By Kevin Streit

Streit is a partner at Dunlap Bennett & Ludwig Practicing in Our Richmond VA Office


[Apr. 8, 2020 Richmond]   Possibly the two largest segments of insurance claims to be anticipated from now into the foreseeable future are Business Interruption (BI) Claims and Supply-Chain Disruption (SCD) Claims, which are really a subspecies of BI. Claim professionals likely are already dealing with one or the other (if not both), and claim disputes can be expected as insureds begin to comb through every insurance contract issued to them in an effort to blunt the economic blow that most of the economy is experiencing. Their counsel certainly can be expected to wring everything they can out of each term and condition in the insurance contract.

Whether it’s a BI claim or an SCD claim, claim professionals should keep certain basic points in mind. Obviously, a key aspect of the claim investigation will be the performance of the insured’s business on the eve of the COVID 19 shutdown. Thorough documentation of a company’s accounts should be requested at the outset, including (most obviously) ledgers, bank statements, balance sheets, income tax returns, and prospectuses for at least one year before the beginning of the COVID shutdown (i.e., going back to March 2019), if not longer.

In terms of the types of documentation needed for a particular claim and the length of time to be documented the assistance of an appropriate expert is invaluable. Key experts in this arena include forensic accountants, private investigators, marketing professionals, and business analysts, among others. It’s never too early to line up such experts to assist in the investigation of BI and SCD claims. Quite often a claim professional is not even sure which areas of an insured’s business should be examined in investigating a claim, and good expert support can be crucial in guiding the investigation as well as in analyzing the data generated in the course of it. There are innumerable providers of such services that cater to the insurance industry, and in claims of any size or complexity a claim representative should reach out to such providers sooner rather than later.

If at any point during the claim investigation questions are raised regarding the availability of insurance coverage for part or all of the claim, an appropriate reservation-of-rights (ROR) letter should be issued as soon as practicable and certainly within any statutory time constraints imposed by governing law. If the claim representative has any question about (i) the availability of insurance coverage, (ii) how best to structure the ROR letter, or (iii) what law may govern a particular insurance contract or claim, just as with other experts it’s never too early to consult coverage counsel, whether in-house or external. Proper documentation of reservations of rights can be critical to preserving an insurer’s rights under its insurance contract and avoiding any arguments for a waiver.

Additionally, the insured’s compliance with its contractual duty of cooperation in the investigation should be reiterated and emphasized frequently in written communications with the insured. As BI and SCD claims are, by their nature, document-intensive it is fundamental to the insurer’s investigation that all relevant documents and records be produced when requested, and that the insured not delay complying with its duty to cooperate.

These are just a few of the more obvious points claim representatives should bear in mind when confronted with the tsunami of BI and SCD claims are is sure to come in COVID 19’s wake. In short, having the right expert support and the proper documentation is the insurer’s best defense to fraud, and both should be put into place at the earliest possible time.

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