By Colleen S. Vallen
Special to the Legal
The past few days have been tremendously heartbreaking and overwhelming for the Northeast region. As we transition from storm to cleanup, it is clear that Hurricane Sandy has caused unprecedented damage and destruction throughout the area. My thoughts are with all those who have been affected. The road to recovery can be challenging and I want to provide some thoughts on ways to make things a little smoother for businesses that experienced a loss.
For many businesses, this will involve filing an insurance claim for property damage, extra expense and business interruption. Many businesses have obtained business interruption and extra expense insurance in addition to their commercial property coverage. In general terms, business interruption insurance protects against losses that occur because of a shutdown of a business as a result of a specific event. Extra expense coverage can provide reimbursement for additional expenditures that are incurred as a result of the event.
Understanding the insurance process will help the insured to facilitate an effective course of action. An important element in the process is to understand the insurance carrier’s expectations. A key expectation in the process relates to documentation. As the ability to generate and maintain information has grown, insurer expectations related to the level of documentation provided to support a claim have also increased. Further, the level of review of a claim has increased as the insurance market has expanded. As a result, gathering supporting documentation is an important element of claim submission.
During these early days, business owners will be pulled in many different directions. Dealing with the event plus normal business issues can be a significant challenge. However, there are some things that a business can focus on, related to documentation, that will facilitate the claim submission process. First, re-familiarize yourself with your policy. This will provide you with important information about your coverage.
Second, keep documentation, financial and correspondence, related to Hurricane Sandy separate from other documentation. On the financial side, consider setting up specific accounts in the accounting system or separate files to track these expenditures. Documents that will likely be important include, but are not limited to, financial statements, budgets/forecasts, purchase orders and invoices, general and subsidiary ledgers, correspondence and key contracts among other data. The insurance carrier will most likely require financial data both pre- and post-event in order to analyze and evaluate the business’ performance before and after the event.
Third, identify key business indicators (i.e., what drives your business) and monitor them. Make sure to track particular Hurricane Sandy-related events. For example, if you have specific customer complaints or cancellations related to Hurricane Sandy and its aftermath you want to identify and segregate these events.
In order to effectively do the above, consider identifying a team to handle the claim. Evaluate your resources – internal and external (consultants, brokers, etc.). Communication and planning among these resources will facilitate the submission of the claim as well as interactions with the insurance carrier.
Colleen S. Vallen is a partner in Citrin Cooperman Philadelphia’s valuation and forensic services group. An expert in the field of forensic and investigative accounting, she focuses her attention on forensic and fraud investigations, the preparation of financial damage analysis and litigation support. She is also highly experienced in the analysis, investigation and review of financial documents as well as case planning and management, financial and economic analysis, expert report preparation, oral presentation of findings and assistance with discovery, interrogatories and depositions. She can be reached at firstname.lastname@example.org or 215-545-4800.