Monday, January 25, 2016

Insurance Coverage

As I think you all know I own an insurance agency. I don’t usually write email under Small Business California that are insurance coverage related but over the weekend we had a client that had their building  totally destroyed by a fire. The business did not own the building.

In reviewing their  insurance at the time of renewal the insured chose to keep all their coverages as is. The fire occurred and in a meeting with the client their contents were one third of what they actually had on  a replacement basis. Fortunately their business interruption was on an actual loss sustained basis so they should be okay here but the loss on their contents was about $400,000 more than they had covered. The take away here is review your coverage closely at every renewal. It was not applicable here but see if your policy has a coinsurance clause. If it does, make sure your coverage  meets the coinsurance percentage because if it does not you will suffer a penalty for the amount you are under insured.

On the liability side, the insured had  $1 million coverage. I don’t know what their lease said  so I am not clear whether they had a waiver of subrogation from the building owner. I also don’t know what caused the fire but if  it is determined that our insured caused the fire,  the building owners insurance  will most likely come back against my insured. We always asked for a copy of the lease but had not received it.
There was also damage to buildings on both sides of the burned out building. Again if the insured caused the fire the other building owners  insurance company will come back on our  insured. The take away here is to read your lease and seriously consider getting an umbrella to have proper protection.

I strongly recommend you review all of your insurance coverages at least on an annual basis and think seriously what would happen if your building was totally destroyed. Do you have a plan to get back into business after a loss?

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA  94116


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