(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims).
Last weekend, I took a little break from blogging to spend time with my parents and siblings to reconnect and reinforce bonds that sometimes get loosened in the life of a dedicated young attorney, who perhaps wants to accomplish too much, too soon in life. While I learned that family bonds are unbreakable and that I can accomplish anything I want in life, Chip, who I am convinced has a clone, blogged about an interesting topic in business interruption claims that generated some debate.
Ideally, commercial interruption claims should be handled by both, the insured and the insurer, in swift and skilled manner. The expediency in which a commercial interruption claim is handled could make or break a business right after a loss. In last week’s blog, Chip noted that:
My experience is that many insurance company adjusters lack the thorough understanding of finance, business management, and accounting required to properly adjust commercial business income and extra expense claims. Most commercial adjusters never do, and lack the skill to do, the income and extra expense calculations themselves. Instead, usually after a delay, the business income claim is referred to insurance accounting firms that provide the analysis only of the numbers, without also having the business operational skills needed to properly determine the amounts owed.
While there may be many talented commercial insurance adjusters out there with the necessary skills and experience who can avoid this situation and, like I, can accomplish anything they want in life, the reality is that some commercial interruption claims are delayed because of carrier mishandling. This can, in turn, lead to a long and protracted legal battle.
For example, in Omaha Paper Stock Co., Inc. v. Harbor Ins. Co., 445 F.Supp. 179 (D.C. Neb. 1978), the court held that:
Where attorney for insured under business interruption policy wrote to adjusters requesting that they advise insured by letter as to any matter which would expedite resumption of operations, but adjusters never responded to the letter nor verbally accepted responsibility to inform insured of any failure by insured to perform as required under the contract, insured could not rely on silence as an acceptance of its attempt to shift the burden of responsibility under the due diligence clause of the contract, and insurer was not estopped from contending that any delay in resuming operations was attributable to lack of due diligence by the insured.
Further, in Hampton Foods, Inc. v. Aetna Casualty, 787 F.2d 349 (8th Cir. 1986), the insured was forced to vacate its building due to an imminent danger of collapse. Coverage was denied, but the trial court ruled in favor of the insured. However, the parties still quarreled over the business interruption calculation. The carrier argued that the period of restoration should be the amount of time it would have taken Hampton to reenter business, had it received payment from Aetna initially. The appellate court disagreed with the carrier and, relying on Omaha, held that the theoretical period of restoration should be reasonably extended because the delay in recovery was due to actions of the insurance company.
One of my mantras in commercial interruption claims is that policyholders should always consider retaining experts to present their claim to avoid the common dilatory pitfalls in this area of the law. Glad to be back. Stay tuned for more.