Commercial Property

While excluded in the standard Commercial Property Policy, this valuable coverage may be purchased at an additional cost. Coverage is available for loss caused by the overflow or backup of sewers, drains or sumps. The limit selected is generally the maximum available for claims resulting from Sewer or Drain Backup, including damage to property and resulting loss of income.
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Blanket Property Insurance is an important element of a business insurance policy when its use is granted by the insurance company. This valuable coverage eliminates the individual coverage limit applying to Building, Your Business Personal Property and Personal Property of Others. With Blanket Property Coverage, you receive a single limit of coverage applying to the items of coverage included in the Blanket Schedule.
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Building coverage on a commercial property policy provides coverage for not only the building, but also for fixtures, machinery and equipment if permanently installed. In addition, it provides coverage for outdoor fixtures and personal property used to maintain or service the building, such as fire extinguishing equipment, outdoor furniture, floor covering and appliances used for refrigeration, ventilating, cooking, dishwashing or laundering. What is important to remember is that each building, and each item considered a building, must be described. This can be accomplished by a broad description of the building or by endorsing the policy with a form called Additional Building Property so that the intent of what we are covering is clear.
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Many cities and counties have ordinances or laws regulating the construction, repair or demolition of insured buildings. The most commonly exercised ordinance would require bringing the building up to current and modern building codes following a loss. An extreme example would require the tearing down of an entire building if 51% or more of the structure sustained damage.

Let’s consider this for a moment and the impact upon an “unendorsed” business insurance policy. The standard business insurance policy only requires constructing the building as it sat immediately prior to the loss. The Building And Business Personal Property policy insuring agreement reads as follows:

Coverage

We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.

The phrase direct physical loss is further emphasized in the Cause of Loss form attached to the Building And Business Personal Property policy. The Cause of Loss form exclusion related to Ordinance or Law reads as follows:

Ordinance Or Law

The enforcement of any ordinance or law:

Regulating the construction, use or repair of any property; or
Requiring the tearing down of any property, including the cost of removing its debris.

This exclusion, Ordinance Or Law, applies whether the loss results from:

An ordinance or law that is enforced even if the property has not been damaged; or
The increased costs incurred to comply with an ordinance or law in the course of construction, repair, renovation, remodeling or demolition of property, or removal of its debris, following a physical loss to that property.

The clarity of these provisions is unmistakable, the intent of the policy to pay for insured building damage only applies to direct loss, not indirect losses that an insured may suffer.

Coverage for Ordinance or Law may be purchased for an additional cost. The coverage that may included for Ordinance or Law are as follows:

Coverage A – Coverage For Loss To The Undamaged Portion Of The Building;

Coverage B – Demolition Costs Coverage; and

Coverage C – Increased Cost Of Construction Coverage.

These coverages all relate to the building portions sustaining direct damage, but because of the operation of the Ordinance or Law the insured suffers loss.
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A crucial part of any business insurance policy, Business Income coverage provides money for the continuation of your business operations, after a covered loss, including normal ongoing operating expenses and payroll. Coverage is triggered by the necessary suspension of your operations, caused by direct physical loss or damage arising from a covered cause of loss at the described location.

The illustration below should assist in your understanding (click to expand).

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Dependent Properties Business Income will provide coverage for your loss of income resulting from a suspension in your operations, caused by and resulting from a covered loss at the location of someone whom you are dependent upon to: Deliver materials or services to you (Contributing Locations); Accept your products or services (Recipient Locations); Manufacture products for delivery to your customers under contract of sale (Manufacturing Locations); Or to attract customers to your locations (Leader Locations).
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Business Income Waiting Period is, by all intents and purposes, a deductible expressed as time. The typical waiting period before business income coverage begins to pay is 72 hours, however, other time options are available to suit your specific needs.
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Business Personal Property is defined as the following: Furniture and fixtures; Machinery and equipment; Stock; All other personal property owned by you and used in your business; Labor, materials or services furnished or arranged by you on personal property of others; Your use interest as tenant in improvements. Improvements and betterments are fixtures, alterations, installations or additions that are part of the building or structure you occupy but do not own; and that you acquire or made at your expense but cannot legally remove. Leased personal property for which you have a contractual responsibility to insure, unless otherwise provided for under Personal Property of Others is also included.

Business Personal Property is broken down into several separate coverage types in the standard Commercial Property Policy. They are Your Business Personal Property, Property of Others and Stock. Each of these will be included if described in the declarations of coverage for Property.
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The basic causes of loss form provides coverage for the following named perils: fire, lightning, explosion, smoke, windstorm, hail, riot, civil commotion, aircraft, vehicles, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action.
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Broad Form coverage limits the causes of loss for the following perils: Fire or lightning; Explosion; Vandalism; Sprinkler leakage; Windstorm or hail; Smoke; Aircraft or vehicles; Riot or civil commotion; Sinkhole collapse; Volcanic action; Breakage of glass; Falling objects; Weight of ice, snow or sleet; Water damage; Collapse.
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Expands the Broad Form Cause Of Loss to provide for all “risks of direct physical loss,” except as limited or excluded in the basic policy. This approach says that all Causes of Loss are insured, except those specifically excluded. Not only are you afforded much more coverage for your property, but it also forces the burden of proof upon the insurer to prove that the claim is excluded. This is a minor distinction, but never-the-less, a huge advantage in favor of the insured.
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