Recent severe storms in the Midwest and Great Plains have caused extensive flooding in several states, with levees and dams breached, roads and interstates washed out or impassible, and cities and towns under water. Corn and other crops have been damaged and destroyed, pushing prices to record highs on commodities exchanges. Power has been lost in many areas. Indiana has asked the United States to declare farm disasters in 44 counties because of crop and livestock losses blamed on the storms, and what is being described as flooding worse than the previous record set back in 1913. Flood concerns exist for the Mississippi River as well, which is expected to crest at 10 feet above flood stage over the next two weeks.
Many farms and businesses undoubtedly have been affected by the flooding. Fortunately, insurance policies may provide coverage for policyholders’ damaged property, loss of business and extra expenses incurred to recover from the floods. First-party property insurance may respond to repair or replace property directly damaged by storms and floods. Business interruption insurance protects earnings that businesses would have obtained had there been no interruption of business caused by covered perils, and contingent business interruption insurance covers losses to policyholders’ business caused by damage to suppliers’ or customers’ property from covered perils. Similarly, extra-expense insurance covers additional expenses incurred to allow policyholders to continue to operate during the period of interruption. In the aftermath of widespread and devastating flooding from the Mississippi River in 1993, courts held that increases in transportation and raw materials costs caused by the flooding, and other losses, were covered under extra expense and contingent business interruption insurance. See, e.g., Archer-Daniels-Midland Co. v. Phoenix Assur. Co. of New York, 936 F. Supp. 534 (S.D. Ill. 1997).
If policyholders have experienced damage or loss to their property, or interruptions to their businesses and extra expenses caused either directly by the storms and floods or because the property of their customers and suppliers has been lost or damaged, they should be encouraged to review their first-party property and business interruption insurance to determine whether they should submit claims to their insurers. Reed Smith’s 60+ insurance recovery lawyers have extensive experience in assisting policyholders to maximize their property and business interruption claims, including in large-scale disasters such as hurricanes, tornadoes, floods and fires