Disaster Recovery

Irma’s Business Interruption Claims

Contingent business interruption claims from Hurricane Irma could take years to resolve.
By: | September 20, 2017 • 4 min read

Hurricane Irma tore through Florida and the Caribbean destroying tens of thousands of homes and businesses, forcing people to be evacuated, and causing an estimated $25-35 billion in damage. On a commercial scale, however, the industries hardest hit were hospitality, retail and construction, as well as health care and manufacturing, say experts.


But worse than the initial physical damage caused to their properties are the mounting business interruption (BI) and contingent business interruption (CBI) claims from companies forced to shut down because of the storm. At one point it was estimated that 62 percent of residents had lost power, exacerbating the problem and leading to issues such as mold.

And with further storms approaching, notably Hurricane Maria, there’s the added challenge for claims adjustors of scrambling to try and differentiate the damage caused by each event, particularly in the more inaccessible areas. That’s on top of trying to reallocate resources from other storm affected parts of the country including Texas.

“Hospitality clients and real estate clients including commercial condominiums and apartments have had some significant claims,” said Marsh’s U.S. property practice leader Duncan Ellis. “Then there are the school boards and retailers, from strip malls to individual big box stalls, a lot of whom have suffered significant damage.”

Estimating overall insured losses in the “tens of billions,” Lockton’s national property claims director Sheri Wilson expects tourism and hospitals, nursing homes and assisted care facilities to be the worst affected in terms of commercial losses.

Duncan Ellis, U.S. Property Practice Leader, Marsh

“Florida’s tourism industry is going to take a battering, not just because of the short-term damage, but with the high season just around the corner they are not going to be able to recover in time because of the lack of materials and manpower,” said Wilson.

“The hospitals are a bit unique in terms of business interruption because they have so many different sources of revenue, so it takes time for that to work itself through the claims process and we won’t know the true financial impact until later this year.”

Willis Towers Watson’s head of property broking Gary Marchitello also expects Irma to result in “significant business interruption losses” arising from extensive power outages, taking months to resolve.

“These business interruption claims could take months to calculate,” he said. “Even if a specific property is not damaged, the insured’s property may face other obstacles to its operations, for example it could be impaired by civil authority and/or it may not have a means of ingress/egress due to nearby road closures.”

Beazley’s head of property Mark Bernacki added: “A key part of the loss escalation will be what’s covered under the extended period of indemnity. This allows the insured, post the normal period of indemnity, to pick up additional business interruption loss until the business can resume full operations.”

Hospitality clients and real estate clients including commercial condominiums and apartments have had some significant claims. —Duncan Ellis, Marsh’s U.S. property practice leader.

While Irma has forced many businesses to shut, Kevin Kavanagh, a partner at Wilson Elser LLP, believes that the longer-term implications are much worse, including lost jobs.


“How long can you be shut down and not be bringing in any money or paying your employees?” he said. “It’s just devastating for smaller businesses, a lot of whom don’t have contingent business interruption and barely enough business interruption to cover their losses.”

Given the scale of the storm, it could also have a knock-on effect on the supply chain for months or even years down the line, said EY’s Americas Insurance & Federal Claims Services Leader Allen Melton.

“Take for example a manufacturing facility that had to close before the hurricane, came back and discovered they have little physical damage to their facility, but they have suppliers that produce key components or raw materials that were either severely impacted or completely destroyed,” he said.

“If they have coverage for contingent business interruption in their policy, they could have a fairly complex claim that could continue well into next year.”

Another issue is mold. With its humid environment, Florida is susceptible to mold and other diseases like Legionella, exacerbated by the power outages resulting from Irma.

Sheri Wilson, national proprerty claims director, Lockton

Veronica Benzinger, chief broking officer at Aon Risk Solutions Environmental Services Group, said that mold has the potential to grow within 36 hours of water intrusion of a building. While many policies cover water intrusion, she said that they often don’t extend to mold.

“The chances are that you are also dealing with potentially contaminated water full of chemicals, petrochemicals or biologics including sewage and so the process may become more extensive that just simply drying out, replacing wall board or pumping water out of your property,” she said.

“The protracted period of no power will also add to the severity, potentially, of the loss, which combined with the humid environment and organic material to feed on, will only encourage mold to grow.”

