Storm and Flood Damage – Policyholder Tips

The ABI estimates that insurers will pay out approximately £560 million to customers affected by Storms Babet, Ciaran and Debi which occurred in late 2023. The beginning of 2024 brought with it 649 flood warnings across the UK due to Storm Henk and with Storm Jocelyn becoming the 10^th storm in five months to hit the country, it’s probably an opportune time to re-visit some top tips for policyholders.

Amongst those affected by storm and floods are commercial policyholders who, in addition to any damage caused to their premises will also suffer business interruption losses.

The Flood Flash Commercial Risk Report 2022 noted that:

• Business properties are twice as likely to be at risk from flooding compared to the average British residential property.
• Over 1 in 4 of those who have flooded in the past 10 years experienced a prolonged period of business interruption.
• 40% of small businesses close permanently after catastrophic flooding.
• Over 436,000 (27%) of commercial properties in Britain have at least a low flood risk. Almost 300,000 (18%) have a moderate risk and 236,000 (14%) are at significant risk of flooding.

Businesses affected by the severe weather should aim to take the following steps to deal with any insurance claim arising because of storm or flood damage:

• Check the terms of your current insurance policy to satisfy yourself that risks such as storm and flood damage are covered;
• Notify insurers immediately of any loss suffered and, in any event, within the required notice period as specified under the policy terms;
• Collate evidence of the claim, including taking photographs and video footage of any damage;
• Consider whether to instruct a loss assessor to help liaise with insurers (and their respective third parties), and to assist with preparing and quantifying any claim;
• Deal with potential claims from suppliers/customers in the event of business interruption;
• Don’t discard damaged items or stock unless insurers have agreed they are beyond economic repair;
• Consider whether steps are required to secure the premises, pending remedial works; and
• Consider what can be done to try and mitigate losses, in accordance with insurers’ requirements.

In addition, all commercial policyholders should take this as a timely reminder of the importance of having adequate insurance cover in place and are advised to:

1. Check the terms of any current insurance policy to ensure that the policy provides comprehensive storm and flood damage cover and check for any specific exclusions;
2. Review the sums insured under the policy to confirm that:

• • the premises have been insured for the full reinstatement cost (including professional fees and site clearance), rather than the market value;
  • there is adequate business interruption cover in place to compensate for the shortfall in gross profit, together with payment of any increased working costs
  • any stock is insured for its cost price, to take into account seasonal fluctuations in price;

3. Give careful consideration to the length of the indemnity period under the business interruption section of the policy, to ensure that the business is afforded sufficient time to recover to the position it would have been in, had the insured risk not occurred;
4. If the property is leasehold, consider whether the landlord has taken out sufficient insurance to cover the building against flood damage and whether it is a term of the lease that the rent will be suspended whilst the building is reinstated; and
5. Review your overall business continuity plan, including supply chain resilience.

If insurers have declined to accept a claim for storm or flood damage or if your business is found to be underinsured following an insurance claim, then please contact Nicola Maher or another member of the insurance litigation team at Edwin Coe and we can discuss your options.

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