5 Annoying Surprises for Business Owners in a Commercial Insurance Claim

These surprises are more than just annoyances; they can delay, reduce, or completely derail a legitimate insurance claim.

Here are five surprising insurance claim headaches for business owners – and how to deal with them.

Business Interruption Complications

Business interruption coverage is a common source of commercial insurance claim disputes.

To accurately calculate business interruption compensation, you need to answer questions like:

• How much money would your business have made if you were able to stay open?
• At what point during repairs can your business safely reopen and start earning money again?

These questions aren’t easy to answer. However, insurers need to answer these questions – and business owners need to supply concrete data – to complete the claim.

Some of the data business owners need to provide for a successful business interruption claim include:

• Historical financial records
• Seasonal sales trends
• Projections of future growth
• Operating expenses, overhead, and payroll

Insurers may argue things like “period of restoration.” You might argue you’re entitled to six months’ worth of lost income, for example, because your business is unable to open for six months. Your insurer, however, might claim your business could have reopened in three months because repairs were mostly completed.

Tip for Business Owners: Keep detailed financial records. Consult with accountants or public adjusters specializing in business interruption claims. Keep documentation organized: the more organized you are, the harder it is for insurers to lowball your BI payout.

Disputes Over Specialized Equipment & Inventory

If you’re a restaurant, manufacturer, medical company, or tech company, then replacing specialized equipment and inventory isn’t as simple as a trip to the store.

During a commercial insurance claim, you could face specialized equipment and inventory disputes, like:

• Depreciation vs replacement cost: Insurers may want to cover the “actual cash value” of equipment, which deducts depreciation. For specialized equipment, however, even a few years of depreciation can unfairly slash value.
• Obsolete or custom equipment: Sometimes, replacing specialized equipment isn’t as simple as going to the store. Your machinery may no longer be made, for example. Your insurer could argue about the value of the equipment – or whether it can be replaced at all.
• Inventory valuation: How much is specialized inventory and equipment worth? How can you prove this value? After fire, flood, or theft, it can be difficult to prove value. Insurers could lowball the payout if you don’t have precise records.

Tip for Business Owners: Maintain up-to-date inventories and equipment records. Keep serial numbers, purchase receipts, and photos. For custom equipment and unique inventory, keep detailed specifications on file. The more information and documentation you have, the better.

Insurers Blaming “Wear & Tear” or “Maintenance”

There are plenty of unexpected surprises in running a business. That’s why you buy insurance: to cover unexpected surprises.

Maintenance and wear and tear, however, are both expected and predictable. They’re ordinary costs of running a business. Insurance doesn’t cover these expected costs.

That’s where insurance complications can occur. Insurers may argue damage was caused by “wear and tear” or “maintenance” instead of a covered loss – like a fire or storm:

• Insurers could label a burst pipe as “neglect” because the pipe showed signs of corrosion
• A roof collapse could be blamed on “old age” instead of heavy snow
• A fire could be attributed to faulty wiring that the insurer claims you should have replaced

These issues are especially tough for business owners operating in old buildings or with older infrastructure. Anticipating all of these problems is virtually impossible. Even if a storm or fire clearly caused the loss, it can be difficult to prove.

Tip for Business Owners: Keep maintenance logs and inspection reports. Prove you were proactive with maintenance. The more documentation you have, and the more you prove you were “on top of things,” the harder it is for insurers to blame you for damage.

Delays Caused by Multiple Policies or Parties

Commercial insurance claims often involve multiple policies or parties, which can annoy everyone involved.

The more parties and policies involved in a claim, the longer it takes to resolve a claim.

Some of the parties and policies involved in a commercial insurance claim could include:

• HOAs and associations (say, for condo businesses or shared office spaces)
• Landlords and tenants (whose coverage applies when multiple policies cover the same space?)
• Multiple insurers (businesses could have multiple policies from multiple insurers, or multiple parties could use multiple insurers)

Tip for Business Owners: Clarify in advance what each policy covers. When filing a claim, get everything in writing and keep a clear paper trail to avoid finger-pointing.

Extra Costs of “Hidden” Damage

Disasters cause obvious damage, like equipment destroyed by a fire. However, there’s also plenty of hidden damage – like smoke and soot damage throughout your building’s HVAC system.

These hidden costs add up. Your insurer doesn’t want to cover these hidden costs because they increase the value of your claim. However, someone needs to pay these costs; either the business owner pays for these hidden damages out-of-pocket at a future date, or your insurer rightfully covers the hidden damage today.

Hidden costs could quickly complicate insurance claims because:

• Insurers dislike covering hidden costs. Insurers often want to close claims as quickly as possible and as cheaply as possible. The longer a claim drags on, the more likely the business is to find hidden costs.
• Insurers often use quick inspections, taking a cursory look at the damage without a deep investigation.
• Insurers could refuse to cover hidden damage – even if you spot it early. They might argue the damage was pre-existing, for example, and wasn’t directly caused by the disaster.
• Insurers could delay coverage while demanding more inspections, reports, or evidence. They could drag out the claim and demand excessive documentation, for example, to reduce your chance of receiving a fair payout for hidden damage.

Delays are devastating. Being forced to pay for hidden damage out of pocket can destroy your finances. The sooner you spot hidden damage and add it to your claim, the smoother your future business operations will be.

Tip for Business Owners: Hire independent experts (like engineers, contractors, or public adjusters) to conduct thorough inspections after a loss. In many cases, these experts spot hidden damage from a covered event, and this damage should rightfully be covered under your insurance claim. A report from a trusted professional could provide sufficient evidence, forcing the insurer to cover the hidden damage.

Honorable Mentions

These are just a few of the annoying headaches faced by business owners during commercial insurance claims. Other headaches include:

1. Lost time: Managing a claim takes time. Talking to your insurance company and its adjuster takes time. Managing an insurance claim, from start to finish, will take hours out of your life – and hours away from your business.
2. Emotional stress: A single large insurance claim could make or break your business. It could determine your business’s financial future. The emotional stress of an insurance claim is a huge headache for business owners.
3. Clients shifting to competitors: Sometimes, lost income is easy to quantify. A large insurance claim, however, could send clients to competitors during your lengthy shutdown. This impact is more difficult to quantify.
4. Employee retention: A lengthy shutdown could force your best employees to seek employment elsewhere. It’s difficult to quantify the impact of losing skilled workers, but it affects the future of your business and creates headaches for owners.

How Public Adjusters Help Business Owners

A single mishandled insurance claim could threaten the future of your business.

As a business owner, there are some things in your control – and other things outside of your control.

You may not be an insurance expert – but you can hire an insurance expert. Public adjusters, including ClaimsMate’s licensed public adjusters, work with business owners every day to handle commercial insurance claims.

Public adjusters have insurance industry expertise. They know the tactics insurers use to take advantage of business owners and manipulate commercial insurance policies in their favor.

Most importantly, public adjusters know how to flip these strategies against insurers and protect business owners. They represent the business owner’s best interests – not the insurer’s best interests.

Dealing with a tricky commercial insurance claim? Contact ClaimsMate today for a no-cost consultation with a public adjuster specializing in commercial claims.

Stephanie Corona

Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.