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

Janet Sheiner, VP of risk management and real estate at AMN Healthcare Services Inc., sees innovation as an answer to fast-evolving and emerging risks.
By: | March 5, 2018 • 4 min read

R&I: What was your first job?

As a kid, bagging groceries. My first job out of school, part-time temp secretary.

R&I: How did you come to work in risk management?

Risk management picks you; you don’t necessarily pick it. I came into it from a regulatory compliance angle. There’s a natural evolution because a lot of your compliance activities also have the effect of managing your risk.

R&I: What is the risk management community doing right?


There’s much benefit to grounding strategic planning in an ERM framework. That’s a great innovation in the industry, to have more emphasis on ERM. I also think that risk management thought leaders are casting themselves more as enablers of business, not deterrents, a move in the right direction.

R&I: What could the risk management community be doing a better job of?

Justified or not, risk management functions are often viewed as the “Department of No.” We’ve worked hard to cultivate a reputation as the “Department of Maybe,” so partners across the organization see us as business enablers. That reputation has meant entertaining some pretty crazy ideas, but our willingness to try and find a way to “yes” tempered with good risk management has made all the difference.

Janet Sheiner, VP, Risk Management & Real Estate, AMN Healthcare Services Inc.

R&I: What was the best location and year for the RIMS conference and why?

San Diego, of course!  America’s Finest City has the infrastructure, Convention Center, hotels, airport and public transportation — plus you can’t beat our great weather! The restaurant scene is great, not to mention those beautiful coastal views.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

The emergence of risk management as a distinct profession, with four-year degree programs and specific academic curriculum. Now I have people on my team who say their goal is to be a risk manager. I said before that risk management picks you, but we’re getting to a point where people pick it.

R&I: What emerging commercial risk most concerns you?


The commercial insurance market’s ability to innovate to meet customer demand. Businesses need to innovate to stay relevant, and the commercial market needs to innovate with us.  Carriers have to be willing to take on more risk and potentially take a loss to meet the unique and evolving risks companies are facing.

R&I: Of which insurance carrier do you have the highest opinion?

Beazley. They have been an outstanding partner to AMN. They are responsive, flexible and reasonable.  They have evolved with us. They have an appreciation for risk management practices we’ve organically woven into our business, and by extension, this makes them more comfortable with taking on new risks with us.

R&I: Are you optimistic or pessimistic about the U.S. health care industry and why?

I am very optimistic about the health care industry. We have an aging population with burgeoning health care needs, coupled with a decreasing supply of health care providers — that means we have to get smarter about how we manage health care. There’s a lot of opportunity for thought leaders to fill that gap.

R&I: Who is your mentor and why?

Professionally, AMN Healthcare General Counsel, Denise Jackson, has enabled me to do the best work I’ve ever done, and better than I thought I could do.  Personally, my husband Andrew, a second-grade teacher, who has a way of putting things into a human perspective.

R&I: What have you accomplished that you are proudest of?

In my early 20s, I set a goal for the “corner office.” I achieved that when I became vice president.  I received a ‘Values in Practice’ award for trust at AMN. The nomination came from team members I work with every day, and I was incredibly humbled and honored.

R&I: What is your favorite book or movie?

The noir genre, so anything by Raymond Chandler in books. For movies,  “Double Indemnity,” the 1944 Billy Wilder classic, with insurance at the heart of it!

R&I: What is your favorite drink?


Clean water. Check out Water.org for how to help people enjoy clean, safe water.

R&I: What’s the best restaurant at which you’ve eaten?

Liqun Roast Duck Restaurant in Beijing.

R&I: What is the most unusual/interesting place you have ever visited?

China. See favorite restaurant above. This restaurant had been open for 100 years in that location. It didn’t exactly have an “A” rating, and it was probably not a place most risk managers would go to.

R&I: What is the riskiest activity you ever engaged in?

Eating that duck at Liqun!

R&I: If the world has a modern hero, who is it and why?

Dr. Seuss who, in response to a 1954 report in Life magazine, worked to reduce illiteracy among school children by making children’s books more interesting. His work continues to educate and entertain children worldwide.

R&I: What do your friends and family think you do?

They’re not really sure!

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]