) for flood policies.  I have been told this exclusion is viewed as a maintenance issue as required by the building owner. Although I don’t agree with it, that is the rationale.  We saw some unusual water damage after Irma, and most was attributed to wind-driven rain.


Food in freezers and refrigerators, medications and other temperature-sensitive items need to be protected by a special spoilage coverage endorsement.  We recommend this endorsement have a separate deductible or at least use of the all other perils deductible on the policy. With 2-5% wind deductibles, a spoilage loss would likely end up being self-insured if there is a power outage from a hurricane. 

Tax Relief on Payroll

I was recently told about the disaster relief section of the tax code concerning payroll to employees when they did not work (before, during and after the hurricane while the business was closed). This payroll is exempt from payroll taxes and worker’s compensation premiums, which seems to me to be some ”reward” for doing the right thing and taking care of your employees.  Your CPA will probably be aware of this and if you need the tax code, ask your Lykes advisor and we will provide it to you.

Future of Property Rates in Florida

Admitted carriers in Florida must go through the process of rate filings and approval with the Dept. of Insurance, which will take time, possibly through the end of 2018. Surplus lines (non-admitted) carriers may adjust their rates quicker. In consideration of all the catastrophes in the world  this year (fires in California, earthquakes in Mexico, hurricanes in the U.S., a hurricane in IRELAND for heaven’s sake!), the claims payouts will be significant. This may drive up the cost of reinsurance and when reinsurance costs increase, we see admitted markets tightening up on their renewals and cherry picking new accounts to insure. Rates in the non-admitted market increase.  It is important to have a plan that your Lykes advisor can communicate that portrays your business as more appealing than others when marketing your account to different insurance carriers.      

Moving Forward…..

Each hurricane/storm is unique.  Irma affected almost the entire state with significant wind and water damage.  Businesses that had agreements with transportation providers to fulfill their evacuation plans found those agreements meaningless when the provider had obligations to many other businesses and ALL needed transportation (for example: nursing homes, ALFs). Same with agreements with generators since Irma came on the heels of Harvey in Houston.  Some businesses with several locations had planned to shift their customer base to other nearby locations, in the event a location was damaged, to avoid loss of income. That plan didn’t work out when all locations in the area were affected.  We became accustomed to 2-5% wind deductibles and were reminded how much this really meant with most partial damage repairs under the deductible. 

We do not know when or how future storms will impact us. This is a good time to evaluate what changes you may want to consider for the future. Ask your Lykes advisor for options so you may make an informed decision.