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Unprecedented Wildfires Devastate Canada, Leave Eastern U.S. Blanketed in Smoke

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Wildfire season has started two months early in Canada, and the devastating scale of the blazes is already unprecedented. Over 400 fires have caused roughly 10 million acres of burn damage so far, and have blanketed a wide swath of North America in smoke, creating orange skies and toxic levels of air pollution for communities all the way from Canada to the Southeastern United States. During the first week of June, New York had the worst air quality on Earth, and the air quality reached hazardous levels in Philadelphia and Washington, D.C. While it has begun to clear in the Northeast, the fires are ongoing and the air quality may continue to change in the days and weeks to come.

Find more answers to common questions about the wildfires below:

Where is all the smoke coming from?

Unfortunately, there is not just one answer for that, as there are multiple regional fires breaking out seemingly all over Canada and even the United States. However, the current air quality issues are coming from out-of-control wildfires in Quebec and Ottawa, Canada. There are also wildfires breaking out in at least six U.S. states, including Missouri, Kansas and New Mexico, but these do not appear to be involved in the air quality crisis.

According to the Associated Press and Canadian officials, the fires in Canada mark the start of what is expected to be Canada’s worst wildfire season ever due to drier ground than usual, which led the fires to accelerate very quickly.

“Right now, with the manpower we have, we can fight about 40 fires at the same time,” said Francois Legault, premier of Quebec, in an interview with Reuters. “But we have 150 fires, so we have to make sure that we focus where the problems are more urgent.”

In total, there are 425 active fires throughout Canada, according to Canadian Interagency Forest Fire Centre, and 232 are considered out of control. About 120,000 Canadians have been displaced from their homes due to emergency evacuations, with the most recent being from remote parts of Northern Quebec, according to Reuters. There are fires in nearly all of Canada’s provinces. The current wildfires in the U.S. have led to no evacuations thus far.

Why is the U.S. experiencing poor air quality?

To put it simply, the Northeastern region of the U.S. and the rest of the Eastern seaboard as far down as South Carolina are stuck in a slow-moving weather pattern that is carrying the smoke and smell from the Canadian fires southward. According to Politico, 13 U.S. states are under air quality alerts, impacting over 55 million people.

The AP noted that smoke from various Canadian fires has actually been showing up in parts of the U.S. since May, but with new fires recently breaking out in Quebec, the air quality has increasingly gotten worse in both Canada and the U.S. The hazy, orange-tinted skies and smoke smell along the eastern U.S. are expected to dissipate soon but may still be present through the weekend.

How do the fires impact businesses?

The fires affect certain industries more than others. Outdoor work like construction, sporting events, primary schools, park services and zoos are continuing to pay close attention to the air quality and have suspended outdoor operations accordingly while air quality is at such dangerous levels. Many professional sporting events have been cancelled. The New York Yankees, Chicago White Sox, Philadelphia Phillies and Detroit Tigers have postponed baseball games throughout the week, with minor league baseball teams, soccer teams and WNBA teams following their lead.

During the course of the week, airports have been taking various precautions, with JFK, LaGuardia and Newark Liberty International Airport grounding flights, shutting down inbound flights and changing flight schedules. Similar precautions were taken at Philadelphia International Airport. Because this is an ongoing situation, these measures and flight operations remain in flux.

How do we manage the risk?

In terms of immediate action, experts recommend staying indoors, wearing a mask if going outside and keeping windows and doors closed until the air quality alerts are lifted. By the end of the week, New York City’s air quality is expected to be upgraded from “unhealthy” to “unhealthy for sensitive groups.” To find out about your specific area, visit AirNow.gov.

Looking longer-term, the current fires are a good reminder that natural disasters stretch far beyond hurricanes, flooding and tornadoes, especially as the climate continues to change. A recent study found that increases in burned forest area across the western U.S. and southwestern Canada over the last several decades can be linked to significant human-caused climate change.

For businesses, take this as a reminder to examine how your organization will handle fallout from wildfires, for example, reviewing your property insurance, business interruption coverage, disaster recovery plans or emergency communications procedures. The following resources from Risk Management can help organizations consider the many risks wildfires and other climate change-related extreme weather events pose to businesses and communities, and can help boost disaster preparedness for these devastating events.

