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Introduction

In the event of a catastrophic commercial property loss, the process of getting your business back up and

running can be overwhelming. Although infrequent, these types of claims can severely impact operations,

earnings, team members and the company’s reputation. Responding to a loss can seem daunting in the

moment, especially considering the first few hours following a loss are some of the most critical. For

these reasons, it is important to have a plan in place prior to a loss occurring.

This guide is designed to help you navigate the commercial property claim process, including filing a claim

and receiving payment, so that you can get back on your feet as quickly as possible. You will find an

overview of the roles parties play amid a loss; recommendations on what actions to take before, during

and after a loss; information on commercial property coverage; and examples of common pitfalls

insureds frequently make that can cause claim delays.

The Roles During a Commercial Property Loss

Several different parties are involved in the property claim process, including the following:

In addition to employing the above specialists, insureds should have an insurance claim coordinator or

risk manager on staff responsible for the overall coordination of the insurance claim. This person should

oversee internal preparations of the claim and be a liaison with the insurance company throughout the

proceedings.

Before the Loss

The claims process can be time-consuming and burdensome, often leaving insureds unsure of where they

stand with their claims. However, preparation can help minimize much of this frustration. In fact, many

property claim issues can be avoided or mitigated by thoughtful planning before any loss takes place.

To better prepare your property and team for a loss, consider taking the following actions before any

damage occurs:

• Understand your coverage. Read and review your policy carefully, particularly the insuring clauses

and exclusions. This can help you understand your rights and obligations before damage occurs,

as well as what types of damage are and are not covered under your policy. Any coverage issues

discovered should be addressed before the loss.

• Identify key points of internal and external contacts. Prepare your team for a loss by identifying

key individuals to act as points of contact. This may include players in sales, operations,

accounting and finance, warehousing, management and risk management interacting efficiently

and effectively with claims specialists regarding salvage, repairs and resuming operations.

• Secure important documents. Ensure financial records, inventory records, appraisals, building

drawings and other important documents are properly secured in a fireproof or off-site location.

Data should also be continuously backed up to a remote server or the cloud.

• Create equipment inventory and take photographs. Document equipment inventory and take

photographs of the property to prove the extent of future potential damage. New photos of the

property should be taken each year or after any alterations have been made.

• Establish a disaster plan and anticipate your loss. Create and communicate your disaster plan

with employees to ensure everyone is prepared for disaster. By anticipating your loss, you may be

able to mitigate some damage and alleviate concerns before damage occurs. Execution of the

disaster plan may include cutting master keys to all areas of the property, moving furniture or

potentially hazardous items inside, and having an up-to-date emergency contact list.

During the Loss

A commercial property loss can happen at any time for various reasons, including fire, water, wind or

vandalism. Once you’re made aware of a loss, it’s important to take immediate action to mitigate the

damage and prevent further damage from occurring.

The following are steps to take in the event of a loss:

• File the claim. File your insurance claim to your property insurer and notify your broker or agent

as soon as possible. The carrier will then assign an adjuster to the claim. The adjuster will review

the damage.

• Prevent further damage. Implement immediate emergency measures to help protect the

property from more damage. Insurance policies require action to be taken to protect and

preserve the property following a loss.

• Document and photograph damage. Make sure to take wide-angle and close-up shots of all

damaged property, adding verbal or written notes when necessary. If security camera footage

exists, keep it in a safe spot and back it up, if possible. In addition, don’t discard anything before

the adjuster inspects all property and photographs it.

• Restore fire protection. Replace damaged sprinkler heads, arrange fire watches, and recharge

extinguishers to get your fire protection system back in service immediately.

• Begin salvage. Inspect all potentially damaged property and separate it from undamaged

property. Start developing a full inventory, describing each item and recording the manufacturer,

the original purchase price, and estimated costs to replace, repair or clean.

• Make temporary repairs. Save, preserve and protect your property by making temporary repairs.

When assessing if temporary repairs are necessary, use the “reasonable person” test—do what a

reasonable person would do and be able to explain your rationale to the adjuster. Inform your

adjuster of the temporary repairs as soon as possible; actions taken without prior authorization

could potentially impact recovery for those expenses.

• Make permanent repairs. Begin making permanent repairs after consulting with your adjuster,

who will likely engage with a construction consultant to help develop a scope of work and then

invite two or three contractors to bid on the scope of work. After the itemized bids are

presented, you, your adjuster and the construction contractor should all agree on a price for the

reconstruction work.

• Track claim costs. Create a ledger to track all costs associated with the loss. You can use work

orders, job accounts and other accounting procedures to track every cost. Categories within the

ledger may include temporary repairs, building reconstruction and contents replacement costs.

• Resume operations. Take the necessary steps to resume normal operations as quickly as possible.

This could include setting up a temporary location, working extra shifts to restore production or

purchasing product from a competitor to continue supplying customers.

