Tuesday, March 11, 1997
Flood insurance daunting
Businesses may be able
to find loopholes
in policies to recoup losses

The Cincinnati Enquirer

Businesses waiting for their property and casualty insurers to cut a check for flood damage should think again. Then they should get canny.

Insurance experts say floods are often excluded from property damage policies. What's more, if a flood is excluded generally, it most likely won't be covered under the policy's ''business interruption'' clause.

Business interruption coverage technically is not a separate policy but rather an endorsement to an existing policy, which means a flood exclusion usually applies.

But there might be openings for a claim in existing policies, said Greg Higgins, northwest area director of Deloitte & Touche's business interruption practice in Chicago.

For instance, property damage policies address ''ingress and egress,'' which means a claim could be filed when customers or employees can't get to or from a business because of the effects of flood or other disasters.

Don Armstrong with the Kentucky Emergency Management Agency said that 7,000 businesses have reported flood-related damage but that the actual losses won't be calculated until the Small Business Administration completes a survey in the next week.

The Ohio Emergency Management Agency said uninsured losses to Ohio businesses have hit $30 million, while insured losses are about $8.8 million.

Several retail operations on Pete Rose Way reported little to no property damage and said they probably would not file claims under their commercial policies.

Ron Burton, who runs a Skyline Chili that was damaged by water there, said the restaurant has been pressure-washed and sanitized, and will open today.

''It didn't get into the store. It just got the hallway,'' Mr. Burton said.

But Mr. Higgins said flood damage isn't always apparent. Water can travel up drywall, for instance, not showing itself until weeks or months later. Rust can stay hidden for years, and foundations might crack or move.

''Much of this damage goes unrepaired and is never claimed,'' Mr. Higgins said.

Signing a ''proof of loss'' statement with an insurer after visible damage is fixed amounts to a release, experts say, making it worthwhile to hire an independent adjuster.

Filing a claim is not an easy process, as most people know, and can become litigious, said Finley Harckham, a New York lawyer who advises policyholders in insurance coverage disputes.

''Insurance companies have not properly rated the business interruption exposures faced by modern businesses, and now are scrambling to find ways to avoid paying claims,'' he said.

Nationwide Insurance Co. of Columbus disputes that and says the company, recognizing the severity of the flooding, is responding quickly to damage claims on homes, autos and businesses.

''This is some of the worst destruction I've seen in my 22 years in this area,'' said William Garrison, a Nationwide claims manager in Marietta.