Companies potentially affected by the Alberta wildfires should be conducting a prompt review of potentially applicable insurance coverage, especially under policies that provide coverage for business interruption and loss of production.
Many businesses undoubtedly will be affected by the raging wildfires in Canada’s oil-rich Alberta province. Mining operations in the country’s main oil-sands region have been forced to shut down, production at other operations has been curtailed, and major pipelines have been closed. Fortunately, the affected companies likely have insurance coverage in place to assist with physical repairs, loss of business income, lost production, extra expenses incurred to recover from the wildfires, environmental cleanup, and potential third-party claims.
Business income, business interruption or loss of production insurance can cover not only lost earnings and expenses that continue during periods of business interruption, but also losses caused by civil evacuation orders, well closures in anticipation of the wildfires, and extraordinary expenses incurred to allow policyholders to continue to operate during the period of interruption. In addition, companies not directly affected but whose customers or suppliers are affected may have contingent business interruption (or contingent business income) insurance that would cover lost income.
Commercial insurance policies also may provide coverage to the extent that the wildfires cause any third-party liability and environmental clean-up costs. Affected policyholders should be aware that coverage under these policies often is triggered at the time of the discharge and not at the time a claim or suit is initiated, which means that policyholders need to act quickly to preserve coverage by timely notifying insurers.
Reed Smith has more than 80 insurance recovery lawyers with extensive experience assisting policyholders affected by catastrophic losses such as the Alberta wildfires, and can help to quickly evaluate applicable coverage. In the aftermath of an event like the Alberta wildfires, affected policyholders should immediately review their coverage, determine their notice obligations, and timely notify insurers to preserve coverage. Reed Smith represents many clients in the oil and gas industry (and other affected policyholders across other industries), and is familiar with the applicable insurance policies and notice obligations.
Client Alert 2016-119