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Managing Business Insurance Claims



During the damage assessment process, take care to assemble all of the facts and information necessary to file your insurance claim. You and/or your response team should be familiar with your insurance coverage and with the information needed by your insurance company and their claims adjusters. Valuable time can be lost if information is not ready when claims adjusters arrive on the scene.

Frequently Asked Questions:

What you should do after the storm passes? A major disaster can be very stressful and very draining. But by immediately taking the proper actions, you have the power to minimize the disaster's financial impact and improve the chances of your business's recovery. Each loss situation is unique. Here are some general guidelines. They are not intended to replace professional insurance, legal, and/or financial advice for your specific case. 

  • Contact your independent insurance agent or broker as quickly as possible. Let him or her know about your losses. If you relocate temporarily, let your agent or broker know your temporary address. After a major disaster, most insurance companies will send adjusters to the area without being notified by victimized policyholders.
  • Make any repairs necessary to prevent further damage to your business. These should include covering breaks in a roof, wall, or windows with plywood, canvas, plastic sheeting, or other waterproof material. Do not have permanent repairs made without first consulting your agent or broker. Unauthorized repairs might not be reimbursed.
  • Keep all receipts for expenditures you've made for temporary repairs and/or to estimate the extent of your damage.
  • Prepare a detailed inventory of all damaged or destroyed personal property for the adjuster. Be sure to keep a copy. Your list should be as complete as you can make it and should include a description of the item and quantities damaged or lost; date of purchase or approximate age; cost at the time of purchase; and estimated replacement cost today.
  • Collect canceled checks, invoices, appraisals, and other papers that might assist the adjuster in determining the value of the destroyed property.
  • If you feel it necessary, secure a detailed estimate for permanent repairs from a reliable contractor and give it to the adjuster when he or she arrives. The estimate should contain detailed specifications of the proposed repairs, itemized repair costs, and replacement prices. Do not, however, give the contractor the go-ahead at this point.
  • Take photos or a video of the damaged areas. These will help you with the presentation of your claim and assist the adjuster in his investigation. Make sure you have photos or a video of your pre-disaster conditions.
  • Even if business furnishings, fixtures, machinery, etc. appear to be "total losses," do not get rid of them until after they have been examined by an adjuster.
  • If your vehicles have been damaged or submerged in water. Do not attempt to start or operate them until they are thoroughly dry.
  • Wooden furniture should be cleaned as quickly as possible. Avoid rubbing in abrasives such as ash, plaster, or wall board particles that might have fallen on the furniture.
  • A dry cleaning establishment can help you evaluate the cleaning or restoration costs for draperies etc. Many professional carpet cleaners specialize in carpet and upholstery restoration.
  • Metal objects, such as office furniture and cabinets, electric motors, computers, and other electronics should be dried and checked our thoroughly by professionals before attempted use.

What do you want to know about filing your claim? If your business was damaged by a hurricane and you have appropriate insurance coverages, the cost of repairs to your space and business property, compensation for destroyed inventory, and recovery of lost business income will be priorities for you. Your insurance policies, in conjunction with your management skills, can help your business survive. Your insurance company claims representative should help you through the process of recovery. Discuss with the claims representative, whose professional experience can be of great value to you, the best way for your business to proceed with its recovery.

  • Call your insurance agent, broker, or insurance company's claim office immediately to report how, when, and where the loss or damage occurred. Be prepared to provide a reasonably accurate description of damages. If you are unable to contact them, proceed with your recovery plan until you can contact them. Most insurance companies will automatically send adjusters into major disaster areas without being notified.
  • Before the adjuster arrives, prepare a list of damaged and destroyed property. The list should include a description of the item, date of purchase or age, cost at time of purchase, and estimated replacement cost. If you have canceled checks or receipts for those items, collect them to show the adjuster.
  • If possible, get a detailed estimate for repairs.
  • Take photographs or videos of damaged areas to compare with your pre-disaster photos or videos.
  • Keep a log of all expenditures and activities after the storm.
  • Keep receipts for all work done.
  • Beware of unsolicited and uncertified repair and recovery firms that invariably show up right after a storm.
  • If your property is looted, contact the authorities immediately. Tell them what was stolen. This report may be needed to file an insurance claim for theft, distinct from the disaster damage claim.

If you own the building and it is damaged:

  • Inspect the building to determine its safety and the extent of damage. Architects, contractors, and building officials may be of help.
  • Board up the building and cover holes in the roof to make it weather-tight and reduce additional damage.
  • Secure the building from casual entry or post guards.
  • Restore the utilities as soon as possible.
  • If necessary, try to install a temporary electrical generator.
  • If possible, use temporary signs to redirect parking or traffic access.
  • Partition the building if some areas are not usable.

To control damage to your stock:

  • Separate the damaged stock from the undamaged stock.
  • Remove all debris as soon as possible after you receive authorization from authorities and your claims representative.
  • Dehumidify the stock area after the building has been made weather tight.
  • Have the stock storage area cleaned. Note: It may be necessary to move the undamaged stock to another location during the clean-up.
  • Consider an alternative location if the building is not usable.

