GREATER EFFECT OF HURRICANES

SUMMARY

GREATER EFFECT OF HURRICANES IN BUSINESS INTERRUPTION CLAIMS

In particular, the parties were in dispute, and the court has addressed whether business interruption claims assessment should take into account the effect of the hurricane (or other catastrophic event) has on the surrounding region, positive or negative, including the impact on policyholders and competitors to the local economy. Some courts have rules that the calculation of business interruption claims must take into account the real – world economic conditions that exist after, and caused by the hurricane. In other words, the assumption should be that exist after, and caused by the hurricane. In other words, the assumption should be that the hurricane hit, but did not damage the property of the policyholder. 

Other courts, however, have decided that the calculation of business interruption should assume that the hurricane had never happened at all and thus should be based on the pre – loss projections, and economic conditions.If the hurricane give affected to policyholder’s competitors, therefore, considers as the greater effects of the hurricane that may allow a policyholder to recover profits that it would have earned had it, like Bubba Gump Shrimp. He would be able to continue operating his business after interrupted the business from hurricane damage. On the other hand, if the hurricane is effect to the local economy, it will result in decreased demand for goods or services to policyholder. 

So, business interruption claims of policyholders can be reduce or negate. “Due consideration shall be given to the experience of the business before the Period of Recovery and experience thereafter had no loss occurred”, this interpretation phrase has been analyzed and given focus by courts for hurricane Katrina issue. In response to these cases, the insurance industry starting to crafting policy language that addresses the situation where a larger (or lack of) impact of hurricanes or other perils that will be factored into the evaluation of business interruption claims. Variations of this language now exist in the market today.

Cases Construing the “Had No Loss Occurred” Policy Language

“There is no loss has occurred”, this issue are measured in the context of the policy language that requires for business interruption losses to policyholder. Some of these cases examining the appropriateness of post – event economic conditions have addressed this issue. There is an example for relevant business interruption that commonly appears in business interruption insurance provisions:In determining the loss below, due consideration shall be given in order to earning business income before the date of the damage or destruction and the income possibilities after that and no loss occurs.

Cases Declining to Considers the “Greater Effects” of the Storm.

Some courts have interpreted this language to require that the losses for policyholder must be measured as the event trigger is not the case at all. Thus, courts have ruled that the policyholder cannot recover for losses incurred as a hypothesis would have earned during the recovery period or the occurrence of the events taken and caused widespread damage but no property is damaged policyholders. Although the court said pre – storm losses policyholders inconclusive establish that it would not be profitable after the storm, it concluded that “in the absence of loss” policy language reflects the intent to exclude from consideration after the loss of the economic situation caused by the same event causing property damage for policyholders. 

Other courts also have adopted this rationale in holding the claim of business interruption, policyholders should not include this amounts obtained as a result of the economic situation after the damage caused by the event to promote the same cause business interruption losses policyholders. The court also explained that the meaning of “loss” and “incident”. There are separate and district terms. But both term “related intertwined under the language of the provision of business interruption”.  Courts also held that this language policy prohibits insurance carriers from relaying on the economic situation after the damage caused by a covered peril to reduce business interruption recovery policyholders.

Cases Consideration the “Greater Effect” of the storm

On the other hand, at least one court has interpreted the meaning of “loss” for property damage suffered by policyholder, not the event or occurrence that causes the property damage. The court agreed with the policyholder that holding the policy required a person to “see how situation for policyholder as if each individual. The court found that “loss” necessarily must have the different meaning of “occurrence” which clearly referred to the hurricane, and give a reason that if the parties had intended to exclude economic condition after the hurricane from consideration the provisions evaluation of business interruption policy will use the term “occurrence” rather than “loss”. 

The court also rejected the argument windfall from insurers, explained that the stores policyholders will be reaped profits after the hurricane, and that these losses are exactly what the policy is required to cover. A several other court, constructing different policy language, also has allowed policyholder to recover increased income or profits they would have earned during the recovery period due to better business environment created by the perils damage their property. There the court held that the policyholder, which was flooded causing business interruption losses, is entitled to recover lost profits it would have increased consumer demand were it to continue operations after the storm. The policy therefore “clearly” “protected” profit opportunities due to increased consumer demand created by flood.

Policy Language Specifically Addressing Post – Loss Economic Condition Caused by the Event triggering coverage

In response to the dispute and the case law on the impact of a greater consideration of a hurricane or other perils in the vicinity, some business interruption provisions now include language specially address whether the post-loss of economic conditions should factor into the calculation of business interruption losses policyholders. There are variations of this language. The court also stated that the policy “may not recover for loss of business income due to wind damage suffered by the customer and competitive business. 

Conversely, any increased in demand or reduction in supply caused by floods customer competitors in other real estate is a factor that allowed the calculation of business income is missing”. Furthermore, the court held the policy’s flood exclusion was inapplicable. This is because the exclusion is relevant only to determination of the coverage and there also was no dispute that the policy covered wind damage. Furthermore, the policyholder was permitted to recover some additional lost income due to arising rental rates which result from flooding.

In additional, some policies state that the “probable experience” of the business during the recovery period will consider any increasing and decreasing in the demand for the policyholder’s goods or services during the recovery period , whether increase or decrease is from the same event which caused the physical loss that cause the business interruption coverage.

The important take away from the “greater or not greater effects”, the policy language will included in business interruption valuation provisions can be determinative for the purpose to review this language when buying or renewing the policies. The policies particularly different variants of this language exist in the market place. Moreover, companies should avoid buying policies that allow carriers to reap the benefits of an economic downturn.