It’s after the wind blows or the fire burns. The insured is sifting through the rubble of what used to be his commercial building, looking for any savable scraps of what used to be.
The good news is that the loss is covered and the insured will be getting a check for the cost to replace the building. The better news is that the policy limit was adequate and the insured will not suffer the consequence of coinsurance. But it’s not over. The insured discovers that, due to increased demand resulting from widespread damage, hiring a contractor to remove the debris will be more expensive than anticipated. But that shouldn’t be a problem because the policy limit is adequate…right? Most commercial property policies will cover the cost to remove debris resulting from a covered cause of loss. However, coverage may be limited or excluded depending on a few important factors addressed in the policy. Factor #1 – How much is enough? First, consider that it is not cheap to remove certain types of debris. For example, removing debris of an old frame building may be less labor-intensive than debris of a building with substantial masonry or steel. Removing such items will likely require the use of a contractor and heavy equipment. Also consider that high demand brought on by widespread damage will likely increase the contractor’s fee for service. Second, consider how the policy calculates coverage to remove debris. Most policies say that the insured will have access to a stated amount—typically $10,000—plus the lesser of:
For example, consider a loss to a building valued at $1 million. If the loss amount is $100,000 and the deductible is $5,000, coverage would be determined as follows:
In this claim, the insured has access to $25,000 plus the stated amount of $10,000 to clean up the mess. Now consider the same building, only this time it is a much greater loss of $900,000. Coverage would be determined as follows:
In this claim, the insured has access to $105,000 plus the stated amount of $10,000 to clean up the mess. In the event of a total loss, it’s likely the policy won’t pay more than the stated amount of $10,000. The purpose of these examples is to show that the more severe the loss, the less money the policy includes for cleanup. Factor #2 – What is ‘covered property? Most commercial property policies will pay only the cost to remove debris of “covered property.” This definition includes items specifically listed as such in the policy. The policy also lists items that are defined as “property not covered.” Items meeting this definition may also require cleanup, and the cost associated will not be paid by the insurance company. Examples of these items include pieces of the parking lot, building foundation, landscaping, and items that end up on your property from somewhere else. Factor #3 – Pollutants If a building is damaged and the site must be cleared, items defined in the policy as “pollutants” may require special care. For example, consider a print shop that catches fire, releasing highly toxic inks and dyes into the ground. Local engineers may require you to extract those pollutants from the site. If so, the cost may be substantial and is typically not covered by a commercial property policy or is limited to a specified dollar amount that may not be enough, such as $10,000. What’s the Solution? The best solution to this potentially large gap in coverage is to call Jon Jepsen at SentryWest Insurance (your Trusted Choice® insurance professional). We can help you amend your existing policy to offer more coverage for the cost to clean up debris. We can also help you minimize your exposure by amending the policy to cover items that are currently excluded, such as those examples listed above. Further, we can help you understand the meaning of “pollutants” in your policy and determine if your property contains items that may require special care to remove. Millions of Americans donate time—their most valuable asset—to serve as a volunteer board member on non-profits, booster clubs, churches, PTAs and civic organizations, just to name a few. The decisions these folks make can have a dramatic impact on their respective organization—and not always for the better. If a volunteer endeavor goes bad, would a volunteer board member have coverage against a lawsuit under his or her homeowner’s policy?
Homeowners’ Insurance The last thing volunteers want to consider is what would happen if their favored organization file suit against them as a result of their efforts. But it happens, and not infrequently. This does happen, especially when volunteers make decisions that directly influence the finances of an organization. Often, the only insurance these volunteers have to back their efforts is a homeowner’s policy. Unfortunately, this policy may be of little assistance. The reason homeowners’ policies do not usually cover liability stemming from actions as a volunteer is the nature of the claim. The policy is designed to cover claims of “bodily injury,” such as someone slipping on cracked pavement in your driveway; and/or “property damage,” such as accidentally setting your neighbor’s house ablaze when burning some brush on a windy day. Claims against board members do not usually involve bodily injury or property damage. Rather, they involve bad decision making that results in financial loss to the organization, such as the decision to invest in an IT system that turns out to be a debacle, costing the organization tremendous time and money. There is another problem. Homeowners policies do not cover “professional services.” This is important to note, because board members are often asked to serve in a capacity consistent with their profession. For example, a church member who is a CPA may be asked to serve on the church’s board as finance chairman. Even though he is not paid for his services, the “professional services” exclusion under his homeowner’s policy would still apply. In addition to the above, homeowners policies do not cover claims of personal injury unless this coverage is specifically added. Personal injury insurance is added to the homeowner’s policy to cover claims such as libel, slander, wrongful eviction, and false advertising. What to Do Events causing claims are unpredictable. While the reasons shown above prove it’s unlikely, not all claims against volunteer board members are excluded by a homeowners policy. Decisions to purchase personal injury coverage and a personal umbrella policy will increase your ability to find coverage for a suit against you. The best method for insuring the actions of board members is for the organization to purchase a directors and officers (D&O) liability policy. These policies are relatively inexpensive for most non-profits. Before volunteering, request information on the organization’s D&O policy. The absence of this insurance leaves you at risk of having no personal insurance to defend a suit brought against you by the organization and should influence your decision to serve. Courtesy: Trusted Choice (Jon Jepsen, CIC - SentryWest Insurance) 5,000. That’s the number of earthquakes felt in the United States each year.
Popular belief may consider California to be the state at most risk of an earthquake, but since 1900, earthquakes have caused damage in all 50 states, according to the Insurance Information Institute. In fact, Oklahoma was struck by at least 10 minor earthquakes in a two-day period in late August 2009. These were strong enough to be felt throughout the central part of the state. While Alaska experiences more earthquakes that any other state, California remains the greatest risk for widespread and catastrophic damage to property. A 2006 forecast by experts from the U.S. Geological Survey, the Southern California Earthquake Center, and the State Geological Survey said that the state is virtually certain to be hit by a major earthquake by 2028. Despite numerous warnings, only 12 percent of Californians own earthquake insurance, down from 30 percent in 1996 — when the state was still recovering from the devastating 1994 Northridge earthquake, which at an estimated $20 billion in property damage was the most-costly quake in U.S. history. Homeowners and business owners have limited or no protection provided by their existing insurance coverage for damages resulting from earthquakes. Some damages caused by specific conditions subsequent to the shaking and cracking — such as fire due to broken gas lines or water damage due to burst water pipes — may be covered by home and business insurance policies, according to the Insurance Information Institute. However, property owners should be aware that property insurance does not cover the damage or destruction of buildings or personal property caused by the shaking and cracking of an earthquake. It is specialized earthquake insurance that provides financial protection for property owners at risk of earthquake damage, explains the Insurance Information Institute. Who should buy earthquake insurance? United Policyholders, a non-profit organization focused on educating the public on insurance issues and consumer rights, draws the following conclusion: “If you live in [earthquake] country, have equity in your home and couldn’t afford to rebuild it on your own, buying earthquake insurance makes financial sense. It really is that simple.” The organization also warns that government and charities may not be able or willing to provide rebuilding resources after an earthquake disaster. Earthquake insurance policies are provided by a small number of private insurance carriers. In California, the California Earthquake Authority, a privately funded, publicly managed organization, provides homeowners with earthquake insurance. For earthquake insurance, it’s important to consider having enough coverage to repair or rebuild a home in light of building code improvements put in effect after the house was built. Plus, consumers will need funds for living expenses while the earthquake-damaged house is repaired. Earthquake insurance is an important issue, especially for those in California and the West Coast. To discuss, please contact Jon Jepsen. Courtesy: Trusted Choice |
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