With the rise of temperatures and an abundance of dry vegetation due to climate change, insurance policy holders should be aware of what their policies cover and how their properties and livelihood can be affected by wildfires and other natural disasters, which will likely occur more frequently. Such is the case when we analyzed some legal matters for our clients affected by the Camp Fire in Paradise, CA.
Natural disasters are dangerous in the moment, but those lucky enough to be prepared and to survive such events still face a potential loss of income, as their friends and neighbors (their customers!) may not have escaped unscathed. Even the best preparation and luck can leave behind financial devastation, particularly if one is unaware of the legalese and fine print in insurance policies.
The devastating “Camp Fire” in Butte County, California claimed dozens of lives and destroyed over 18,000 structures. Many business properties burned to the ground. The businesses whose buildings remained standing found that that their insurance policies would not fully reimburse them for their claims of lost business income.
Under a typical insuring clause, an insurance company agrees to pay for the “actual loss of business income you sustain due to the necessary suspension of your “operations” during the period of “restoration.” Translation? If your property wasn’t directly damaged physically, insurance policies with this clause won’t cover your losses. Even if the business’s only customers were locals who all lost their homes (or their lives) and were no longer able to support the business, insurance wouldn’t cover that loss of income for the insured business, if the business’s property was physically unscathed.
Be aware that many insurance companies are now offering policies that do not require physical damage to the property where your business is located. “Non-damage Business interruption” policies protect businesses when covered events cause a disruption of their income stream, even without physical damage to their location. Such policies may also cover for damage to property owned by others that impacts your business. For example, loss or damage at a key supplier or customer’s location. Coverage for many other perils is available and please consult with your insurance professional to fully explore your options. (For example, cyber insurance has become essential for almost any business that relies upon the internet for revenue.)
To protect your business and yourself from financial setbacks, it is vital that you understand the language and nuance of the insurance policies you sign. We strongly suggest reaching out to your trusted legal counsel to review any policies, or legal documents, which can either protect, or fail to protect you in the event of a natural disaster like the “Camp Fire.” Should you be seeking such counsel, please don’t hesitate to reach out to us at Dental and Medical Counsel so we can help protect you and your business from the fine print.