More resources:

Proactive Tips for Businesses Facing Hail Damage Claims

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Last week, a severe thunderstorm unleashed massive hailstones in Alberta, Canada, damaging dozens of cars and unleashing potentially record-breaking hailstones the size of grapefruits. While the stones were notable, the storm was less of a rarity—indeed, hail is becoming increasingly common and increasingly costly as a natural catastrophe peril around the world. In 2020, Aon’s Global Catastrophe Recap identified hail damage in a severe thunderstorm as the driver of one of Canada’s costliest severe weather events on record. In 2021, insurers faced multiple billion-dollar loss events resulting from severe convective storms in the United States, with the greatest damage inflicted by hail that impacted the Plains, Midwest, Southeast and Northeast.

“Public perception often assumes that tornadoes drive the bulk of annual severe convective storm (SCS) damage costs,” said Steve Bowen, managing director and head of catastrophe insight on Aon’s Impact Forecasting team. “The reality is that large hail typically accounts for a majority of thunderstorm-related losses in North America during any given year.”

Further, North America is not alone in facing this peril, as hail also caused significant recent damage events in parts of Europe last year, struck Australia yesterday, and NOAA reports China, Russia, India and Northern Italy are all prone to damaging hailstorms.

As companies assess their natural disaster preparedness, there are some proactive measures that should be taken specifically for hail to leave organizations best positioned for any resulting insurance claims. Many commercial property policies contain provisions that any lawsuit against an insurer must be filed within one year following the “inception of loss,” otherwise it is barred. In other words, the “inception of loss” date starts the one-year clock ticking. The question then becomes, when exactly is that date? The Wisconsin Supreme Court hit this issue head-on in the case of Borgen v. Economy Preferred Ins. Co. In this 1993 opinion, the court determined that the phrase “inception of loss” in the context of hail damage essentially means “the date of the specific hail storm,” not “the date I discovered the hail damage.”

In 2018, the 5th Circuit Court of Appeals took things a step further in Certain Underwriters at Lloyd’s of London v. Lowen Valley View, L.L.C. In that case, a hotel filed a lawsuit against its insurer for refusing to cover hail-related roof damage under a commercial property insurance policy. The 5th Circuit agreed with the insurer’s argument that: 1) several hail storms had struck the vicinity of the hotel in the several years preceding the claim; 2) only one of those storms fell within the relevant coverage period; and 3) the record lacked reliable evidence permitting a jury to determine which of those storms, alone or in combination, damaged the hotel. The 5th Circuit further rejected the hotel’s engineering report, which asserted the subject storm was the “most likely” cause of the damage, deeming it insufficient.

Taken together, these decisions can blindside businesses that believe their insurance policies will automatically respond in the event of hail damage.

Let’s say you operate a business in Plano, Texas, and have a commercial property policy with a renewal date of January 1, 2022. You’ve noticed some recent leaks over the past week in your 8-year-old roof. Based on this discovery, you enlist a roofing contractor to investigate further. You learn that the roof needs to be replaced due to the existence of hail damage, so you submit a claim to your insurance carrier. Now, consider Plano has had at least 11 significant hail strikes since your roof was installed, according to StormerSite: 

Storm Date                 Min. Hail Size Range (Max)
11/10/2021                         1.00”
4/23/2021                          1.00” (up to 2.00”)
5/18/2019                          1.00”
3/24/2019                          1.25” (up to 1.75”)
6/6/2018                            1.00”
4/6/2018                            1.50” (up to 2.00”)
4/21/2017                          1.75”
4/11/2016                          1.50” (up to 2.50”)
3/23/2016                          1.25” (up to 2.00”)
4/27/2014                          1.25”
4/3/2014                            1.75”

Based on the Borgen case, the relevant “inception of loss” date would be the most recent hail storm on November 10, 2021, and each specific storm prior to that. This would mean any claims potentially implicating the events on May 18, 2019, and earlier could be time-barred, assuming your prior insurance policies contain the one-year filing limitation mentioned above. Given the number of equivalent hail strikes over the course of those eight years, you will likely have an uphill battle under Lowen Valley View in attributing the recent April 2021 and November 2021 storms to a loss under your current policy.

