Even the best laid plans can go awry in a disaster.
For example, when Winter Storm Uri plunged into Texas in mid-February with unprecedented extreme low temperatures, and snow and ice that lingered for far too long, even organizations that had disaster and recovery plans in place found themselves looking for “Plan B” options when those blueprints didn’t work out, says Arnie Mascali, president of Procor Solutions + Consulting, which specializes in helping clients — with a focus on public entities — with disaster planning and recovery.
Mascali cited as an example a public entity that in advance of the February storm “was prepared. It had disaster planning in place. It had a restoration contractor signed up. Unfortunately, that restoration contractor was overwhelmed with the amount of work that was to be done. … I’m aware of public entities that were basically looking up restoration companies by the dozens to help them.”
Organizations need disaster plans and backup plans, Mascali said. In Texas, all 254 counties in the state were impacted by Winter Storm Uri, not just isolated counties and regions that typically bear the brunt of catastrophe events like hurricanes, hailstorms and wildfires. With “federal disaster zones in almost every county in Texas, every one of the public entities in these counties [were] seeking some kind of response. … Unfortunately, it’s not surprising that some public entities were waiting days if not weeks for an adequate response,” he said.
On Feb. 12, 2021, Texas Gov. Greg Abbott issued a proclamation designating the whole state a disaster area as a result of the winter storm. The disaster designation was renewed on March 15. More than 100 fatalities have been attributed to the extreme weather in Texas alone, and estimates for insured and uninsured losses in the state have reached has high as $130 billion.
Texas has more than 5,000 units of government, or public entities, across the state, according to the U.S. Census Bureau. As with commercial businesses with property that sustained damage from the February storm system, those public entities will first look to insurance for recovery funds, but insurance may not be their only resource, Mascali said.
“Generally, what happens for a public entity is, if it has insurance coverage to a certain amount, that insurance would respond first,” Mascali said. “A public entity would first need indemnification or reimbursement from its insurance company for whatever is covered under its policy.”
There are many reasons, however, why insurance may not provide for a full recovery of losses that a county or a school district might have sustained during a catastrophe, Mascali said. For instance, what was the cause of a particular loss and was it a covered peril? Were there limitations in the policy or was the deductible extremely high?
Agents and Brokers
When a disaster loss does occur, from the very first the public entity needs “to have their broker/agent by their side walking them through the policies that were placed for them. Having that broker/agent as your advocate is immeasurable,” Mascali said.
The broker/agent placed the coverage, helped design the program and should be looked to for help in understanding the terms and conditions of the policy. The answers may not be what the “public entity wants to hear in terms of coverages that are available or limitations of that coverage,” but it’s important that they fully understand what coverages they have before they meet with an adjuster or insurance company representative, he said. That way, “they are prepared. They understand what the intent was of the particular terms and conditions and they are ready to explain how the events that occurred fit within those terms and conditions.”
Documentary evidence is vital and should be broadly inclusive. “Every piece of loss or damage that could even be remotely related to the event” should be documented, Mascali said. “It’s not the time early on to segregate out damage that they’re not certain that it is part of that event. …
“I’ve seen too many times where claims are identified either too late, or it’s too difficult at that point to adequately add the damage to the event,” he added.
Following a catastrophe or disaster loss, it’s important for a public entity — especially if it’s the first time the organization has sustained damage from such event — to visit with their “broker or agent and say, ‘we didn’t foresee a winter storm in February causing power outages, causing freezing and thawing of pipes or fire suppression systems that led to the ensuing loss … We’ve got to think about that going forward,'” Mascali said.
While it may be uncomfortable to learn what is or what is not covered under their policy, this is when the insured has “the opportunity now to see their insurance in action … see what they actually purchased.”
FEMA can be a resource for recovery when insurance falls short. FEMA considers itself to be a last resort, Mascali said. But it works “in parallel with insurance. FEMA will determine the amount of insurance coverage that should have been applied to a particular loss and they would deduct that amount from any eligible amount.”
“Even if it’s just a deductible amount … certainly they can seek reimbursement for that from FEMA,” he said.
He added, however, it’s important to note that “FEMA does not reimburse for business interruption or business income losses.”
He emphasized that organizations should not wait until their insurance claims are resolved to file for assistance from FEMA.
The claims documentation process for public entities “is not much different for whether it’s an insurance company that’s reviewing it or auditing it, or a FEMA field inspector,” Mascali said.
Assistance from FEMA likely will not be immediate, especially after an event that is so widespread like the winter storm that impacted every region in Texas. That’s why organizations should not delay in reaching out to FEMA, Mascali said. There’s the issue of how quickly FEMA can get their field inspectors to the site. “It doesn’t happen like with an insurance claim where insurance adjusters are there days later. There are possibly weeks, perhaps even months later when a FEMA field inspector shows up,” he said.
“We would want commercial policyholders or public entities to make sure they are videotaping, absolutely putting things in writing, document what’s happening now so that a month from now, a week from now, whenever it is that the field inspector for FEMA comes, there’s a record created,” Mascali added.
It’s the property owner’s responsibility to adequately document everything. “I can’t stress enough the value of a video or an iPhone, whatever it may be. [Document] the damage at each stage along the way,” Mascali said. Damage on the day of the loss, what was done immediately to mitigate the damage, the beginning of rehabilitation on reconstruction, all those things need to go in the record, making sure it “tells a story from the day of the loss until that insurance adjuster or field inspector arrives.”
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