What if I have business interruption insurance? Keeping your business operating in a fashion that is as close to normal as possible may be crucial to its recovery. While business interruption insurance may pay for some of your covered losses, it may be that your only chance of surviving and prospering is to keep serving your customers. Insurance claims representatives know from many years of experience in helping businesses recover from disasters that there are some key operational strategies and emergency recovery procedures to follow as you pick up the pieces.

  • When filing a business interruption claim, you should be prepared to show the income the business was generating both before and after the loss. Keep detailed records of business activity and the extra expenses of keeping your business operating in a temporary location during the interruption period. If you are forced to close down, include expenses that continue during the time that the business is closed, such as advertising and the cost of utilities.
  • If possible, continue conducting business operations as normally as possible, making business decisions as if you had no insurance policy. Your customers will likely appreciate your efforts to provide them with continuing service.
  • Start a physical inventory as soon as possible. It may be required by your insurer. The inventory may be taken by you, your employees, or a professional inventory service. Discuss the options with your claims representative and get his or her opinion on the best method, given your circumstances, for you to conduct the post-disaster inventory.
  • Organize your books and records. Your insurance company claims representative will need to examine these in order to evaluate the damages.
  • If portions of your inventory are lost or damaged beyond recognition a "book inventory" will be needed to evaluate your loss. It is important that any inventory shipments received or sales made after the disaster be documented separately from the pre-disaster business.

There are some things that you can do to expedite your business interruption claim:

  • Prepare a list of steps required to promptly resume operations on a full, or even a partial, basis.
  • To help you calculate the amount of your business income loss your claims representative will need:

    • Historical sales records
    • Income and expense information as shown in recent profit and loss statements and/or income tax forms
    • Other business records that might assist in projecting what your profits would have been had your business not been interrupted.
    • Consider ways to reduce continuing expenses.

 Things you may want to do immediately:

  • Close out the books as of the date of the loss and maintain a separate, accurate record of any sales or operating expenses that continue after the loss. Remember, the claims representative will need to verify these expenses as part of the claim process.

  • Maintain accurate records for extra expenses incurred to expedite the resumption of operations.

  • Create a written record of any communications received regarding orders to evacuate, including who ordered the evacuation, date, and time.

  • If any property is totally destroyed or blown away in the storm, prepare an inventory of the remaining stock.

Some ways you may reduce loss of business income:

  • Carefully consider ways to continue business operations, even if on a partial basis. Consider ways to expedite repairs and replacement of destroyed inventory.
  • Rent another temporary facility if your current location is not serviceable.
  • Enlist the support of your non-competitor business associates if they can help you maintain service or supplies to your customers.
  • Downsize your operation if a portion of your building remains serviceable.
  • Consider sending printed materials to your customers describing how you plan to continue operations during the restoration period.
  • Act quickly to restore and protect your inventory, but keep the damaged property for the claims representative's inspection.

What if I'm not satisfied with the way my claim was handled?

  • Talk to your insurance agent or claims manager to explain your point of view.
  • Call the consumer affairs or complaint department of your insurance company and tell them your story and why you think you deserve a larger settlement.
  • Contact the Alabama Department of Insurance Click Here about your problem.
  • If you've tried all other options, consult an attorney who specializes in insurance matters to see if he thinks you have a valid claim that is worth a lawsuit. Provide the lawyer with all relevant documents and a copy of your insurance policy. Tell your attorney about any settlements offered by your insurance company and the attorney will judge whether you have a legitimate case that might result in a much larger settlement if brought to trial. Attorneys work on an hourly basis or on a contingency basis in which case they receive a portion of whatever settlement you ultimately receive. Get your lawyer's fee structure in writing before you pursue your case, and make sure you are kept current on the status of the case as it progresses. You must agree to any settlement reached between your attorney and the insurance company before it is made final.

More Insurance Tips:

  • Review your current insurance coverage. Is it enough to get your business back in operation after a disaster? Will it cover the replacement cost of vital facilities? Make it a regular annual procedure to review and update insurance. Also, remember that insurance on mortgaged property probably only covers the lender with nothing left over for you.
  • Be aware of your "contents" insurance. Does it cover the replacement cost of critical equipment?
  • Know what your insurance does not cover. Most general casualty policies do not cover flood damage. Many require additional riders for windstorm, sewer backup, or earth movement. Consider adding coverage for likely perils, especially flood insurance.
  • Consider business interruption insurance that assists you with operating needs during a period of shutdown. It may help you meet payrolls, pay vendors, and purchase inventory until you are in full operation again. Also be prepared for the extraordinary costs of a disaster such as leasing temporary equipment, restoring lost data, and hiring temporary workers.
  • Don't assume that, just because you haven't experienced flooding before, it will never happen. Flooding patterns can change dramatically with development: water, which runs off new streets and parking lots, may overwhelm nearby streams and surrounding land. Landslides and sinkholes may develop because of distant earth movement, natural or man-made. The creek by your building may be a tiny, placid stream that has never flooded, but a downpour may change it into a destructive torrent that destroys your building's foundation. Plan for the worst.