Commercial Property Owners: Know Your Rights When Disaster Strikes
By Natisha Quijano, Esq.
If you own commercial properties, you already understand that catastrophes such as hurricanes can have devastating consequences to your building(s). However, the loss after a major hurricane is almost never limited to the structural damage, so it is important to think about the intangibles to make sure you are getting what you are owed, and what you deserve under your policy. Commercial policies may include coverage for Business Income and Professional Fees.
Business Income Coverage
A typical business income insurance clause reads as follows: We will pay for the actual loss of business income you sustain due to the necessary suspension of your “operations” during the period of “restoration.” The suspension must be caused by the direct physical loss, damage, or destruction to property. The loss or damage must be caused by or result from a covered cause of loss.
However, there are different types of business interruption coverages. Be sure to understand the specifics of what your policy provides. The first step to understanding business income coverage, generally, is to understand certain important terms:
Actual loss sustained means that the business income coverage covers the actual loss sustained by the insured as a result of direct physical loss or damage to the insured’s property by a peril not otherwise excluded from the policy. The insurer is only obligated to pay if the insured actually sustained an interruption of business leading to a business income loss.
Business income includes the net income (net profit or loss before income taxes) that would have been earned or incurred by the insured and the continuing normal operating expenses incurred, including payroll.
Period of restoration is often defined as the length of time required to rebuild, repair, or replace the damaged or destroyed property. The period of restoration begins when the physical loss or damage occurs; it ends when the property should, with reasonable speed, be repaired or replaced.
Often restoration can be a very long and arduous process. You may find yourself in a situation where your policy period expires before restoration is complete. Don’t worry; expiration of the policy does not automatically end the period of restoration. Once you establish that the physical loss occurred during the policy period, the business income coverage will provide coverage for the duration of the period of restoration, even if the policy expires before the period of restoration ends.
Professional Fees
For business owners, submitting a claim to the insurance company can actually come with added out of pocket expenses. If your policy provides coverage for Professional Fees you may be able to recover some of the funds required to prepare your claim.
Typically, “Claim Preparation Costs” is defined as:
1. The cost of taking inventory and the cost of gathering and preparing other data to substantiate the extent or amount of loss or damage; and
2. The cost of services provided by accountants, contractors, and engineers solely for the purpose of determining the extent or amount of loss.
Be mindful that some policies require the Insured to obtain prior written approval for the vendor (e.g. accountants, contractors, and engineers) to be engaged in order to obtain coverage under the provision. What this means is that while some policies allow for the recovery of these types of costs, you may first need to seek approval from your carrier before engaging with the vendors in order to later recover the professional fees expended.
Never forget, we’re here to help if you ever have questions about your policy!
Natisha Quijano, Esq.
Learn more about Natisha here!
DISCLAIMER: This website is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Cohen Law Group through this site does not form an attorney/client relationship. This site is legal advertising. Please review the full disclaimer for more information by clicking here.
