Two businesses can suffer comparable hurricane damage and face very different recovery paths. One can retrieve its insurance policy, sales history, payroll records, inventory, photographs, and vendor contacts even though its building is inaccessible. The other must reconstruct the same information from bank statements, suppliers, employees, and memory.
Both businesses may have legitimate losses. Only one is immediately prepared to show what happened, how operations were affected, and what it will cost to recover.
During more than 35 years working with insurance claims, including claims arising from more than a dozen hurricanes, I have seen the issue from several perspectives. My work has included independent and catastrophe adjusting, insurer claims management, in-house legal positions, appraisal, arbitration, and policyholder representation. One lesson has remained consistent. Good records do not guarantee coverage or payment, but missing, inaccessible, or inconsistent records create uncertainty that can delay nearly every part of the adjustment.
Claim readiness belongs inside the business continuity plan. The records and tested procedures that help a company continue operating are often the same records an insurer will need to evaluate property damage, business income, and extra expense.
The One-Hour Hurricane Claim Readiness Test
Before hurricane season, assume that the principal location and its local network are inaccessible. Also assume that the person who normally maintains the records is unavailable. Select another authorized employee, start a 60-minute clock, and require that person to retrieve and open these records from another location:
- The complete property policy, including declarations, endorsements, schedules, deductibles, limits, waiting periods, and claim-reporting information.
- Monthly profit and loss statements, general ledgers, sales records, payroll data, accounts receivable, accounts payable, budgets, forecasts, and tax returns.
- Current inventory records showing quantities, descriptions, locations, and purchase costs.
- A fixed-asset register identifying machinery, equipment, furniture, computers, serial numbers, acquisition costs, and maintenance records.
- Recent photographs or video showing the condition and contents of each business location.
- Critical customer, supplier, lease, service, and outsourcing contracts.
- Insurer, broker, employee, customer, landlord, restoration company, equipment vendor, and alternate-supplier contacts.
- The continuity plan, including decision authority, alternate locations, communication procedures, secure technology access, banking access, and payment methods.
A record does not pass merely because someone believes it exists. The employee must retrieve and open it. The record should be current, complete, readable, available away from the premises, and accessible without depending on one person’s memory, device, or password.
The companion workbook classifies results as Green, Amber, Red, or Not Tested. Green means the item was retrieved within the hour, is available away from the premises, is current under the selected freshness target, and has an owner. Amber identifies incomplete access, stale information, a missing retrieval time, or another correctable weakness. Red identifies a failed retrieval, no off-site access, or missing update information. Not Tested means the drill remains undone.
This is an operational readiness test, not an insurance-policy deadline. It reveals what the business can actually produce when normal systems and personnel are disrupted.
Pre-loss photographs are particularly valuable. As discussed in A Picture Is Worth a Thousand Words, photographs and video can help establish the pre-loss existence, condition, location, and quantity of property. Current inventory and asset records also keep the contents portion of a claim from becoming the scavenger hunt that follows when records are incomplete.
Read the Profit and Loss Statement Before the Storm
A business income claim is not ordinarily calculated by treating every dollar of lost sales as a covered loss. The analysis generally considers the income the business would have earned, the income it actually earned, normal operating expenses that continued, and expenses that were not incurred because operations were interrupted. The policy language and facts control.
That is why a business should pull a recent profit and loss statement before hurricane season and examine it line by line. For each expense, ask:
- Would this cost continue if the business were completely closed for 30 days?
- Would it continue at a reduced amount?
- Would it stop or decline with sales or production?
- Would the business incur a new or increased cost to continue operating or reopen sooner?
Rent, insurance premiums, software subscriptions, equipment leases, interest expense, property taxes, and some payroll may continue during a shutdown. Cost of goods sold, packaging, delivery charges, sales commissions, transaction fees, and other volume-driven costs may decline. Utilities, maintenance, security, payroll, and similar expenses may continue only in part. Fixed and variable are useful starting labels, but the business must determine how each account would actually behave during the selected interruption scenario.
Our prior discussion of pre-loss organization of financial data explains why this work should be completed while records and personnel remain available. Business Interruption Essentials also addresses the records commonly used to evaluate an interruption loss.
Continuing Expenses, Saved Expenses, and an Unprofitable Business
A simplified top-down analysis begins with lost sales and subtracts expenses that were not incurred. A P&L cross-check compares the projected operating result without the interruption with the estimated operating result during the interruption. When both approaches use consistent inputs, they should reconcile.
