Catastrophe · Insurance · Property Insurance

Hurricane Florence – Property Insurance Tips

Hopefully Hurricane Florence weakens and has a minimal impact on the East Coast of the United States, but if we are not so lucky I wanted to share some coverages that you might have available in your property policy that will help mitigate the financial loss.

  • Debris Removal – often this has a sub-limit but it can help with cleanup costs
  • Catastrophe Allowance – not standard in all policies, but can give you some additional coverage if your limit is not sufficient to replace your property
  • Denial of Access – Can pay Business Income in the event you cannot access your premise because of damage to a nearby property
  • Expediting Expense – an additional coverage that responds when you make temporary repairs to get back into business
  • Equipment Breakdown – can be especially important if your HVAC system gets damaged and you have temperature sensitive product
  • Claims Expense – Can pay for a third party to help you work through the claim, especially important in business income claims
  • Ordinance or Law – Can help pay for demolition, increased cost of construction, loss to undamaged portion of the building
  • Preservation of Property – the safeguards you put in place to protect against loss can be covered
  • Business Income and Contingent Business Income – provides coverage for income lost while your premise is down from a covered cause of loss or a key supplier/customer
  • Civil Authority – provides coverage for loss of income because the government deemed a road or bridge unsafe or closed it due to a covered peril
  • Extra Expense – added cost to relocate

These are just a few examples of where coverage can be found.  You do want to be aware that not all policies will have these coverages, but most of them should be found in even the most basic of policies.

A couple of things to be aware of that can work against insureds.

  • Coverage can be impacted by deductible, particularly wind deductibles that might differ from your regular deductible. In wind prone areas you might incur a percentage deductible instead of a flat dollar amount.  For example, your deductible might be 5% of total insured values subject to a minimum of $50,000
  • Wind deductibles could also impact Business Income and Contingent Business Income
  • Flood is often excluded
  • If you have National Flood Insurance Program (NFIP) coverage they adjust the loss on an “actual cash value” basis, meaning it is replacement cost minus depreciation.
  • NFIP coverage is limited in total limits available
  • If you are in a flood zone but have no NFIP coverage but have flood coverage through your insurance carrier it could be subject to a deductible equivalent to what NFIP would have covered.

I hope this is help that is ultimately not needed.  For those in the states that could be impacted, I wish you the best and hope there is little or no impact to you, your business and your families.

Financial Loss · Insurance · Risk Management

What is a Black Swan Event?

I got a lot of great feedback on my post about protecting yourself from Black Swan events, but numerous people asked me to better define what a Black Swan was and to provide some examples.

A Black Swan is simply an event that you never could have predicted that causes catastrophic damage.  Even when something is predictable the results are typically underestimated.  Some real life examples are the banking crisis in 2008, the Fukushima nuclear disaster in 2011, and 9/11.

Here are some examples of what a Black Swan could like for a company in the Life Science industry:

  • A fire destroys your building.
  • You are a sole sourced company and your key supplier suffers a loss so they can no longer produce your product.
  • You or your key supplier are shut down due to regulatory action.
  • Your patent is infringed upon and you need to defend it.
  • Your CRO’s computer system is hacked into and the data from your clinical trial is stolen or destroyed.

What these examples have in common is that they can all be insured.  The problem is that only the first example is usually covered correctly by your insurance program.  If you are not sure if you have coverage for the other events, it means you probably don’t.  Do you not have coverage because your broker never told you there was a solution or because you made a conscious decision to self-insure?  If it is the former you need to ask yourself if your broker is actually providing value.