The ongoing tragedy unfolding in the current brushfire in the city of Laguna Niguel is a reminder of the importance of having an emergency plan in light of mandatory or forced evacuation orders from civil authorities. The threat of wildfires, hurricanes, rising floodwaters, and other calamities that provide homeowners and business owners with advanced notice often trigger mandatory evacuations due to orders from regulatory agencies.
Experiencing this so after wildfire season has concluded is a sobering reminder for insureds, consumers, and business owners to remain ever vigilant and know the ins and outs of their policies. Many homeowner’s policies provide coverage for forced or mandatory evacuations under certain conditions. Business or commercial policies also tend to have coverage for financial or income losses when civil authority prohibits access to the business premises. Having a professional on your side to help evaluate your options and taking the right steps is critical to proper reimbursement of covered expenses.
Regarding homeowner’s policies, depending on the specific insurer and policy, most insurance contracts have the language to the effect that if a civil authority prohibits your use of the “residence premises” as a result of direct physical damage to neighboring properties from a covered peril, then coverage is triggered for “Additional Living Expense” (“ALE”) or “Fair Rental Value” (“FRV”) up to a certain period generally ranging from fourteen to thirty days.
Neighboring properties means premises that are insufficient proximity to your residence premises that present a reasonable risk that the fire affecting the neighboring properties could endanger your own residence premises or the safety of its occupants while there. Coverage is available for maintaining one’s standard of living or the fair rental value if the residential premises are rented to others.
For affected homeowners, under the mandatory evacuation or civil authority provisions, an insurer is generally obligated to pay it’s insured under the ALE standards for any reasonable increase in living expenses incurred in order to maintain the household’s usual standard of living. Similarly, the FRV coverage is triggered if a rented property is no longer accessible due to a civil authority order. If you are unable to use your home or rental property due to the mandatory evacuations, these coverages apply. Indeed, some insurers may permit policyholders to make claims under this coverage even if they are not located next to neighboring premises that are being directly damaged by a covered loss.
Accordingly, if a mandatory evacuation is ordered, then coverage should be available for ALE or FRV depending on your specific circumstances. In order to make a claim, it is advisable to follow the mandatory evacuation order, get you and your family, loved ones, and pets to a safe place, save all your receipts for hotel, lodging, meals, track extra mileage, maintain your leases and abeyance of rents, or evidence of other costs during the civil authority evacuation period and notify your insurer about your claim promptly.
Under most business policies or commercial coverage forms, an insurer will be responsible for the actual loss of Business Income (“BI”) and insured sustains or if the insured incurs any Extra Expenses (“EE”) caused by the action of civil authority that prohibits access to the insured premises due to direct physical loss to neighboring properties that are in proximity by a covered peril.
BI generally means (1) net income or loss (before income taxes) that would have been earned or incurred and (2) continuing normal operating expenses incurred, including payroll, and (3) less any saved expenses. EE, on the other hand, means those necessary expenses one incurs during the period of restoration that would not have been incurred without direct physical damage from a covered loss. The EE is normally intended to offset or minimize the suspension of operations or reduce the BI loss; albeit, pure EE forms may not have such limitations.
For business owners or commercial enterprises, the coverage for BI under the civil authority provisions begin a certain time period after the civil authority order, typically 72 hours, and may apply up to another period, often three consecutive weeks, after the coverage begins. Similarly, EE coverage under the civil authority coverage usually starts immediately after the civil authority order and ends a definite period, often three weeks, after the order or when the BI coverage ends, whichever is later.
The civil authority provision is implicated when the order is issued under threat of potential loss. In fairness to insurers, many do not apply a deductible to this coverage as the intent is to offset losses when the actual property is not destroyed. However, insurers are also able to cap their exposure to a defined time period thereby limiting their damages. It is important to understand the coverages available under your policies as the initial steps in the claims process can have a serious adverse impact on your recovery.
Civil authority losses apply to homeowners, small businesses, manufacturing facilities, service enterprises, rental facilities, and a variety of commercial operations. You must carefully review your policy with an expert to understand the implications and shortfalls due to the provisions. Retaining a sophisticated professional advocate to navigate you through the minefield of claims issues is advisable.
SunPoint Public Adjusters, Inc. (“SunPoint”) is the “Gold Standard” of the public adjusting industry. Our team of seasoned public adjusters comprehensively review and evaluate your policy, immediately deploy a team of experts to assess and quantify your damages and customize a strategy around your personal recovery to promptly and properly maximize the resolution of your claim.
Our in-house and other veteran experts are experienced in quantifying and negotiating building, personal property, inventory, stock, machinery, business interruption, or other additional coverages. We work solely on your behalf to favorably resolve your claim. Our experts ensure your insurance company does not delay, diminish, or deny benefits that are rightfully owed to you. Industry experts agree that having a public adjuster like SunPoint on your side early in the process expedites and maximizes your recovery.
Our team of experts has been advocating on behalf of policyholders for decades. We have handled, managed, and successfully navigated claims ranging from homeowner losses; corporate losses in the hundreds of millions of dollars; disaster losses involving government entities and entire municipalities; agricultural and recall losses, and virtually any type of disaster claim that could be imagined. Our team is unmatched in our industry. Our goal is aligned with yours. To obtain a free assessment of your specific circumstances and recovery please contact us to strategize your best means of recovery.