Tuesday Edition: Cement Shortage


Storm reconstruction will require a lot of cement. And guess what port handled the most cement in America last year — you got it: New Orleans.


 


CNN/Money points out that New Orleans, which has special facilities for unloading cement, handled about 12 percent of all cement coming into the country last year.


 


CNN says that last year, 32 states and the District of Columbia were short of cement. Many will have worse shortages this year.


 






How to Turn Sick, Vacation Time Into a Donation



The IRS has announced an interesting idea that would allow just about anybody to donate unused sick or vacation time to help victims of Katrina. The question is how many businesses will allow it.


 


CNN/Money said:



The Internal Revenue Service announced a program where employees across the country can trade in their sick or vacation days in exchange for cash to help victims of Hurricane Katrina.


Under the program, employees can donate their sick, vacation or personal days back to their company, according to an IRS statement.


 


The company in turn will make a cash donation to any qualified tax-exempt organization providing relief in the region.


 


Employers can then deduct the amount of the donation from their taxes and employees do not have to count the donated time as income.


Here is the IRS page about the program.


 





 


Public Adjusters

I first heard of public adjusters following the tornadoes that hit Nashville in the late ’90s. These are folks who home or business owners hire to negotiate with insurance companies. They are, in effect, professionals who represent the insured, when he or she feels the insurance company is not doing all it should do.


 


The public adjuster takes a cut of the settlement which, sometimes, can be as high as 30 percent.


 


In Florida, where we have a lot of experience with such things, the state has imposed a 10 percent fee limit.


 


The National Association of Public Insurance Adjusters has a code of conduct. Here it is.


 


Bankrate.com weighs the pros and cons of hiring your own adjuster to wrangle on your behalf with your insurance company.  


 






Business Interruption Insurance



I have not seen many stories yet about business interruption insurance. It is a policy that businesses can purchase to guard against lost income when they have to evacuate. It is a fairly important story because, soon, insurance claims will become a huge story as we turn our attention away from survival  and toward how to start over. As businesses and homeowners figure out what to do next, their answers will have something to do with their insurance settlements.


 


The Las Vegas Review-Journal reported about the casino industry’s losses around the Gulf Coast. All of the casinos have business interruption insurance, but nobody is quite sure yet what that will pay for:



A typical business interruption policy, normally part of a business’s overall commercial insurance package, kicks in after five days and has a 12-month cap.


 


“Generally, they are not open-ended,” said Nicole Mahrt, the western region public affairs director for the American Insurance Association in Sacramento, Calif. “Some businesses will negotiate policies that are longer in length. It will depend on the contract.”


 


Business interruption insurance covers a company’s lost net income, temporary relocation expenses and on-going payroll expenses. The damaged casinos also, most likely, had property damage insurance.


 


“Business interruption insurance is not a blank check and it doesn’t pay for everything,” Mahrt said. “The insurance is based on what the company has lost.”


Of course, this is a story of interest far beyond the storm area. Katrina’s devastation should give all business owners pause about what threats their businesses could withstand. The Insurance Information Institute explains:



Business interruption insurance can be as vital to your survival as a business as fire insurance. Most people would never consider opening a business without buying insurance to cover damage due to fire and windstorms. But too many small business owners fail to think about how they would manage if a fire or other disaster damaged their business premises so that they were temporarily unusable. Business interruption coverage is not sold separately. It is added to a property insurance policy or included in a package policy.


A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick resumption of business after a disaster is essential.



  1. Business interruption insurance compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the profits you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt.

  2. Make sure the policy limits are sufficient to cover your company for more than a few days. After a major disaster, it can take more time than many people anticipate to get the business back on track. There is generally a 48-hour waiting period before business interruption coverage kicks in.

  3. The price of the policy is related to the risk of a fire or other disaster damaging your premises. All other things being equal, the price would probably be higher for a restaurant than a real estate agency, for example, because of the greater risk of fire. Also, a real estate agency can more easily operate out of another location.

Here is more useful information about business interruption insurance from the American Bar Association.


 




 


Insurance Advice



Here is a Web site by a huge law firm that does a lot of work with businesses. The site offers what looks to me to be highly practical and detailed advice about insurance claims after a disaster. I think I will bookmark this site because it will be useful for just about any calamity. The site says:



… Unlike Hurricane Andrew and the series of hurricanes that hit the Florida Panhandle in 2004, which primarily affected residential property, Hurricane Katrina has caused an unprecedented amount of damage to industrial (largely oil and chemical-related) and commercial property. That means impacted businesses will face longer and therefore more costly business interruption losses, complex contingent liability losses, and untold amounts of extra expenses incurred in an attempt to restore business operations. Insurers may also be further exposed due to the absence of state reinsurance programs, such as Florida’s program that reportedly paid insurers $3 billion following last year’s hurricane losses.


 


What this adds up to is heavy losses for insurers, and in such circumstances it can be expected that the insurers will seek every available avenue to limit their losses, including denial of potentially covered claims.





 


Flood Insurance


 


Last month, I “maxed out” my flood insurance (I told the insurer I wanted all I can buy). I suspect that in the next week or so we all will be reporting about flood insurance in some way or another. Fewer than half of New Orleans’ homeowners have flood insurance sold by the National Flood Insurance Program, run by FEMA.


 


The NFIP program offers up to $250,000 coverage for homeowners to rebuild damaged properties, and up to $100,000 to replace contents. Homeowner’s insurance covers damage from fire and wind. But it does not cover damage from water. Virtually all of the damage in New Orleans is water damage, not wind damage.


 


Here are the latest stats from FEMA on flood insurance:



Learn more about flood maps and risks:



The (Baltimore) Sun wrote:



If Katrina and past hurricanes can be a guide, homeowners will be in for some ugly surprises, such as finding that they don’t have the necessary coverage or that they must pay steep windstorm deductibles. Insurance experts are predicting that residents in coastal areas, including those not affected by Katrina, might be headed for higher premiums …


 


One of the most consequential issues for claims adjusters, and Gulf Coast residents, in the weeks ahead will be to determine whether the damage was caused directly by Katrina or by the flooding that occurred afterward.

“That’s the question of the day,” said Phil Supple, a spokesman for State Farm Insurance Cos., which as of yesterday had 223,000 Katrina-related claims on houses and autos.

The reason it’s important is that wind damage from Katrina will be covered by homeowners’ policies. Flooding won’t. For that, residents need flood insurance from the federal government. Many residents living in flood areas don’t have flood insurance.

About 46 percent of New Orleans homeowners had flood insurance, while only 10 percent to 20 percent of those in flood areas of Alabama and Mississippi did, said Carolyn Gorman, vice president with the Insurance Information Institute, a trade association for property and casualty insurers.

Homeowners in a flood area can buy the federal insurance through their regular agent. It takes at least 30 days before flood insurance coverage takes effect. Homeowners who buy it now theoretically would be covered for the tail end of the hurricane season, which runs until November.

Another big challenge for Gulf Coast residents will be to provide information to insurers to support their claims, experts said. Homeowners often are advised to make an inventory of property inside and outside the house and keep it off site. The inventory can make the claims process go faster and prevents homeowners from forgetting items that had been lost.


Automobile insurance does usually cover flood damage.  


 




 


Gun Sales Increase


 


Around the storm area and around cities where storm evacuees have swelled populations, gun sales are up.


 











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Editor’s Note: Al’s Morning Meeting is a compendium of ideas, edited story excerpts and other materials from a variety of Web sites, as well as original concepts and analysis. When the information comes directly from another source, it will be attributed and a link will be provided whenever possible. 

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