How Can Insurance Agents Help the Texas Fire Victims?

By Leslie C. Thorne | September 13, 2011

As fires tear through Texas, businesses and homeowners struggle to determine their losses. According to the Insurance Council of Texas, this year’s fire losses are Texas’ worst on record. The Texas Forest Service has reported that more than 1,900 homes and dozens of businesses have been destroyed so far.

In handling the crisis, policyholders must quickly evaluate their available insurance coverage. Any delay in identifying coverage and claiming policy benefits will compound problems and can foreclose coverage altogether. In the case of businesses, failure to pursue available insurance can even result in liability to shareholders.

To protect their clients, every agent first must understand what coverage its clients hold by reviewing their policies and determining which ones could provide coverage. In doing so, agents should also consider what additional coverage may be purchased to protect those clients not yet affected.

Commercial Property

Agents should first look to their business clients’ commercial property policies. Most businesses carry this type of insurance, which covers assets lost or damaged as a result of various perils. The policies generally cover losses resulting from fire. Of course, agents and their clients must consult the actual policy language in evaluating coverage issues.

Business Interruption

Agents should also determine whether their clients carry business interruption coverage, which can be crucial to a company’s survival. These policies typically compensate business owners for lost income and ordinary business expenses as long as the policyholder’s business premises actually suffered damage resulting from the fire.

Contingent business interruption coverage may also apply. After the fires, many businesses in affected areas will find that their customers or suppliers cannot do business because of their own physical damage. Contingent business interruption coverage applies in such a situation, protecting a policyholder’s profits following damage to property belonging to the insured’s customers or suppliers (as opposed to its own property).

Other Business Coverages

Agents should also consult their clients’ policies to determine whether other types of coverage may apply. For instance:

  • Extra Expense Coverage reimburses a policyholder for necessary expenses in excess of operating expenses incurred during the restoration period while its business recovers from the physical damage.
  • Ingress/Egress Coverage may apply when customers, suppliers or workers cannot get to the policyholder’s property.
  • Interruption of Computer Operations Coverage compensates a business owner for income lost when operations are suspended because of an interruption in computer functioning resulting from a covered peril.
  • Utility Services Coverage compensates the policyholder for business interruption losses caused by loss of power or communication services.
  • Civil Authority Coverage reimburses an insured for income lost when a civil authority prohibits access to a business due to physical damage to other property.

Coverage for Homeowners

When it comes to individuals, an agent’s first stop should be its clients’ homeowners policies. Homeowners insurance typically reimburses policyholders for the repair or replacement of their homes or personal property. Typical Texas homeowners policies cover damages caused by fire and include:

  • Dwelling Coverage, which pays for damage to a home. It typically includes coverage for unattached structures, such as fences, detached garages and storage sheds.
  • Personal Property Coverage, which compensates the homeowner if items in the house are stolen or damaged.
  • Liability Coverage, which covers a homeowner if he is sued and/or found legally responsible for someone else’s injury or property damage.
  • Medical Payments Coverage, which may pay the medical bills of people hurt on the homeowner’s property (and sometimes away from the home).
  • Loss of Use Coverage, which reimburses the homeowner for additional living expenses if he must temporarily move because of the damage.

Making a Claim

In the event of a loss, agents should immediately advise their policyholder clients to take steps to preserve coverage. Under most policies, an insured must:

  • Give prompt notice to the insurer;
  • Attempt to protect the property from further loss or damage (if possible);
  • Provide the insurer with a written proof of loss as outlined in the policy. Under commercial policies, this usually must be accomplished within 90 days, but can be extended depending on the circumstances. If an extension is needed, the insured must request one and should obtain the insurer’s permission in writing;
  • Allow the insurer to inspect the property and otherwise cooperate with the insurer;
  • Keep a record of any and all expenses; and
  • Resume business activities as soon as possible.

Agents should immediately provide notice to the carrier and work with the policyholder to assess and document the damage. Agents can also aid in preparing proofs of loss and advising clients how to handle adjuster inspections. Of course, since every policy will include its own conditions, agents and their clients should closely examine provisions to determine the various requirements.

Preparing for Disaster

For clients not yet affected, agents should take this opportunity to assess current coverage and make any necessary adjustments. For instance, if a business has not secured business interruption coverage, it may be a good time to consider that option. For businesses and homeowners alike, agents also may want to confirm the levels of coverage needed. Over time, the value of real property and the contents of the structures may change. The last thing a policyholder needs when disaster strikes is to learn he has insufficient coverage.

Leslie C. Thorne is a member of the Business Litigation and Insurance Coverage practice groups in the Austin, TX, office of Haynes and Boone LLP.

Topics Texas Agencies Profit Loss Property Homeowners

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