NEW ORLEANS -- If retailers only thought a fire, flood or tornado could shut down their stores, then at least one Louisiana lawyer asks them to consider the fire at the refinery that could cut off supply or the bridge that washes out and prevents customers from coming. That's the difference between casualty insurance and business-interruption coverage.
Speaking at the recent CSP Leadership & Crisis Prevention Forum sponsored by BIC Corp. and Federated Insurance, Collier Graham of Wise Carter Child & Caraway, Jackson, Miss., said that retailers need to fully understand their coverage in that many of the true reasons they suffer damage or loss of livelihood goes beyond the physical destruction of property.
"What if a hurricane hit your refinery and you can't get the contracted, refined fuel?" he asked the 28 attendees. "If you do not have a rider or endorsement or if it's not in the standard policy, you're not [covered]. I have advised a petroleum-retail client … to sue his broker because the broker said he didn't need it or was covered when he wasn't."
Going into some of the basics involved, Graham said that when a business is forced to shut down, certain costs begin to accrue, including salaries, utilities, rent and other fixed costs--all of which a business is entitled to insurance reimbursement.
One unforeseen example would be if power went out during a hurricane. A business could be up and ready to run within a day, having either been untouched or only slightly affected in the physical sense. But power to the region may be down for a month.
"Are you covered? Maybe. You might have a separate endorsement for loss of utility," he said. "Where I live we have awful infrastructure. We're too poor to maintain it. Our sewer pipes are so bad [that after a storm], we lost water and sewer for a better part of the month."
In addition to understanding what the "loss potential" is for a business, retailers need to have an accounting system that will be able to prove loss. Graham said a lot of factors that go into loss calculation.
Generally speaking, he said it's the net profits adjusted seasonally from the previous year. But that could be a plus or minus. For instance, he said the offshore drilling rig that spilled for weeks in the Gulf a couple of years ago certainly caused damaged to hundreds of businesses. Some were covered and some not.
He said a lot of the damage that occurred was not from oil washing onto the beach. It's that tourist didn't come. For many businesses, that loss was not covered. "But if you had a condo or Hilton had oil on its beach, you had a covered loss," he said. "If a c-store was near the beach and suffered no [physical] … then you had no coverage."
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