An expected operating loss does not necessarily mean that an interruption has no economic effect. Consider a simplified example. A business expected $100,000 in revenue and $120,000 in normal expenses for the month, producing a projected $20,000 loss. If the business closes, earns no revenue, and must still pay $50,000 in continuing expenses, the estimated interrupted result is a $50,000 loss. The interruption increased the loss by $30,000. The top-down cross-check reaches the same result because $100,000 of lost sales minus $70,000 of saved expenses equals $30,000.
That illustration does not establish a covered claim amount. A complete analysis may need to address the policy definition, waiting period, limits, ordinary payroll provisions, period of restoration, extended business income, partial operations, unaffected locations, actual post-loss sales, seasonality, market conditions, growth trends, deferred demand, mitigation, and other facts. Gross lost revenue and historical profitability do not answer the coverage or valuation question on their own.
The workbook therefore labels its result Preliminary Operating Impact Before Policy Terms. It also allows the business to use a supported sales projection when a simple historical monthly average does not reflect seasonality, contracts, or current trends.
Neither this example nor the workbook provides accounting advice or the true measure of a covered loss. A business should consult a qualified accountant, and when appropriate, a forensic accountant, to measure an actual business income loss. Before purchasing or renewing coverage, the business should also work with its accountant and insurance agent or broker to evaluate its revenue and expense profile, appropriate limits, waiting periods, and policy terms. No planning worksheet establishes coverage.
Extra Expense Planning Begins With Vendors
The same exercise should identify the additional resources that could maintain operations or shorten the interruption. Depending on the policy wording and facts, relevant costs may include temporary premises, generators, expedited shipping, temporary equipment, data recovery, security, overtime, or alternate production arrangements.
As explained in Extra Expense Coverage Business Survival, these expenditures can be important to business survival. Coverage still depends on the policy and the purpose, reasonableness, necessity, timing, and documentation of the cost.
After a hurricane, demand for generators, fuel, roofers, drying equipment, electricians, refrigeration, temporary workspace, telecommunications equipment, and specialty supplies can quickly exceed local capacity. A company that waits until landfall to identify vendors may find that essential equipment is unavailable or delayed.
A useful vendor plan should identify:
- The exact service, equipment, capacity, and technical specifications required.
- A primary vendor and at least one alternate, preferably outside the same affected area.
- A 24-hour contact, expected lead time, and the employee authorized to place the order.
- Normal cost, expected emergency cost, incremental cost, deposits, available credit, and preauthorization requirements.
- Reservation or priority arrangements, delivery access, storage, installation, permits, and related professional needs.
- Quotes, contracts, invoices, proof of payment, work orders, photographs, and the operational reason for the expenditure.
A note that says ‘obtain generator’ is not a plan. The business should know the required capacity, connection method, fuel source, run time, delivery arrangements, and whether an electrician, transfer switch, permit, or security plan will also be needed.
The vendor worksheet separates the normal cost already reflected in the P&L from the expected emergency cost and calculates the incremental amount. It also requires the user to classify the cost for review. Roof tarping, water extraction, debris removal, or building repair should not be labeled automatically as extra expense merely because they arise after the storm.
Use the First 30 Days to Build a Reliable Record
The first month after a storm should be managed as an operational timeline, not as a universal statement of policy or legal deadlines.
During the first 24 hours, protect people, follow access restrictions, report the loss through the appropriate channel, prevent additional damage when safe to do so, and document conditions before moving or discarding property when circumstances permit.
During days two through seven, coordinate inspections, begin a room-by-room inventory, separate ordinary operating costs from storm-related expenditures, preserve invoices and receipts, and maintain a written record of important communications and decisions.
During days eight through thirty, compare actual operations with the pre-loss baseline. Track sales, payroll, continuing expenses, saved expenses, temporary operations, vendor commitments, and reopening costs. Update projections as facts develop and reconcile the information provided to the insurer with the company’s accounting records.
Actual notice, proof-of-loss, inventory, suit-limitation, and other deadlines come from the policy, applicable law, and any catastrophe orders. They should be identified and calendared separately.
Preparation Preserves Evidence and Options
The purpose of this preparation is to preserve reliable facts, reduce avoidable uncertainty, and allow business leaders to make faster decisions when time and supplies are limited. It is not a method for manufacturing or inflating a claim.
The companion Business Hurricane Claim Readiness Self Check combines the One-Hour Test, a profit and loss continuity planner, and an extra expense vendor plan. It is provided for general information and planning only. It is not accounting advice, a completed loss calculation, or a recommendation of any coverage amount.
Businesses can also consult Merlin Law Group’s free Hurricanes A Complete Policyholders Guide and Preparedness Checklist for broader hurricane preparation guidance.
A hurricane may make the building inaccessible. It should not also make the business’s records, recovery plan, and essential vendor relationships inaccessible.
