Before The Storm: Four Steps Businesses Should Take Now To Protect A Future Standard Flood Insurance Policy Claim

September is peak hurricane season. Even in a quieter year, the best time to address flood-claim documentation and insurance issues is before severe weather threatens the property. Once property is damaged, it can be difficult—or impossible—to recreate the evidence needed to establish its pre-loss condition, value, and contents.

For businesses insured through the National Flood Insurance Program (“NFIP”), understanding the Standard Flood Insurance Policy (“SFIP”) and its requirements is especially important. As discussed in our prior article, Flood Claims Under the SFIP: How Failing to Comply with Strict Policy Deadlines Can Sink Your Flood Claim, NFIP claims are governed by strict federal requirements and deadlines. Preparing before a loss can put a business in a much better position if a claim becomes necessary.

Here are four things in-house counsel, risk managers, and business owners should be doing now to protect a future SFIP claim:

1. Know what the SFIP policy covers—and what it does not.

For each insured property, determine whether the SFIP provides building coverage, contents coverage, or both, and confirm the applicable limits and deductibles. Also make sure the declarations accurately reflect the insured entity, property, and current use of the building.

Why does this matter? Reviewing coverage before a storm gives the business an opportunity to identify gaps while there may still be time to address them, including through additional or excess flood coverage.

2. Create a pre-loss record of the property.

Take current photographs and videos of the exterior and interior of insured buildings, including equipment, machinery, furniture, inventory, and other valuable contents where contents coverage applies. For significant items, record identifying information such as make, model, serial number, quantity, and location.

Why does this matter? Post-storm photographs show damage, but pre-loss photographs help establish what was present and its condition before the flood. If there is later a dispute over whether deterioration, a prior loss, settlement, or the flood caused damage, contemporaneous evidence can be important.

3. Preserve the records you may need to prove the loss

Maintain accessible copies of documents that may later be needed to substantiate a flood claim, including invoices, equipment schedules, inventory reports, receipts, renovation records, photographs, maintenance records, building plans, and records of significant repairs, including prior flood repairs.

Those records should not exist only at the insured location. If a flood damages paper files, computers, or servers, the business could lose both the property and some of the evidence needed to support its claim.

Why does this matter? FEMA’s claims process may require documentation such as bills, receipts, photographs, repair estimates, and related records. The easier those materials are to locate after a storm, the easier it will be to substantiate the claim.

4. Decide who will manage the claim before the storm arrives.

A significant flood loss may immediately involve facilities personnel, operations, accounting, risk management, insurers, adjusters, contractors, and legal counsel. Waiting until after the event to determine who is handling what can create gaps in documentation and communication.

Businesses should identify in advance who will report the loss, communicate with the insurer and adjuster, collect supporting documentation, and monitor NFIP requirements and deadlines. As explained in our prior discussion of SFIP claim deadlines, those requirements can be unforgiving. Responsibility for tracking them should be assigned before, not during, the chaos following a significant loss.

A flood claim is built in large part on evidence that existed before the flood. Businesses that understand their coverage, document their property, preserve important records, and establish a claims-response team before a loss occurs will be in a much better position to present a complete and well-supported NFIP claim if the water does rise.