The 2017 and 2018 wildfires in California destroyed countless homes and had a huge impact on businesses. Hundreds of AFM clients, including nursing homes, hotels, apartments, restaurants and shopping centers, suffered losses. From an insurance point of view, there are many lessons to be learned from these losses.
The biggest lesson is that just because a natural disaster happens one year, does not mean it cannot happen again the very next year. In California in 2017, 9,133 fires burned 1,381,405 acres, including more than 10,000 structures. It was one of the worst wildfire seasons on record. That was until 2018, which brought a total of 8,527 fires that burned an area of 1,893,913 acres and destroyed or damaged more than 23,000 structures in California. Events such hail, hurricanes, wildfire and flood are unpredictable. There are peak seasons, but these events can occur many times in a year or several years in a row in the same geographic region. The time to prepare is now.
Coverage triggers for emergency evacuation
Another lesson is that different policies have different coverage triggers for emergency evacuation expense. While some policies require an order of civil authority before emergency evacuation coverage kicks in, others do not. AFM's emergency evacuation expense coverage can be utilized by the client's own management and an order of civil authority is not necessarily required.
AFM's proVision's healthcare endorsement covers “the reasonable and necessary costs incurred by the Insured for the emergency evacuation and subsequent return of patients, tenants or lawful occupants when the Insured's management, using reasonable discretion, or a civil authority orders the emergency evacuation of a described location as a direct result of immediately impending physical loss or damage of the type insured by this Policy.” Emergency evacuation expense coverage is also part of the proVision's real estate, education and condominium endorsements. These industry-specific endorsements can be added to proVision policies to customize coverage and fit businesses' specific needs.
BI period of coverage
Another lesson is that the period of business interruption coverage varies with different insurance policies.
For example, in AFM's proVision policy under Protection and Preservation of Property (PPP), there is a specified period of business interruption coverage that extends 48 hours prior to the insured taking the first reasonable action of temporary protection of property, and then for 48 hours after that first action. The rationale is that many businesses either need to begin the process of shutting down or evacuating residents and/or guests before they can begin to board up windows, doors, etc. Then, unless physical damage is sustained, the policy anticipates a day or two to remove the temporary measures and resume operations.
Partial payment under ingress/egress
Partial payment under ingress/egress is another coverage many AFM clients benefited from during the wildfires. For example, in the 2017 Napa wildfire, AFM paid a number of business interruption claims where the facility (hotels, restaurants, etc.) was open but the main access roads into the area were impacted by fire damage from the wildfire. Many hotels and restaurants suffered loss of customers despite being fully open.
The proVision's ingress/egress coverage states: “This Policy covers Business Interruption coverage loss incurred by the Insured due to the necessary interruption of the Insured's business when ingress to or egress from a described location(s) is physically prevented, either partially or totally, as a direct result of physical loss or damage of the type insured to property of the type insured whether or not at a described location.”
Not all insurance companies offer partial coverage, as AFM does.
For more information about how AFM's proVision policy will respond in the event of a loss, please contact your account team about attending a policy workshop.