When business owners need to make a commercial property insurance claim, they are forced to learn how insurance works, what is covered, what is excluded, and how to document and prove their claim — all while trying to keep a business going.
It’s important for a business to fully understand all of the coverages available or limited by its insurance policy and not just take the insurance adjuster’s word for how the policy works. You could lose out on what you deserve if you don’t fully understand your policy.
What does commercial property insurance do?
Commercial property insurance is one element of a business owner’s policy. It helps a business bring its property back to where it was pre-damage. This can involve repairs when a property is partially damaged or a complete replacement in the event of a total loss. Each insurance policy is different with its own language, deductibles, conditions, limitations, and exclusions.
Some commercial policies have additional coverage for things like law and ordinance, which will cover costs related to bringing a damaged building into compliance with the current building code. Other policies have lower limits for certain parts of a loss — for instance, some policies only provide a limited amount of coverage for damage caused by water or mold.
Understanding your commercial insurance policy
Almost every business has insurance. But, most business owners don’t really get to know their insurance policies until they are in the middle of the claim process. Along with figuring out if the insurance adjuster is being honest about how the policy works, business owners are also trying to learn about all of the different parts of the policy: what limits are available, what is excluded, how deductibles work, and what kind of documentation is needed.
Commercial policies are dense and full of endorsements; they definitely are not all the same. Our lawyers look at policies regularly as we defend businesses against their insurance companies and we still need to review each policy individually to capture the nuances of each one. Courts will also interpret various policy provisions differently.
What’s in your commercial insurance policy?
Here are the key elements to help you understand your policy as you read through it:
The better you understand your policy, the better decisions you’ll make about your claim and about your coverage in general. But Google will only get you so far. If you think your insurance company is misinterpreting your policy or you’re just not sure what to think, don’t hesitate to reach out to our law firm. We provide free case evaluations and our insurance law experts will tell you what they think about your claim and policy. We tend to do a better job explaining insurance than the adjuster will.
Additional policies and coverages
Business interruption insurance
If business interruption insurance coverage is purchased, commercial policies cover business interruption, which are financial losses caused by a business being shut down because of a loss to the business’s property. Business interruption insurance will usually pay for lost profits and operating expenses that continue even while the business is shut down. This can include ongoing costs like payroll or rent.
Many business interruption insurance policies also cover “extra expense,” which means the extra costs incurred by the business to get back up and running faster. Extra expenses include things like money paid to expedite repairs or the cost of moving to a temporary location to maintain business.
Depending on the policy, there may be coverage for losses caused by the government (called a “civil authority” in insurance policies) blocking access to a property. This happens at times when an area has been evacuated or shut down because of a dangerous condition or catastrophic damage. Business policies can also provide coverage for income lost because utility services were disrupted, such as the loss of power to the insured building.
Business interruption coverage can be subject to waiting periods (usually some number of days before the insurance company has to start paying) and can be subject to maximum amounts that will be paid. Sometimes insurance companies will try to apply lower limits based on the type of loss. Some policies also will have blanket limits that apply to all locations where other policies might have individual limits for each of the business’s locations. If the different locations are all part of an interconnected business, there can be significant legal issues on whether the policy should pay for lost income at each property.
Every policy is unique, but no matter what the policy says, it is important to collect the right financial information and other evidence to document a business interruption loss.
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Coverage for lost rent
Where a commercial property owner is a landlord renting out a commercial building, that owner can buy an insurance policy that covers the loss of rents when a tenant is forced out by damage to the property.
Contingent business interruption coverage
A contingent business interruption is a loss of business income caused by a loss experienced by another company or person. This type of insurance provides coverage for a loss of contingent business income. Businesses that are part of a supply chain that require other companies to be in operation. These types of policies usually require there to be a direct relationship between the insured business and the other integral business that sustains damage, and sometimes those other integral businesses have to be scheduled (listed) in the policy.
Outdoor sign coverage
Commercial insurance policies will often limit or exclude coverage for outdoor signs, such as marquees or digital display signs. This coverage can be purchased, with the specific limits matching the value of the signs.
Builder’s risk insurance
Businesses that are having a structure built or renovated can purchase builder’s risk insurance. This type of coverage protects a company against the risk of losing building materials, fixtures, or other equipment during construction.
Fine arts coverage
Businesses that own fine arts can buy insurance that covers damage or loss to its art. Without this coverage a commercial insurance policy might not cover art or might limit the coverage to a specific maximum dollar amount.
Electronic data coverage
A breach or loss of data can cripple a business or cause significant financial losses. Insurance is available for losses resulting from electronic data destruction or losses.
Employee theft or dishonesty
By default, a lot of policies will not fully cover losses caused by a business’s own employees. Business owners can purchase additional coverage to protect against losses caused by employees’ dishonesty. This can include the theft of property, stock, or money.
Spoilage or contamination coverage
Food industry businesses can experience serious losses if any food spoils or becomes contaminated. This can occur because of damage to refrigeration equipment or utilities, which leaves stored food outside of the safe temperature range. Businesses like restaurants, food storage services, grocery stores, or food producers all may need spoilage or contamination coverage.
