Insurers awash in flood claims as businesses recover from hurricane

August 29. 2011 1:43PM

Insurers awash in flood claims as businesses recover from hurricane

Jeff Perlman, a partner in the insurance brokerage Borden Perlman, of Lawrenceville, said Hurricane Irene has disrupted businesses by making it difficult for customers to reach businesses — especially retail locations that may be in full operation, yet cut off from their customers by the flood.

"The biggest issue is the flooding, which is causing people to not be able to get to business locations," Perlman said. "If you can't get to a location because the road is out or because of flooding, that will affect the businesses in the community."

New Jersey Manufacturers Insurance Co. said by Sunday afternoon, it had received 6,200 calls reporting damage to homes and 600 related to auto insurance, with the heaviest concentration of calls from Middlesex, Morris, Mercer and Monmouth counties.

NJM activated its catastrophe response plan earlier this week while Irene was approaching, to prepare staff and resources for the service needs of policyholders.

"Irene was a huge storm not typically seen in New Jersey," said NJM CEO Bernard M. Flynn. "The damage across the state is significant, but much less than it could have been if Irene had taken a slightly different track."

Perlman said businesses cannot buy flood insurance that covers the loss of business that results from a flood. Congress makes the rules on flood insurance, he said, and right now, flood policies don't include business interruption coverage.

"There is some discussion in Congress to make that available, but right now, it's not," he said.

The majority of his customers are between New York and Philadelphia, and his staff of 45 has handled several hundreds claims so far from Irene. About 80 percent have been homeowner claims, with the rest business claims. In one of the largest business claims, a strip mall suffered the collapse of its floor due to the weight of the water; that will be a claim of hundreds of thousands of dollars for the repairs, Perlman said. Other claims include building damage from a fallen tree, and wind that drove water into a large apartment building, damaging the building.

Other insurers told similar stories. David Pagoumian is CEO of Edison-based Napco, a wholesale insurance broker that negotiates coverage for businesses all along the East Coast. The claims he's seen so far from Irene "are the typical hurricane claims, such as flooding and trees falling on buildings." He said a large retail drug store suffered flood damage, as did a large apartment building.

He said the property loss from Irene could be about $7 billion: "We have seen roof peeling and water damage, wind-driven rain, trees falling on buildings."

Glenn Tippy, president of Gerrity Baker Williams, in the Flanders section of Mount Olive, said he has so far seen claims from a manufacturer that suffered water damage to its equipment, and a warehouse that flooded. He said there are small businesses that will be wiped out by the hurricane if they don't have flood insurance.

Insurance agent Jeanne Heisler, of the Ronan Agency, with office in Brick and and the New Egypt section of Plumsted, said some businesses reported damage from trees falling on their buildings, and there have been claims for food spoilage from restaurants that lost power.

The majority of the damage was reported by homeowners, she said: “We were spared pretty well, considering the size of the storm.”

"We have not seen roofs blown off, which is the type of damage we were expecting," Perlman said. "All in all, we have seen many fewer and less severe" claims than expected.