As is the case after any natural catastrophe, businesses affected by Superstorm Sandy promptly turned to their insurance carriers for help. Many insurance policyholders were taken aback by the significant obstacles insurers placed before them in responding to their property and business interruption insurance claims. Sandy was a wake-up call for policyholders in the Northeast, many of whom previously had perceived the risks associated with hurricane, flood, and storm surge damage as inconsequential. Given that the National Oceanic and Atmospheric Administration and other organizations have predicted “extreme activity in the Atlantic” this hurricane season, with “more and stronger hurricanes” expected, there is no better time to review your property insurance coverage. The discussion below provides an overview of some insurance coverage-related issues facing commercial policyholders after a catastrophic storm.

Review Sub-limits and Deductibles for “Named Storm” and “Flood” Coverage

Commercial policyholders should be aware of the distinction between coverage for “Flood” perils and “Named Storm” perils. This post-Sandy issue arises out of property insurers' attempts in recent years to limit their exposure to flood risks in Northeast coastal areas by reducing policy sub-limits and increasing deductibles. While many insurers restricted coverage for “Flood” perils in this fashion, in many cases they did not include similar limitations for “Named Storm” perils. Many policies categorize certain counties in New York, Connecticut, and New Jersey as high-risk flood zones, but low-risk areas for Named Storm perils.