Mechanical breakdown insurance coverage
Some businesses rely on machinery or equipment to run their business, such as manufacturers or companies that rely on refrigeration. If there’s a breakdown in key equipment, it can completely shut down the business and cause a significant income loss. This type of coverage can protect against those losses.
Coverage for money, valuable papers and securities
Businesses can add coverage to their commercial property insurance policy for losses of money, other valuable papers, or securities. Depending on the wording of the policy, this can cover cash or other valuable paper lost on the premises (whether stolen or destroyed), a loss at a bank, or a loss during transport.
Newly acquired or constructed property coverage
As businesses expand, they may build or buy other properties. With this on their policy, businesses can extend existing coverage to a new property. Newly Acquired Property Coverage is usually temporary, and is meant to protect a business from a loss while it lines up long term insurance coverage.
Leased equipment coverage
Businesses that lease or rent equipment may need leased equipment coverage to protect them and the lessors of the equipment. Often, this type of insurance is required to rent the equipment in the first place. Leased equipment coverage can protect the business owner from having to repay the rental company in the event of a loss.
Coverage for outdoor property and landscaping
Many businesses maintain outdoor property like fences, signs, and landscaping. Businesses can buy coverage for outdoor property, which is usually set a specific dollar figure as a maximum limit.
Underground storage tank coverage
For businesses that rely on underground storage tanks, like gas stations, it is important to make sure that those storage tanks are covered by their insurance policies. This may involve purchasing additional coverage for storage tanks and any fixtures that are attached to them.
Common commercial policy claims
Commercial property insurance policies insure against all kinds of losses. We have had clients whose commercial property was damaged by hurricane winds, which forced tenants out of their building until repairs were done. We have also seen commercial losses for fires, sinkholes, pipe breaks, water damage, termites, hail, and wind. Businesses can suffer losses from vandalism, or theft.
How to file a commercial insurance claim
Insurance policies often have instructions in them for how to submit an insurance claim, but it’s not always possible to find your policy while you’re in the middle of dealing with damage to your property.
Often, the fastest way to submit a claim is to call your insurance agent and ask if she can submit the claim for you or tell you how to submit it.
You can also use Google to find out how to submit a claim with your insurance company. For example, Nationwide has an online claim website.
How insurance companies handle claims
Once a claim is submitted the insurance company will typically assign an adjuster, who will come look at the insured property and talk to the business owner about the claim. Frequently, the adjuster will conduct a recorded statement of the business owner, and may ask for documents. In many commercial property insurance claims, the insurance company will hire experts of its own, including engineers, mold assessors, or forensic accountants.
Ultimately, the insurance company has to make a decision about the claim and it will do one of two things: accept coverage and pay some amount or deny coverage and pay nothing.
Cost of repair
Even when an insurance company accepts coverage, there is still often a problem with the insurance company not paying enough for the loss. Insurance adjusters will frequently underestimate the value of a loss and pay too little for a business to actually make the repairs it needs. Sometimes it’s easy to know when an insurance company is lowballing your business, like when there’s been a huge loss and the insurance company is only offering a few thousand dollars (we’ve seen it). Other times, you might just feel it’s too little.
When we fight an insurance company that underpaid an insurance claim, we use expert witnesses to estimate the cost of repairing damaged items and invoices for repairs that have been done.
Businesses should definitely be skeptical about whether the insurance payment is sufficient and should be extremely cautious about accepting any amount as a final settlement payment.
When insurance companies delay payments to businesses or wrongfully deny claims, it can cause the business to lose profits or even completely destroy the business. These bad faith actions by insurers can make it so that the available policy limits are no longer enough to restore the business to where it was before the loss. Insurance companies can be held liable for breaching their obligations to treat insureds with good faith, and the recoverable damages can exceed the policy limits available. Bad faith law requires policyholders to comply with very specific laws before a claim for bad faith damages can be made.
We understand how stressful this is. And we understand it’s even more stressful when the insurance company ultimately tries to get out of paying what it owes for the damages and losses.
What happens when your commercial property claim is denied?
When an insurance company denies your claim, it should be in writing. The denial letter should explain why the insurance company is denying the claim and explain where the insurance company is getting its facts and information from.
Insurance companies deny claims for many different reasons, some legitimate and some not. Broadly speaking, denials usually are issued when the insurance company believes that the cause of your damage is excluded under your policy.
A denial is not the end of the road. Insurance companies will sometimes reconsider their position and reopen and readjust a denied claim. Usually though, the only way to convince an insurance company to change its position on a denied claim is to fight the insurance company in court.
Fighting insurance companies
If your business has had its commercial insurance claim denied, underpaid, or delayed, don’t just accept it. We’re business owners too and our business is helping people fight their insurance companies. Our attorneys will provide you with a free consultation to talk about your claim and we will tell you if we think you have a case against your insurance company and how we suggest pursuing it.
Here’s how we can help
- Tell us about your insurance claim.
- We’ll tell you how we evaluate your claim right away and for free.
- If we think we can help you recover more insurance money, we’ll make a plan of attack together.
- You’ll never pay out of pocket — we’ll only get paid out of the additional money we recover from the insurance company.
Fill out the case evaluation form or start a chat, and a lawyer will evaluate your case and reach out to you. Or you can also call us directly at (727) 821-3195.