Pub. 11 2012-2013 Issue 4

N e w J e r s e y C o a l i t i o n O f A u t o m o t i v e R e t a i l e r s 17 new jersey auto retailer w w w . n j c a r . o r g with off-premises power failure coverage were also subject to a 72-hour waiting period deductible. As can happen with weather- related events, many vehicles were damaged, allowing a number of dealers to more than make up their business interruption losses through increased sales demand. Sandy may, in the future, cause some insurers to think twice before offering off-premises power failure business interruption, but that remains to be seen. Flood insurance is often required by lenders on properties in high-risk flood zones. Dealers with properties in lower-risk flood zones and those with no lender requirements should also consider flood coverage. Flood insurance is available through the National Flood Insurance program for buildings and contents with limits up to $500,000. For those who wish to buy more coverage and/ or include business interruption coverage, excess coverage and BI coverage can be found in the open insurance market through a DIC (Difference in Conditions) policy. Any significant long-term changes to the New Jersey insurance market resulting from Super-Storm Sandy remain to be seen. However, the potential coverage changes and limitations discussed here are no different than those insurance challenges faced by dealers in the Southeast, Florida and the Gulf Coast for many years. You are not alone. Roger Beery is President of Austin Consulting Group, Inc. He can be reached at 720.528.8900, x11. So, with all this turmoil in the market, getting alternative bids and quotes is a must. If your insurer does not think you have other alternatives, they will push premiums and deductibles as far as they think they can. Having alternatives is your best defense. The Effects of Super-Storm Sandy These are, in fact, national trends experienced across the country, including areas affected by Super-StormSandy. It is hard to predict the long term insurance market effects of Sandy if, in fact, there are any at all. Probably the most noticeable change will be stricter underwriting of auto inventory anywhere near a flood zone. Changes may include a required inventory evacuation plan with severe penalties for not following the plan during a weather event. Flood exclusions for auto inventory may also become more commonplace, even for dealerships not considered in a high- probability flood zone. In some cases, flood exclusions are added at renewal but not effectively communicated to the dealer. In ad- dition to flood exclusions, carriers may limit flood coverage by offering higher deductibles and/or lower coverage sub-limits. With any auto inventory coverage, the prudent dealer must specifically ask their carrier to explain all deductibles, exclusions and other coverage limitations that may come into play during a weather- related loss. It is also important to remember that many flood zone maps have been re-drawn in recent years, putting dealerships in flood zones when they were not before. Super-Storm Sandy highlighted, for many New Jersey dealers, the various coverage nuances found in different policies. These differences were more apparent in business interruption claims. Often, when business interruption coverage is considered, the dealer is most concerned with the potential of a large loss such as losing the repair facility to a fire for months on end rather than a short-term claim. With Sandy, the policy differences came to light on smaller front- end losses, particularly those dealerships that suffered no building damage. In some cases business interruption coverage hadnodeduct- ible, in some cases therewas a dollar amount deductible andwith still others therewas awaiting period deductible (72 hours inmost cases). For those dealers who did not suffer building damage, their losses came as the result of off-premises power failure lasting days or even over a week. Off-premises power failure is a common busi- ness interruption exclusion, but is only offered in some policies. Of course the cost of this coverage should be considered because the loss is usually for a fairly short period of time. Some dealers