Top Contributing Factors in Commercial Property Damage ClaimsThe same incidents that damage homes and other residential properties cause significant or catastrophic commercial property damage. However, commercial properties in high-traffic areas and open to the general public are vulnerable to additional risks that might not impact private property. Let's look at some of the most common causes and contributing factors among commercial property damage claims in the U.S.:
- Fire: Wildfires are increasingly common in drier parts of the country, but fire can damage commercial property anywhere. Cooking fires in kitchens, combustion of flammable materials due to improper storage, and errant sparks from shoddy electrical work can all contribute to extensive property damage.
- Storms: Hurricanes, tornadoes, hailstorms, and blizzards can all cause severe damage to the exterior and interior structures of commercial properties. When intense storms and other extreme weather events devastate communities, it can take weeks or even months to resume normal business operations.
- Flooding: Some flooding results from natural disasters like hurricanes or storm surges, but any commercial property can sustain flood damage. With enough rain, snowmelt, or plumbing leakage, even a relatively small structural defect can allow for devastating water intrusion, flooding foundations and ruining commercial properties from the ground up.
- Crime: Many commercial property damage insurance claims arise due to criminal activity, such as burglary, theft, or vandalism. There are many reasons a commercial property might be the target of a crime, including civil unrest, local economic factors, disgruntled staff members, and angry customers.
How to File a Commercial Property Damage Insurance ClaimMost business owners deal with commercial property damage at some point. And unfortunately, the insurance claims process for commercial owners is not always straightforward. Providers can and do reject valid, well-supported claims for various reasons, many of which stem from preventable errors and omissions. Following the proper procedures when filing a commercial insurance claim is essential. Initiating the claims process as soon as possible after a property damage event is equally important. Even a brief delay can make a claim drag on much longer than it should and postpone your eventual settlement. After you have addressed any on-site emergencies resulting from the damage, you should anticipate and cooperate with the following stages of the commercial property damage claims process:
- Notifying the insurance provider: The first step in any insurance claim is to report the damage to your commercial insurer. Many insurance companies require notification from policyholders within specific time limits, so you should always report property damage events, even if you're not sure your insurance covers them. Failure to notify insurance carriers per the terms of given policies may be grounds for denial of otherwise valid claims.
- Contacting the police, if necessary: Make sure you notify the authorities and obtain copies of any police reports if your property sustains damage due to criminal activity, such as burglary or vandalism. Most states also require drivers to report accidents that result in certain minimum levels of property damage, so if an accident damages your vehicle, be sure to check and comply with your local police reporting requirements.
- Reviewing relevant insurance policies: If you know or suspect a particular policy applies to your property damage scenario, get a copy and check it thoroughly. Many policies require you to take specific steps when a covered loss occurs, and you don't want an avoidable mistake to jeopardize your claim. If an applicable policy contains confusing provisions or language, do not hesitate to ask a trusted attorney to review it with you.
- Accounting for damaged property: You will need extensive documentation and other proof of your losses to claim compensation from an insurance claim. Preparing an inventory of any property damaged or destroyed in the incident is a good idea so nothing gets left out. Consider taking photos or video footage of everything you include in the inventory. Keep documents and other claim evidence in a secure, organized location.
- Working with the insurance adjuster: Once you have evaluated the damage to your property and submitted a claim, the insurance company should assign an insurance adjuster to the claim within a few days. Adjusters are responsible for investigating claims, evaluating the damage, and determining the extent of the insurance company's liability. If an adjuster visits your property, show them the damage and your business records.
- Preparing a Sworn Proof of Loss form: Some insurance providers may ask you to provide a Sworn Proof of Loss (SPOL) form as part of your claim. A SPOL is a formal declaration you make under oath about the nature and scope of any damage to your property. When requested, you must sign, notarize, and submit the SPOL forms to the insurance provider. And because a SPOL constitutes a sworn statement, it is essential to prepare yours as thoroughly and accurately as possible.
- Making temporary property repairs: Property damage insurance policies usually contain provisions that require you to take reasonable steps to mitigate your losses. So, if you can do so safely, you should act to prevent additional property damage losses from occurring. For instance, if there's a hole in your property's window or roof, you might cover it with a tarp to stave off water damage. Be sure to save ruined parts and retain receipts from out-of-pocket repair expenses so you can show them to the insurance adjuster.
- Obtaining estimates for repair costs: Once an insurance adjuster has had the opportunity to assess the damage to your property, you can seek out repair estimates. It's best to plan on obtaining at least two quotes from reliable professionals. If your insurer disagrees with your calculations, the adjuster may arrange its own appraisal. You may need to pay the quoted costs for some repairs upfront and then seek reimbursement afterward.
- Filing specialized or non-standard claims: You may need to file a specialty insurance claim in certain circumstances, such as a business interruption or civil authority claim. If you have business interruption insurance, you can seek compensation for net losses in anticipated revenue due to temporary closures or relocations. If your business suffers losses due to governmental activity that prevents you from accessing your property, you can seek compensation from a civil authority coverage policy.
- Participating in settlement negotiations: When a repair technician fixes your insured commercial property, they will most likely bill your insurance provider directly. But when your policy includes compensation for out-of-pocket repair expenses or other losses, you may need to seek reimbursement yourself. If the insurance company disputes the valuation of these more loosely defined losses, you may need help from an attorney to negotiate a fair settlement.
- Filing a property damage lawsuit in court: Insurers will usually try to resolve property damage insurance claims without litigation. However, when insurance companies or other liable parties refuse to accept responsibility for covered losses, the best way to demonstrate your resolve may be to proceed to court. Settlement negotiations often continue behind the scenes as everyone gets prepped for trial, and many lawsuits settle well before the court reaches a verdict. When a judge or jury comes to a decision, it is final, and all parties must abide by the ruling.
What to Do if Your Insurer Denies Your Commercial Insurance ClaimUnfortunately, insurance companies often deny property damage claims, in whole or in part, for various reasons. Your provider may insist that your policy excludes the specific type of event that caused the damage, that you took too long to report the incident, or that you lack sufficient evidence to support your claim. Whatever the case, you do not automatically have to accept a rejected claim or reduced payout. To push back and demand the benefits you have paid for in premiums, you can:
- Determine why your provider denied the claim: When an insurance company informs you of the denial of your claim, it must provide a written notice specifying the language in your policy supporting its decision. If you believe your insurer based the denial on a misunderstanding or error, a thorough review of your provider's justification can indicate how to address it.
- Contact the insurance adjuster for clarification: You can reach out to your insurance provider directly to discuss a claim denial with which you disagree. Consider calling your insurance agent or writing a “response letter” to explain your benefits claim.
- Get in touch with a public insurance adjuster: A public insurance adjuster is an independent professional who can review your claim, explain the limits of your policy, and offer expert advice on how to proceed. In some cases, a public adjuster might even recommend filing a regulatory complaint against an insurance carrier that fails to comply with state insurance laws.
- Prepare to appeal the denial of your claim: If your attempts to reason with the insurance company stall, filing a formal appeal is your last step before resorting to legal action. Your denial letter should contain details on how to appeal your provider's decision, which you usually must do within a short timeframe. When you file your appeal, provide an organized argument and plenty of supporting evidence to show why your original claim is valid.
- Contact an experienced property damage lawyer: If you are preparing to appeal a denied claim or file a property damage lawsuit, you should speak with an experienced attorney immediately. Commercial insurance providers usually have fat purses and teams of corporate lawyers, which puts claimants at a significant disadvantage. Having a skilled attorney represent your interests is the best way to level the playing field in your favor.