Q: How can my business protect itself legally from the impact of severe weather?
ACE advises: Start with insurance. As a lawyer, I often review insurance policies after a loss occurs — or worse, after coverage has been denied. By then the horse is out of the barn.
However, when I set up a company I send the owner directly to an insurance agent. A good agent knows how to evaluate the specific risks associated with a business, and to manage those risks through available coverage. Increasingly those risks include flooding, severe storms, prolonged power outages and supply chain disruptions.
Once I know what risks are covered — and which are not — I’m in a much better position to draft a contract, which may or may not include requiring the other party to increase its coverage.
Be prepared to answer these questions:
Property coverage. Does your policy reflect the current replacement cost of your buildings, equipment and inventory?
Flood risk. Standard commercial property insurance generally does not cover flood damage. Do you need separate flood insurance? Never assume MEMA or FEMA assistance will be enough.
Business interruption. If your business had to close for several weeks because of a weather event or utility outage, would your policy cover lost income and continuing expenses?
Equipment and utilities. Would your coverage respond to damage caused by power surges, refrigeration failures or prolonged electrical outages?
Supply chain disruptions. How dependent is your business on key suppliers or transportation routes affected by severe weather?
Liability exposure. Have changes to your operations created new risks?
Policy exclusions. Understanding what is not covered is just as important as understanding what is covered.
Insurance is only one part of climate resilience; there are risks insurance will not cover. Businesses should also review emergency response plans, data backup procedures, vendor relationships, and facility maintenance to reduce the likelihood and impact of a disruption.
As weather-related risks evolve, an annual conversation with both your insurance advisor and your attorney can help ensure that your insurance, contracts, and operational plans work together to protect your business.
