Disasters in the last decade–such as flooding in the Midwest,hurricanes along the Gulf Coast and wildfires in California–havecaused catastrophic property damage and business interruptionlosses totaling hundreds of billions of dollars. What's one of thefirst questions a risk manager's boss always asks? “Were wecovered?”

Insurance policiescan play an important role in helping businesses recover from thesetypes of disasters, but only if claims are managed properly.

These policies may provide coverage not only for physical damageto, and loss of property, but also for the extra expenses incurredin dealing with the aftermath–losses resulting from theinterruption of business and during the time of recovery, or evenexpenses incurred in advance to minimize any damage and loss.

To make sure they obtain the full recoveries to which they areentitled, insureds should pay careful attention to these eightlessons learned in connection with disaster-related losses:

#1: Protect Internal Conversations!

Property insurance policies can be long and complicated. Earlyon in the process of loss investigation and adjustment, riskmanagers should consult with their counsel to ensure theyunderstand the nuances of how their policies may apply to theirclaims.

Because most discussions with counsel are privileged andprotected from disclosure, the involvement of counsel will allowinsureds to both legal opinions on the merits of the claim whileprotecting confidential communications regarding the claim frombeing released.

#2: Fully Understand ProceduralRequirements!

Property policies contain a number of procedural requirementsthat must be understood and carefully followed.

For example, “notice” provisions generally require that aninsured alert their carrier within a reasonable time after aninsured event occurs. Therefore, an insured should give notice assoon as possible.

Most policies also require that an insured provide a “proof ofloss, signed and sworn to by the insured” within a certain numberof days after “inception” of the loss.

It is not unusual for the effects of a disaster and theresulting loss–particularly rebuilding efforts and time-elementlosses–to continue well beyond the date specified for submitting aproof of loss.

Insureds should calendar the earliest day for when the proof ofloss is due, therefore, and consider seeking an extension of theproof-of-loss date until some time after the claim is adjusted andboth sides reach agreement on the amount of the claim.

#3: Be Aware Of Client ConfidentialityIssues:

After disasters, many businesses turn to their insurance brokersand accounting firms for advice about how to handle and presenttheir claims. In that context, they have candid discussions aboutcoverage issues, relevant facts and evaluation of damages.

In many states, however, communications between insureds andtheir brokers and accountants are not subject to attorney-clientprivilege or treated as confidential.

#4: Don't Overlook Less-Obvious Coverage!

All coverage starts with a comparison of what has been lost withwhat is covered under the policy. Immediately upon suffering aloss, an insured should review their policy to determine whatcategories of coverage may be available.

Some of the categories of loss covered in a typical propertypolicy are property damage, extra expense, accounts receivable,leasehold interest, rental value, royalties, demolition ofbuildings or structures, decontamination costs, fire extinguishingexpenses, interruption by civil authority and debris removal.

#5: Document Actual Losses!

One lingering area of uncertainty in disaster claims is how todetermine how much an insured actually lost. For this reason, riskmanagers should document all property damage and keep a detailedaccount of all costs incurred to repair or to replace property thathas been damaged.

In many cases, it is wise to use the resources of forensicaccountants to document a business' losses. In fact, the costs ofretaining such an accountant often are covered under thepolicy.

Business interruption claims can be particularly difficult toquantify because they involve estimations and expectations.Insureds should preserve historical sales data as soon as possibleand carefully document all repairs and other financial hardship asa result of the disaster.

#6: Don't Short-Change Your Coverage When MeasuringLosses!

Insureds frequently measure their loss by comparing the incomethey would have generated without the disaster to the income theyactually generated. Under at least some policies, however, this mayresult in a lower insurance recovery than the law permits.

An insured may be entitled to measure its loss based not on whatit would have made if there had been no disaster, but on what itwould have made if there had been increased demand for its goods orservices after the disaster and it had been able to conductbusiness.

#7: Establish A Good Working Relationship With YourInsurer!

Carriers will seek supporting information from insureds to makepayments on claims.

Striking the proper balance between legitimate requests forsubstantiation of a loss and endless demands for more informationrequires good-faith activity on both sides, as well as a workingrelationship with a goal to close the claim with an agreed-uponadjustment.

#8: Don't Lose Your Right To Pursue Legal Action, IfNecessary!

Most property insurance policies have a contractual limitationsprovision–that is, a contract equivalent to a statute oflimitations that states when a lawsuit against the insurer must befiled.

Many policies require that any suit be filed within one year(sometimes two years) of “inception” of the loss. Some states donot count in this period the time from first notice to the insureruntil the insurer conveys its coverage position, while some permitparties to extend the period or waive the deadline.

Additionally, it is not always clear what state's law may governthis issue or how a policy is interpreted. Therefore, don't assumethat the law in the jurisdiction where the insurer is based orwhere the loss occurs is the law that will control.

Learning these eight valuable lessons will spare risk managers,insurers and brokers many problems after a disaster strikes.

Linda D. Kornfeld, Kirk A. Pasichand Barry J. Fleishman are allpartners at Dickstein Shapiro LLP, where they serve together in thefirm's Insurance Coverage Practice, which is chaired by Mr.Pasich. Ms. Kornfeld is managing partner of thefirm's Los Angeles office.