The Claim’s Perspective: Simple Solutions to Big Exposures


Meteorologists predict a below average hurricane season for this year though business owner policyholders know that forecasts are not an exact science. Unpredictable weather patterns pose an ever present threat of moderate to catastrophic physical damage and interruption to their business operations. Case in point is Revere, MA.

On June 28, 2014 it may have surprised you to learn that a tornado with wind gusts of up to 120 mph touched down north of Boston and in only four minutes left many businesses uninhabitable because of extensive physical damage to buildings, flooding and widespread power outages. What is worse than being a business owner impacted by this tornado is an owner who, as a result of this event, learns that he or she is underinsured and will not be able to restore their employees’ jobs and resume their business operations. Knowing the scope and nature of the commercial property insurance you purchase, when you purchase it, makes an unpredictable weather event more foreseeable in terms of the degree to which it might impact you, your employees and your patrons.

Just as important as understanding the extent of coverage afforded to you by your commercial property policy is a business owner’s responsibility to inspect and diligently maintain the exterior and interior of their business. This can not only mitigate the extent of potential property loss, but it can, in some instances, completely eliminate loss exposures such as flooding and fire.

Unlike storm related events, this type of loss exposure is both predictable and almost entirely preventable, yet we still see catastrophic losses that threaten the lives of employees and patrons and/or result in devastating physical damage and loss of business income. This exposure is created when a business owner fails to routinely inspect, clean and maintenance their commercial cooking operation and fire protection systems. Kitchen exhaust fires are becoming more common, and the burden is ultimately on the business owner to select a contractor that can provide the proper service and help him/her comply with national and industry standards that pertain to fire safety requirements. Simply hiring an unqualified or the cheapest contractor (with no or inadequate insurance) will not prevent the cost of a fire.

Too often we have business owners sustain flooding throughout the interior of their buildings, which leads to temporary closure, clean-up costs and food spoilage losses. As we investigate these types of losses, we occasionally discover that the cause of the flooding is not direct physical damage to the building by a covered cause of loss but rather a poorly maintained or dilapidated roof that allowed water to damage the interior contents and building structure. Consequently, these business owners must then absorb the cost of the repairs on their own if the commercial property insurance policy they purchased does not cover damage caused by wear and tear of the roof. Whether you are the building owner or a tenant, routinely inspect your business, and if you discover something in need of repair, don’t hesitate to fix it. You will likely find that the repair cost is a small fraction of the cost you may incur if a water damage claim is not insurable under your commercial property insurance policy.

Below are a few best practices of commercial property insurance policyholders:

  1. Carefully choose commercial property insurance policy that best fits your business operations. Be sure to consider the inherent and not so inherent risks associated with it
  2. Adhere to a schedule of routine inspections for cleanliness or possible repairs
  3. Upon discovery of any issues, incur the cost and do not delay action
  4. Do not let a property loss be the only opportunity you have to learn the nature and scope of your commercial property insurance policy
  5. Contact your agent if there is a property insurance coverage you do not currently have but would need to resume operations in the event of a loss

Stephanie Connon is the General Counsel, VP of Claim Operations and Assistant Secretary at Hospitality Insurance Group. 


Please be advised that the opinions expressed are the views of the author alone and should not be attributed to any other individual or entity and shall not constitute a legal opinion.