For business owners and managers a major fire – such as the blaze that caused significant damage to Cork’s Douglas Village Shopping Centre in August 2019 – tops the list of nightmare scenarios which, however unlikely, must be prepared for writes Louise Lonergan, Solicitor and Tax Consultant.
Aside from the risk to employee and customer safety (thankfully not a factor in the case of the Douglas fire), consequences of fire damage to property and stock etc. can include a long period of enforced closure as well as the complex necessity of dealing with insurance companies for compensation payments.
Insurance providers may seek to decline or delay payments under policy, adding to the stressful fallout of such a tragic event and complicating your business’ efforts to continue trading. At CDS Law & Tax we have many years’ experience in this area, not only in advising on and dealing with insurance companies but also in helping businesses to find alternative sources of funding that will help them stay afloat while claims are being determined.
With that in mind, our litigation department has put together a list of frequently-asked questions that we hope business owners will find helpful to speed up the resolution of insurance claims after a major fire.
FIRE AND MY BUSINESS – FREQUENTLY-ASKED QUESTIONS
The first thing you should do following a fire at your business is immediately notify your insurance company. Next, refer to your insurance policy in detail to see that you have complied with all terms. On a practical level try and retrieve all documentation, computers, servers and records, if possible, to support your future claims. Once the premise is safe, carry out a stocktake. It is likely that both uou and your insurance company may engage a Loss Adjustor’s. This is an insurance professional who, in the event of an insurance claim, is appointed to assess the loss and the amount of compensation that should be paid out to cover damage to property/stock as well as compensation for Business Interruption (BI).
If a resolution to your claim cannot be reached with your insurance company, you may wish to obtain legal advice and to pursue the matter through the courts (in some cases a resolution may be obtained through mediation after legal proceedings have been instigated).
When it comes to insurance claims, time is of the essence. Insurance companies do not typically want to pay out, leaving your business vulnerable until the claim is resolved. At CDS Law & Tax we can take steps to support your claim including engaging the services of forensic accountants and insurance experts to advise and prepare reports. This means that you are prepared if issues arise, and these reports will support any potential court proceedings.
In short, yes. The Commercial Court can provide a fast track system, if you are permitted access, where you can seek specific performance of your policy.
Again, yes. In situations where you are one of a number of businesses/individuals that have been affected by the same fire at the same location, you can consider coming together as a group to issue proceedings in a test case. While every individual’s claim will be unique, similar issues regarding liability may arise. Group pressure can assist in this regard.
Proceedings can also be taken by third parties – e.g. a group of individuals whose cars were destroyed by a major fire. These third parties generally must pursue their own insurance companies, but by grouping together and supporting one test case they can achieve results which may mitigate the necessity to pursue their own individual case.
Insurers may first attempt to deny policy indemnity or refuse to make a decision in relation to claims. In addition, they will engage loss adjusters who assess the claim with the assistance of accountants. You need to be prepared to contest the assessments by making sure your claim is properly assessed by your own accountants who are experienced in this area (per question 2 above).
In most cases of this type, yes. However, insurers will focus on what caused the fire (Causation) and whether it was reasonably foreseeable that the damage suffered would arise from the fire. In our experience, the issuing of proceedings is required in many instances to progress matters. If action is not taken immediately, a business may not survive since cashflow will be impacted and the insurance company will not typically pay on a timely basis. Occasionally where liability seems clear we will pursue interim payments.
Any claim is limited to the level of insurance cover and the category of that cover. Generally, damages for consequential losses and stress for breach of contract by an insurer are not recoverable.
The insurance contract is critical in this instance and the role of your broker in agreeing your annual renewal must be done carefully. Your broker also owes you a duty of care in this instance.
FIRE AND MY BUSINESS – HOW CDS LAW & TAX CAN HELP
The litigation department of CDS Law & Tax can help with regard to legal advice around major fire events, both in dealing with the insurance claims process (including declined claims) and with delays to compensation payouts. We also focus on the survival of businesses by assisting in the introduction of accountants/ financiers in the sourcing of interim funds through alternative sources to banks (some of whom may be prepared to take future insurance settlements as security).
Additionally, our team of tax experts can help you to consider the taxation implications of any payments under your policy.
In our experience, after a major fire it is vital to act quickly to ensure survival of the business, as insurance companies by their nature will delay and deny policy indemnity.