Even if it were somehow possible to assign each item of roof damage to a particular hailstorm—and further that statute of limitations issues would not limit recovery almost entirely—the number of storms creates another problem. With 11 storms occurring over the life of your roof, the insurer could argue that would mean 11 separate occurrences, which in turn would mean having to go through 11 separate deductibles before you ever saw a single dollar of insurance proceeds. Depending on the amount of your deductible, this means recovery could be impossible as a practical matter.

Read together, these rulings put the onus on business owners in areas at risk for hail damage to proactively conduct at least annual inspections to determine the existence of any roof damage potentially attributable to a particular insurance policy. It further puts the onus on business owners to understand the insurance claim process, including seeking tolling agreements to extend the deadline for filing a lawsuit.

Tornadoes Devastate Midwest and Southern States

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Last week, a series of tornadoes ripped across the Midwest and Southern United States, killing dozens and crippling infrastructure in Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri, Ohio and Tennessee. While Karen Clark & Company has estimated that the insured loss from the tornado outbreak will be about $3 billion, and credit rating agency Fitch predicted that losses would total $5 billion, Dr. Joel N. Myers, AccuWeather founder and CEO, estimated that the tornadoes are expected to cost about $18 billion in total damage and economic loss. Mark Friedlander, director of corporate communications at The Insurance Information Institute, said, “Based on preliminary assessments of the extensive property damage we are seeing across multiple states, this weekend’s tornado outbreak has the potential to be the costliest on record in the U.S.”

As of Monday, 88 deaths across the region had been confirmed, but over 100 people are also missing, which means the death count may be higher. The cyclones killed more than 70 people in Kentucky, the hardest-hit state, leaving thousands homeless and knocking out power for more than 25,000 in the western region of the state. Additionally, 10,000 Kentucky homes and businesses reported being without water, and another 17,000 were under boil-water advisories, according to the Kentucky Division of Emergency Management.

Across the entire affected region, 750,000 customers were left without electricity. These outages have complicated search and rescue efforts, as rescue workers excavated destroyed buildings, searching for people who are still missing. In Mayfield, Kentucky, for example, the city’s main fire station and multiple police stations were inoperable, and the city was scrambling to find new ways to field emergency calls.

Also in Mayfield, at least eight people died at a Mayfield Consumer Products scented candle factory after workers reportedly pleaded with supervisors to let them leave the building after warning sirens sounded and an initial twister had passed with little damage, only to be threatened with firing if they did not continue working. Over 100 workers were trapped inside the building after the next tornado leveled it. Several survivors have already filed a lawsuit against the company, citing “flagrant indifference” to worker safety, and that the company “knew or should have known about the expected tornado and the danger of serious bodily injuries and death to its employees if its employees were required to remain at its place of business during the pendency of the expected tornado.”

Another tornado struck an Amazon warehouse in Edwardsville, Illinois, killing six people and injuring another. Amazon claims that it took all necessary precautions, but family members of victims have alleged that the company prioritized productivity over worker safety by not heeding tornado warnings and not adequately preparing employees for emergency weather safety responses. Amazon pledged to help workers and their families affected by the tragedy by donating $1 million to the Edwardsville Community Foundation, a charitable trust that benefits regional communities. OSHA is reportedly investigating the Amazon warehouse, and Kentucky state regulators are investigating the Mayfield Consumer Products event.

While an Amazon spokesperson noted that the company’s warehouse was up to code, Illinois governor J.B. Pritzker also promised an investigation into whether building codes needed to be updated, “given serious change in climate that we are seeing across the country.” Scientists say that climate change may have changed normal weather patterns and led to these tornadoes’ increased intensity and reach, with record warm temperatures across the region potentially exacerbating the disaster.

