Risk & Claim Mitigation Requirements

If 2020 taught us anything, it's the value of being prepared. And just in time. The year 2021 rang in with a vengeance. Increases in COVID-19 cases and sweeping severe winter weather have wreaked havoc on the state of Texas in particular. After freezing weather, fire, hurricane, flood, or windstorm, protecting your property and your belongings may seem like common sense. After all, you want to preserve as much of your property and real estate as possible. You likely also have a duty under your insurance policy to mitigate damage caused by an adverse event. But, being prepared will assist you in making the most of your efforts in the event of a disaster.

Mitigation Actions for Policy Holders

Examples of mitigation include:

  • Plugging a leak or turning off a water valve to stop water flow from a burst pipe
  • Covering your leaky roof or shattered window with tarp to prevent rain from entering your building
  • Drying out damp areas of your home to prevent mold formation
  • Contacting a restoration company to remove wet items, such as carpets, upholstery and sheetrock from your building after a flood, rainstorm, or pipe burst
  • Wiping metal objects dry to keep rust from forming
  • Securing the premises against burglaries and vandalism
  • Pruning a compromised tree to prevent branches from falling on your building or a person
  • Clearing fallen trees and branches from your roof and surrounding land
  • Cleaning up debris from your property after heavy winds
  • Putting out a fire or calling the fire department immediately

While you should do everything within your power to minimize damage, you are not expected to put yourself in harm’s way to mitigate damages. Take efforts to mitigate only after your safety is assured. You are also not expected to take action that is beyond your ability or skill level, such as removing heavy debris. In such a situation, you may need to contact a professional to assist you with your mitigation efforts.

Mitigation of Damage by Businesses
Businesses are also responsible for taking mitigating efforts against damage to property value and income. You may consider:

  • Reopening the business as soon as practicable
  • Continuing your operations from a remote location, if possible
  • Securing your inventory, warehouse and office against water, theft or other types of damage
  • Locating alternate sources of supplies and materials if your vendors sustained damage in the storm

Your failure to mitigate damages to your home or business may reduce the amount of compensation to which you are entitled. The insurance company may calculate the damages that occurred up to the point you could have mitigated. For Example, your insurance company may pay to replace tiles blown off during hurricane-level winds, but deny your claim for water damages arising from the rainstorm that occurred one week later if you did not properly tarp your roof.

How to Prepare for Business Interruption

Your initial meeting with the loss adjuster and their accountants should be an open dialogue where you discuss the impact that the loss has placed on your business and the items that you expect to include in your claim. The adjuster or accountant can identify the documents that they would like to review to support your claim. Since there is no exact list of documents that every adjuster will request, it is important to have this meeting with your insurance adjuster early in the claim process. Ultimately, a policyholder will want to focus on providing enough documentation to answer the questions of the adjuster and their accountants while not overburdening anyone with too much information that may be irrelevant to the claim.

So what is needed?

Here is a sample list of documents typically requested by the insurance company:

  • Monthly Profit and Loss Statements for the previous 12-24 months
  • Monthly and Daily Production Reports for the previous 12-24 months
  • Monthly Cost Accounting Reports for the previous 12-24 months
  • Invoices and Purchase Orders for the previous 12-24 months
  • Monthly Inventory for the previous 12-24 months
  • Payroll for the previous 12-24 months

Photo by Erik Mclean on Unsplash

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