Brokers, your hotel clients need business interruption insurance… and here’s why.
While it’s not every day that disaster strikes, when it does there’s usually no letup. Case in point: last year’s hurricanes that hit businesses, big and small. As for hotels, the loss of income, if they’re left with no choice but to temporarily shut down operations, coupled with huge repair costs, is nothing short of devastating – that is, if no business interruption insurance is in place.
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Getting covered though isn’t the be-all and end-all. Hoteliers will have to be ready with their figures when it’s time to make a claim.
“Try to provide as much data as possible in these kinds of situations,” said Dana Kravetz, managing partner at law firm Michelman & Robinson's Hospitality Industry Group, as quoted by Hotel Management. “When you start talking about rate and occupancy during an interruption, these factors will cause a fair amount of potential disagreement between [insurance] carriers and ownership over what those numbers would actually be.”
In addition, as with all kinds of policies, insureds will need to have a clear understanding of what their coverage entails – brokers’ cue to step in to provide enlightenment. Certain business interruption policies, for instance, might not compensate if there’s no direct physical damage to the hotel.
Meanwhile, the report also cited the recent wildfires in California.
“There are a handful of hotels [in Napa Valley] without any major damage, but road closures and other things like that can also be used as a basis in interruption claims,” Michael Bellisario, vice president of equity research and a senior analyst at Robert W. Baird & Company, was quoted as saying. “Smoke damage, fallen trees, and other concerns are all grounds for successful claims.”
Citing data from risk modelling company AIR Worldwide, a previous Reuters report said about $6 billion to $9 billion – out of an approximate total of $25 billion in insured commercial losses – was attributed to business interruption due to Hurricane Katrina in 2005.