Businesses and risk professionals should prepare now for more frequent and intense weather events. The following recent Risk Management articles may help:

Hurricane Risk Management: Key Considerations Before and After Storms Strike

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On Sunday, August 29, Hurricane Ida made landfall in Louisiana as a Category 4 storm with winds of 150 miles per hour, making it one of the most powerful storms to ever hit the United States. Striking on the same date that Hurricane Katrina devastated the region 16 years ago, Ida caused significant wind damage, storm surge and flooding in Louisiana and Mississippi and has left 1 million homes and businesses without power, including the entire city of New Orleans. Ida has now weakened to a tropical storm and will continue to cut through the south before making its way across much of the East Coast, bringing significant risks of wind, rain and inland flooding throughout this week.

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The storm marks another overactive hurricane season officially underway in the United States, prompting business leaders and property owners to ensure they are adequately prepared from an insurance and risk management perspective.

Some key recommendations to consider before and after any hurricane include:

Preventative Measures

First, establish a plan that includes clearly defined roles and responsibilities for preventative measures to protect your building, employees or tenants in the event of a hurricane. This plan should include everything from the identified incident response team and the established internal and external communication protocols to the selected offsite workspace and disaster recovery plan.

It is also critical to have a predetermined contact list for key service vendors, suppliers and contractors—and to build relationships with those individuals in advance. When a storm of any magnitude hits, multiple businesses will likely be affected, so establishing a vendor rapport beforehand allows you to pre-negotiate rates and availability guarantees, helping to save time and money after a disaster.

From a property perspective, ensure that your buildings and structures are adequately protected to mitigate potential damage. Precautionary steps like boarding up buildings, covering windows and landscaping, and fastening anything that could blow away or fall may seem like small considerations, but can significantly reduce damage and losses.

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Additionally, back up important paperwork and IT services to avoid losing valuable assets. Severe weather often causes power outages and other service disruptions that may last longer than anticipated, and key files like property records and facility plans should be safely stored and easily accessible in the event of a hurricane.

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Not only is this important for overall business operations, but it is also easier to adjust claims when you can show that you recently backed up files.

Read the Fine Print

When it comes to your insurance policies, it is critical to verify that your coverage includes appropriate, up-to-date limits and deductibles.

This includes determining if you have adequate insurance based on your location and its respective risk for floods or windstorms. In addition, you should review your policy’s sublimits, which set coverage limits for certain scenarios, so you know what to expect if damage occurs. For example, windstorm, flood and named storms all have different limits based on the typical severity of the type of storm.

Do not wait until the hurricane is coming to evaluate or modify coverage, as this is like trying to insure a burning building, and insurance carriers will be bombarded with requests. Perform these evaluations and changes proactively so you can remain calm knowing the appropriate coverage is in place for any potential threat.

If a hurricane does hit close to home, business owners can typically tap into business interruption insurance and extra expense limits for any losses that occur due to suspended operations resulting from the storm. This also applies to property owners who may need to move tenants to a different location while the property is being fixed—a process that could take several months depending on the severity of the hurricane and the associated damage—and are therefore not incurring rent.

Now What?

If a hurricane impacts your business, implement your disaster recovery plan. Then, as soon as it is deemed safe to re-enter the property, document all damage in detail with written descriptions, as well as photos and/or videos. At this time, take a full inventory of damaged materials, as this will be important throughout the claims process, and save any pieces that could help with restoration down the line. Most claims require you to immediately notify the carrier of damage and provide the documented “proof of loss” within a specific time frame. Before doing so, reach out to your insurance broker who can help guide you through this process.

Another best practice is addressing any damage in a timely manner to avoid any issues that could worsen with time or additional weather events. Taking immediate action, such as covering an exposed roof, securing doors and windows, removing water, and drying out any affected areas, can lessen the potential impact of further deterioration and keep those in the vicinity safe from harm. For more dangerous and technical issues, like getting the electric system back up and running, consult a qualified professional.

While hurricanes can certainly be daunting, there are ways to prepare in advance to make sure you are not caught off guard or without a plan. Be sure to assess your risk and execute the appropriate steps to protect your business, property and employees. Most importantly, lean on your insurance broker and other qualified vendors with any questions or concerns.