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SEATTLE-Many commercial property insurance buyers in the Northwest are finding coverage for flood and storm losses despite policy exclusions for such perils.

It can be especially important to investigate all possible coverage avenues because companies hit by natural disasters sometimes initially don't think they have a claim, then find more extensive losses when they start repairing what was thought to be minor damage.

Most losses from flood and other natural disasters are excluded from commercial property policies, explained William A. Johnson II, property damage claims specialist who coordinates the Western regional services for Deloitte & Touche from San Francisco.

"But endorsements are available for some risks," he said.

Businesses that have already suffered a flood loss may find that endorsements purchased with a different type of loss in mind provide indirect flood coverage.

For example, "even if a policy excludes coverage of flood damage, the ingress/egress (endorsement) might provide some financial relief," said Shellie Landa, Western region director of business insurance and a certified insurance adjuster at Deloitte & Touche in San Francisco.

An ingress/egress endorsement pays for losses when a flood or other event denies employees and customers access to a business. "If a bridge washes out or a road is closed, a business can often be crippled," she said.

Besides endorsements, businesses in designated flood plains may be able to obtain additional flood insurance from insurers if they also buy coverage from the government-run National Flood Insurance Program.

Most major insurers offer such commercial coverage in several combinations, such as on a coinsurance or excess basis, Mr. Johnson explained.

Companies have two other ways to get coverage for business interruption triggered by natural disasters if they have not sustained real property damage themselves, said Tim Owen, vp in Seattle at Maxson Young Associates Inc., a claims adjusting firm that specializes in commercial insurance.

Included in property forms is coverage for contingent business interruption, which applies when a business is unable to operate because of damage to one of its suppliers, he added.

There also may be some standard business interruption coverage when access to a business is prohibited by an act of a civil authority.

For example, a Pennsylvania company received payment from its property insurer to cover the payroll of its employees who were unable to come to work when the State Patrol shut down a freeway during the February 1996 storms, Mr. Owen said.

Several Leavenworth, Wash., businesses are filing business interruption claims sustained when a highway pass was closed for two weeks early this year due to snow, cutting off access to the town so that "no one from Seattle could get over," he said.

Such losses would be calculated based on the revenues the businesses would have generated if civil authorities hadn't closed the road, he said.

But not all insurers will pay out in these situations.

A spokesman for Chicago-based CNA Insurance Cos. said CNA's policies would not respond if police were to bar traffic to a business because of flooding, though "some difference-in-conditions policies may respond." CNA so far has received about 600 claims, totaling $18 million, from the Northwest storm, he said (BI, Jan. 13).

Even if an insurer initially denies a business interruption claim, a policyholder may be able to win coverage, Mr. Owen said. For example, several hoteliers obtained coverage after Mount St. Helen's erupted in 1982, spewing volcanic ash onto their parking lots. Initially, the hoteliers thought the claims would not be covered.

Insurers also have paid claims by East Coast hotels that lost business during hurricanes when potential patrons could not reach them, he said.

"Sometimes the insurance adjuster will suggest there's no coverage available," said Mr. Johnson of Deloitte & Touche. "But policies are always subject to different interpretations."

In many cases, policyholders don't file claims even if they are insured, thinking the damage isn't substantial enough to exceed the deductible, other insurance experts note.

Microsoft Corp. closed its campus one day from the Northwest snow based on state patrol advisories, "but we never really thought of putting in a BI claim or extra expense (claim)," said Scott Lange, director of risk management for the Redmond, Wash.-based software maker.

"To have business interruption, I guess, you would have to not be able to ship product, and certainly that would not have affected us like it would a small business that may have lost sales for the day," he said.

In cases that do involve property damage, policyholders should be sure to have an expert survey the damage before deciding not to file a claim, Deloitte & Touche's Ms. Landa said.

Policyholders shouldn't settle their claims without thorough damage assessments, she warned. For example, a policyholder may underestimate the amount of damages when its insurer prepares the "scope of damages" assessment if the damages are not analyzed by a trained eye. It is easy to overlook crucial damage that will only show up months or years later, explained Greg Higgins, Northwest area director of the business interruption practice of Deloitte & Touche.

Floods usually do not appear to destroy property; things just "need to be cleaned up," he said. "But the destruction that does occur," such as pipe corrosion, "can show up much later."

Estimates also may be low if the adjuster or risk manager fails to consider upgrades that may be needed once repair begins, Mr. Johnson said. "The uniform building code may require all parts of a facility to be code upgraded, even if not all of it is damaged."

In some cases, policyholders that try to mitigate their losses may diminish their insurance recoveries if they fail to document their costs carefully.

Apple products company Tree Top Inc. in Selah, Wash., tried to reduce its losses before its insurer arrived but was careful to document its expenses.

"Everyone was in agreement that we needed to do what we could to mitigate these losses," even though the insurer couldn't get an adjuster to the site for a couple of days due to inclement weather, said Scott Taylor, corporate cash and risk manager.

Two of Tree Top's warehouse facilities suffered partial roof collapses, but the pallets of packaged apple juice helped hold up the roof in some places, he said. "Since we're insured for the sales price value, we would have had a $9 million loss," he said.

By salvaging, cleaning and repackaging the undamaged bottles and cans of juice, the company's storm claim fell to just under $4.7 million, Mr. Taylor estimated.

Tree Top buys property and flood insurance from Wausau Insurance Co. The storage facilities are covered under an endorsement to the policies.

But Tree Top is more the exception than the rule, said Ms. Landa.

"After a loss, a company is forced into a position where it has to make business decisions quickly," she said. "It's important that the policyholder look carefully at what happens following the loss to determine which expenditures may be covered. Unfortunately, they don't always make claims for all of the coverage they are entitled to," she said.