With the one-year anniversary of Hurricane Irma fast approaching on Sept. 10, policyholders who are still involved in insurance disputes may soon be forced to decide whether to file suit. The statute of limitations for breach of an insurance contract under Florida law is five years. But as with any rule, there are exceptions—and they may be hidden in the policy itself.

Insurance policies frequently contain provisions governing the timing of a suit to recover benefits. Some effectively replace the statute of limitations with a window as short as one year to file a lawsuit over unpaid proceeds. Whether this period runs from the date Irma made landfall or when the insurer issued its coverage decision, the window is rapidly closing. This is particularly true for those with policies that require pre-suit mediation or impose a waiting period even after negotiations have failed. Many policyholders must accordingly decide whether to walk away from a claim, accept an inadequate offer, or legally vindicate their rights.

To make this decision—and to plan for the hurricane season ahead—it helps to consider the insurance issues that many businesses have had to navigate. In Irma's aftermath, all types of enterprises were rightfully focused on what they knew best: getting their operations back up and running. Making a claim under business interruption insurance was far less familiar. It may have even seemed overwhelming when faced with the slew of questions that had to be answered: When did the interruption technically begin under the policy? What time period was covered? What losses could be claimed?

Things only became more complicated when insurers refused to honor claims and raised a host of reasons why the insured was owed less or had no coverage at all. This is a frequent bargaining tactic used by carriers that leaves policyholders asking the same bottom-line question: How do I know what's fair so I'm not leaving money on the table? The discussion below identifies just some of the issues that are crucial to submitting and negotiating both past and future business interruption claims.

When Did the Business Interruption Begin?

Business interruption coverage focuses on reimbursing policyholders for the loss of business income due to the necessary suspension of operations. Accordingly, the critical first step is identifying when the business interruption actually began. One might instinctively assume that this coincides with Irma making landfall. This is not necessarily the case. A storm with Irma's size and trajectory disrupted business long before the first wind gust reached shore. As Floridians are well aware, large portions of the state were under mandatory evacuation orders. For Miami-Dade County in particular, it was the largest evacuation in history. Some policies specifically account for this situation through civil authority coverage and effectively broaden the available recovery. Determining precisely how the relevant policy language interacts with the “period of restoration”—the time necessary to rebuild, repair or replace damaged property—can make a substantial difference in the appropriate amount of the claim.

What Is the Covered Time Period for Lost Business Income?

A second key element to any claim is the length of time that lost income is covered. Some policies, for example, are obligated to pay until business returns to normal. But as business owners are keenly aware, “normal” does not simply mean there's an “open” sign in the front window. Businesses lost electricity throughout the state. Debris, fallen trees, and flooding inhibited access to businesses for weeks. Government offices remained closed. Suppliers may have had limited ability to operate. All of these factors could have reduced a business's bottom line for months after the storm. Insurers inevitably seek to save money by downplaying or ignoring these consequences to shorten the covered period of time. Where policies address these situations, businesses must make sure they're receiving everything they bargained for when they paid a premium for insurance.

How Much? Calculating Your Business Income Loss.

Once there is clarity on what the policy covers, the most important question is how much. While policies frequently detail how things like lost income should be calculated and quantified, there are still areas of uncertainty that insurers attempt to exploit. For example, new businesses or those at new locations may lack a long accounting history to establish revenues from prior years. Businesses have fixed and variable costs that may change as a result of a storm. A business might even generate some income notwithstanding a storm and its aftermath. Insurers have cited these reasons as a basis to drive down the claim's value. Maximizing an insurance recovery often turns on how effectively a policyholder deals with these issues.

Protecting Your Rights When the Insurer Refuses to Adequately Pay

It is illegal for insurers in Florida to misrepresent policy provisions or make material misrepresentations for the purpose of leveraging a lower payout under the insurance contract. But in the face of a natural disaster where claims are in the billions and businesses may be desperate, carriers do not shy away from testing these legal boundaries. While insurers bank on attrition, businesses should not throw in the towel when the facts and policy language are on their side.

Florida law provides for fee shifting in insurance disputes and requires an insurer to pay the reasonable attorney fees of a policyholder who prevails in litigation. Insurers may also be held liable through a bad faith claim for the consequential damage to a business when the carrier refuses to fairly and timely pay a claim. An experienced coverage attorney familiar with carrier tactics can offer guidance and ensure that business owners are not leaving money on the table when they need it the most.

Walter J. Andrews is a partner at Hunton Andrews Kurth in Miami. His practice focuses on complex insurance litigation, counseling and reinsurance arbitrations and expert witness testimony. He may be reached at [email protected].

Cary D. Steklof is an associate at the firm. He represents individual, corporate and municipal policyholders in all types of first- and third-party insurance coverage and bad faith disputes. He may be reached at [email protected].