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Risk in Context

Three Strategies for Recovering From Flood Losses

Posted by Robert W. O’Brien August 19, 2016

In the last week, more than 40,000 homes and businesses have been damaged by flooding across Southern Louisiana. At least 13 people have been killed, while thousands more remain in emergency shelters, and roads and other infrastructure remain inaccessible. The Louisiana floods follow flooding in West Virginia in June that led to more than 20 deaths and affected thousands of homes and businesses.

These are just the latest reminders of the potentially devastating effects of flooding -- one of the biggest natural hazard risks for businesses, as it can happen anywhere at any time. While you can’t always prevent the damage, you can take steps to better manage the insurance claims process.

Account for Your Employees and Prevent Additional Property Damage

Communicating with employees immediately following a flood can be difficult, especially if power lines or mobile phone networks are damaged. That’s why you need to have an effective communications plan in place before disaster strikes; it should address how to confirm their safety and share updates with them.

When the event is over and you return to the property, be aware of potential new dangers — for example, wildlife that may have sought refuge inside. And make sure power is turned off to avoid shocks and surges.

Understand Your Insurance Coverage

Before you file a claim, make sure you understand the deductibles, sublimits, and other terms and conditions in your property insurance policy. You might also consider excess flood insurance limits along with additional coverage through the National Flood Insurance Program (NFIP). Be aware of any special notice provisions that may be present in both your property and NFIP policies, which may have different requirements.

Document Your Losses

Document any property damage quickly so you can provide your insurer with as much information as possible. For example, take photos or video of any standing water as soon as it’s safe to do so. And record progress as the water recedes, so you can more clearly capture damage left in the water’s wake.

Also, prepare a written evaluation of your losses with as much documentation as possible. Among other things, this should include:

  • Fixed asset register and depreciation records.
  • Your most recent physical inventory.
  • Payroll records for employees used in cleanup and recovery, including the specific hours worked and tasks performed as well as pay and overtime rates. A unique accounting code should be used to capture all costs associated with recovery efforts.
  • Purchase orders or estimates of all contracts for repair or replacement of damaged assets.
  • Profit and loss statements for two years prior to the event for all affected locations.
  • Budgets and forecasts prepared before the loss to depict anticipated loss results.

Robert W. O’Brien

Robert O’Brien, managing director of Marsh USA, Inc. is a senior property claims officer of Marsh’s National Property Claims practice.