2011 has been a year filled with global natural disasters, marked earlier by the Japan earthquake and more recently by the Thailand flood. These events are continuing to have financial consequences for companies around the globe with facilities, trading partners or clients in the impacted regions. First-party property and business interruption insurance is a critical financial resource for companies suffering losses because of natural disasters.
The insurance claim process for natural disaster losses typically involves company representatives with financial and risk management responsibilities. However, in-house lawyers can also help the company protect its insurance recovery effort.
2. Choice of law: Master and local policies frequently include choice of provisions that designate the law or forum of the country in which the policy was issued. Decisions regarding which country’s law best protects the company’s interests in the case of natural disaster losses should be made early in the claim process..
Certain countries have developed insurance coverage law that is less favorable to policyholders than the law that has been developed in the United States. Additionally, not all countries allow for jury trials or significant discovery. Depending on the issues it may be important for the policyholder to protect its ability to litigate in a particular jurisdiction under a particular law. This means that the policyholder should evaluate potentially applicable laws and decide under which policy to pursue coverage and how to frame arguments to seek to ensure application of that law.
4. Insurer communications regarding the claim: Property and business interruption claims are often complicated. It may take months for a company to fully evaluate the nature and extent of its losses, sensitive coverage issues and the right strategies for maximizing coverage. Communications with the company’s insurer(s) can later end up as exhibits should coverage litigation ensue. Thus, in the first instance, a limited number of individuals should be designated to communicate with the insurer(s) regarding the claim.
Counsel should coordinate with those individuals regarding the information that is provided to the insurer(s) to ensure that the information provided is consistent, and seek to reduce the risk that early communications, before the company has fully evaluated its claim, may later be used against the company to support a coverage denial. Early insurer communications should be factual, there should be no agreement regarding legal issues such as the number of “occurrences,” applicable sublimits or deductibles, or how or whether policy provisions or exclusions apply until counsel has decided the approach that best protects coverage.