Commercial Water Damage Claims: 8 Things You Should Know

Insurance companies, unfortunately, often take advantage of inexperience when processing claims. They may offer a lower-than-expected settlement, for example, or deny your claim entirely.

We’re here to help. Keep reading to discover some of the most important things you need to know about commercial water damage claims and how they work.

A Standard Commercial Policy Covers Water Damage But Not Flood Damage

You expect insurance to be there when your business experiences a disaster. Unfortunately, that’s not always the case.

A standard commercial policy or business owners policy (BOP) covers water damage but not flood damage:

• A standard insurance policy covers sudden and unexpected events linked to water damage, including burst pipes. If a pipe suddenly bursts and damages your business, then insurance should cover the cost of repairing this damage and restoring your business to pre-loss condition.
• A standard insurance policy does not cover flood damage. If you live in a flood-prone area, then your business should buy a separate flood insurance policy through FEMA’s National Flood Insurance Program. If you don’t have flood damage, then your insurer will deny coverage for water damage caused by rising floodwaters.

Review your coverage and local flood risk to determine if your business needs flood insurance.

Insurance Can Deny Claims for Negligence or Lack of Maintenance

Insurance is designed to cover sudden and unexpected water damage – not gradual water damage that occurs over time due to lack of maintenance.

Let’s say your business has old, leaky pipes. You’ve noticed signs of water damage for months – like a discolored ceiling, high water bills, and a weird smell. However, you’ve ignored these signs. One day, the water pipe bursts, causing catastrophic damage to your business. Insurance may deny your claim because damage was caused by negligence or lack of maintenance.

As a business owner, you have an obligation to maintain property owned by your business. If you fail to maintain your property, then you may be considered negligent, leading to insurance claim denial.

Insurance Doesn’t Cover Mold Remediation

Mold remediation costs businesses millions of dollars each year. In most cases, businesses pay for mold remediation out of pocket.

Insurance doesn’t cover mold damage or mold remediation unless it is proven to be a direct result of another covered loss. As mentioned above, insurance focuses on sudden, unexpected events – not gradual damage over time like an ongoing mold issue.

It can take just 24 to 48 hours for mold to develop after a burst pipe, which is why it’s important to alert your insurance company ASAP. The sooner you notify your insurer of water damage, the less likely you’ll experience mold.

The Most Common Sources of Commercial Water Damage Are Roofs & Toilets

Approximately one-third of all commercial water damage claims are connected to roofs or toilets.

Some of the most common sources of commercial water damage issues include:

• Roof leaks
• Leaking or damaged toilets, toilet hoses, and other plumbing
• Malfunctioning sprinklers
• Water heater
• Water tank, water pipe, and water main issues
• Sewer and sewage backup problems

With proper maintenance, you can reduce the risk of water damage across all of these areas.

Many Commercial Water Damage Claims Are Preventable

There’s good news for business owners: many commercial water damage claims are preventable.

By taking certain precautions, you can avoid many common water damage claims, lowering costs for your business.

Some of the best ways to reduce the risk of water damage insurance claims include:

• Check the property thoroughly and regularly for signs of water damage. Discolored ceilings, higher water bills, and dripping noises are all sounds of water damage.
• Be extra thorough after changes in weather. If your business recently experienced a cold snap, for example, then pipes may have frozen. Or, a recent storm may have damaged your roof, increasing the risk of water damage.
• Respond quickly to water damage by securing the scene, notifying your insurance company, and contacting a restoration company. Insurance covers sudden and unexpected water damage but not gradual damage that occurs over time. Contacting your insurance company promptly can increase the chances of a smooth claim process and having your commercial water damage claim covered.

Commercial Policies Often Have Water Damage Exclusions

Your commercial insurance policy, like any insurance policy, has exclusions. If your water damage meets any of the exclusion criteria, then insurance could deny your claim.

Many of these exclusions boil down to a simple premise: did the water damage occur from a natural or manmade event? Generally, commercial insurance covers manmade events but it may not cover natural events.

Some of the most common exclusions linked to commercial water damage include:

• Flooding
• Tsunamis
• Standing water
• Groundwater
• Sewage backups

Some Exclusions Are Ambiguously Worded in the Insurer’s Favor

Most states require insurers to write insurance contracts in language an average adult would be able to understand. However, many insurers use ambiguous wording – particularly with exclusions.

When an insurance policy has ambiguous wording, it makes it hard for policyholders to understand what’s covered and what isn’t covered. After a covered event, insurers may use this ambiguous wording to deny or reduce your claim.

In many cases, policies with ambiguous wording end up being deciphered in court. This is where a public adjuster or insurance attorney may be able to help.

How to Respond to Water Damage: Step-by-Step Guide

If you spot water damage at your business, it’s important to respond as quickly as possible to avoid potential insurance complications.

Here’s how you should proceed with a typical water damage insurance claim:

Step 1) Secure the scene if safe to do so. Turn off water at the source to prevent further damage. Turn off electricity in the water-damaged area. Take other steps – like setting up buckets or tarps – to mitigate further damage.

Step 2) Contact your insurer. Your insurance company can advise on the next steps to take. The insurer may authorize emergency funds, for example, or tell you to hire a restoration company to begin repairs.

Step 3) Document the damage. Take photos and videos of the damaged property and inventory. Be thorough when checking your property for damage: water damage can travel behind walls and into surprising areas of your business.

Step 4) Hire a public adjuster to solve water damage insurance claim disputes. If your insurer pushes back against any aspect of your water damage insurance claim, then consider hiring a public adjuster. A public adjuster represents your best interests in an insurance claim, negotiating with the insurer on your behalf to facilitate the claim settlement you deserve.

Contact ClaimsMate today for a no-cost consultation with a public adjuster specializing in commercial water damage insurance 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.