Components of Commercial Property Coverage

One of the most essential steps to getting your business up and running following a commercial property

loss is having the right coverage in the first place. The proper coverage can make all the difference

between a minor disruption to operations and a severe financial loss.

A commercial property insurance policy is typically divided into several sections, and different types of

records are required when documenting each element. Here are the basic components of commercial

property policies:

• Commercial building coverage—Following a loss, property damage may be partial, or the building

may be completely destroyed. In the event of a partial loss, the claim will mostly consist of repair

costs, including labor and materials. If the building is destroyed, a formal appraisal can help

determine the value for claim purposes.

• Business personal property—Business personal property coverage may include equipment,

fixtures, materials or supplies. Equipment and fixtures in need of repair typically only require an

invoice to present your claim. However, those in need of replacement may require estimated

replacement costs from manufacturers or dealers if they are still relatively new pieces. The

replacement of older equipment and fixtures may require your capital assets ledger, acquisition

costs, appraisals and maintenance logs before actual cash value can be determined. Materials

and supplies figures can be relatively simple to develop based on the last physical inventory plus

purchases less sales. The valuation method of your damaged and undamaged property may

depend on your policy provisions, and there may be possible issues in treating freight, purchasing

and selling expenses, bad debts, shrinkage, returns and allowance, commissions and discounts.

• Business interruption—Most business interruption policies only take effect when there is a

definitive loss of sales due to stopped operations, physical loss or damage to covered property by

a covered peril. If you can reduce business interruption by resuming complete or partial

operations, utilizing or renting other facilities, or using raw stock, stock in process or finished

stock, you may be entitled to recover the extra incurred expenses.

• Extra expense—Extra expense coverage and expense to reduce loss coverage are considered two

separate categories. Expense to reduce loss typically falls under business interruption coverage

and requires that every dollar spent reduces the business interruption claim by a dollar. Extra

expense, however, must be purchased as a separate coverage under most policies and allows you

to spend more than the dollar saved to continue normal business operations.

It may seem overwhelming to deal with a commercial property loss, but fortunately, you don’t have to do

it alone. To learn more about commercial property coverage and specific policies available to you, it’s

important to work with a qualified insurance broker. Contact us today to learn more.

While it’s impossible to predict when a disaster may strike, some steps can be taken before, during and after a

commercial property loss to potentially reduce damage. By planning and preparing policies and procedures,

business and property owners can respond better when a loss occurs.

This checklist provides actions to complete before, during and after a commercial property loss:

Before the Loss

Take photographs before any damage occurs.

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Back up critical information and data.

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Establish an emergency response team.

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Establish contacts with reputable contractors.

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Create a disaster response plan.

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During the Loss

Request a complete copy of the insurance policy.

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Notify senior management, affected departments and the emergency team of the loss.

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Notify the insurer as soon as possible, preferably in writing. Report the name and address, location, date and

time of loss, type of loss, the property involved, the extent of damage and contact information.

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Protect property from further damage by restoring fire protection, making temporary repairs, securing vital

records, beginning cleanup and expediting long-term repairs.

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Take photos and videos of the damage before beginning cleanup efforts.

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Prepare a proof of loss, providing details of the destroyed or damaged property. Document the amount of loss

incurred.

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Submit proof of loss, photos and reports to the insurer.

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Cooperate and assist the insurer in the investigation.

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Hire claims experts.

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Obtain repair estimates or appraisal documents from contractors.

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Resume operations.

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After the Loss

Conduct inspections.

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Document all activities and expenses.

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BEFORE, DURING AND AFTER A

COMMERCIAL PROPERTY LOSS

Presented by Venbrook Insurance Services

For more risk management guidance, contact us today.

Most people understand that insurance companies have a duty to reimburse insureds for commercial property

damage not excluded by their policies. What’s less known is that if a loss does occur, insureds also have obligations

to their insurance company. Many commercial property insurance policies include language detailing steps that

must be taken following a loss. Failure to fulfill these responsibilities can potentially lead to a claim being denied, a

delay in claim payments, nonrenewal or even cancellation of the policy.

Use this checklist to ensure the completion of all required duties in the event of a commercial property loss:

Common Duties

Notify the police if laws may have been broken. Report all theft losses and obtain a police report

case number.

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Notify the insurer as soon as possible, detailing how, when and where the loss or damage occurred.

Include a description of the property involved.

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Take all reasonable steps to protect the property from further damage. Keep a record of the

expenses required to do this, including hours and wages.

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Provide the insurer with an inventory of the damaged and undamaged property if requested,

including quantities, costs, values and the amount of loss claimed.

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Set aside the damaged property, keeping it in the best possible condition for examination.

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Allow the insurer to inspect the property and any related records.

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Allow the insurer to take samples of damaged or undamaged property for inspection, testing or

analysis.

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Cooperate fully with any claim investigations, which may include being questioned under oath.

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For more risk management guidance, contact us today.

Presented by Venbrook Insurance Services

COMMON DUTIES IN A

COMMERCIAL PROPERTY LOSS