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Hurricane claims still in the pipeline

Hurricane claims still in the pipeline

Hurricanes Harvey, Irma and Maria caused widespread damage across the southeastern United States and the Caribbean, and many of the resulting claims are still being processed.

While insured loss estimates for the hurricanes are in the range of $80 billion to $90 billion, business interruption and contingent business interruption claims in particular are still being assessed as some areas hit by the storms struggle to recover.

“We are doing work handling and reviewing claims for each of these storms,” said Derek Royster, partner with forensic accounting firm RGL Forensics L.L.P. in Charlotte, North Carolina.

“We are seeing and handling business interruption claims,” said Kent Adams, regional managing partner of the Wilson Elser Moskowitz Edelman & Dicker L.L.P. offices in Houston and Beaumont, Texas. “We’re seeing the claims, but not the litigation. That’s a good thing.”

So far, storm claims are largely being resolved outside of the courts, said Robert Fisher, a partner with Clyde & Co in Atlanta. “At this time, we are seeing fewer claims matriculating to a contentious state or to a level at which claims individuals and professionals see a need to elevate to their outside counsel,” he said.

Outside counsel sometimes become involved with the claims process before or in the absence of litigation.

“It is not uncommon for us to represent an insurer in connection with coordinating boots on the ground such as adjusters and third-party experts where necessary,” Mr. Adams said.

Claims volumes are higher given the compound nature of the events.

“There’s clearly a higher volume of claims that are being submitted arising out of the successive storms,” said Mr. Fisher. “The volume is higher than in Sandy and Katrina. You’ve got more geographic area that was impacted.”

Claims and losses have many causes.

RGL Forensics is handling large claims with substantial property damage as well as smaller losses with shorter interruption periods due to off-premises power interruption and civil authority, Mr. Royster said.

“We’re seeing more larger physical damage cases down in Puerto Rico and the Caribbean, whereas in Florida there’s a larger volume of losses with short interruption periods, whether from lost power interruption or a civil authority order,” Mr. Royster said. “So it’s a little different for each storm.”

Supply chain disruption has also become an issue.

“Then we’ve seen some contingent business interruption cases in which a supplier has been impacted as a result of one of the hurricanes, and the insured is a downstream business with contingent business interruption coverage and their business has been affected as a result of damage to the supplier,” Mr. Royster said.

“Some hydrocarbon storage facilities and chemical plants that are fed by suppliers and serviced by vendors have been down or out of commission or otherwise interrupted, and that has rippled back through the supply chain,” Mr. Adams said.

Power problems in Puerto Rico exacerbated a dire situation, but some parts of the island are now said to be operational and waiting for visitors to return, leading to hotel occupancy and other losses.

About 69.4% of normal peak load and 57% of customers have been restored, and all 78 municipalities are at least partly energized, according to a Jan. 3 Event Summary Report on Maria and Irma from the U.S. Department of Energy.

“For the most part, the physical damage portion has been fixed or is in the process of being fixed,” said Christian Ryan, head of the U.S. hospitality, sports and entertainment practice for Marsh L.L.C. in Dallas. “Many of our clients are fully functional, up and running,” but lack robust occupancy.

“One problem hotels in Puerto Rico are going to face is occupancy,” Mr. Ryan said. “Are people going to choose Puerto Rico for a vacation or for a conference in 2018? I think there’s a perception issue — exacerbated by the media — that the island is not ready as a whole. A number of hotels are up and running again. The issue is whether people will come.”

Occupancy and rate claims can extend beyond a year based on policy language.

“Business interruption claims are still being tallied for some hotels in Puerto Rico. Typically, policy language provides coverage for lost revenue from lack of room occupancy for in excess of a year after filing a claim, although some policies may only provide up to six months of coverage,” Mr. Ryan said. “When I look at the business interruption component of this, I think we’re going to have a long road to stabilization on room occupancy and rates.”

The extended interruption of power may lead to conflicts in some claims resolution.

In Puerto Rico, Mr. Fisher has already seen time-element issues where the extended power outage caused a tension between standard time-element and off-premises power interruption coverages, where there was a delay in accessing and beginning to assess damages and make repairs, he said.

Tourism makes up 8% of the island’s gross domestic product, which is dominated by manufacturing at 47.3%, according to Peter Sousounis, assistant vice president and director of meteorology for AIR Worldwide in Boston.









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