Skiing with my family last weekend, I noted the unusually warm weather in the Rockies. Although it has been dry up there recently, the massive snows received earlier this winter, and the possibility of heavy spring snows ahead, made me realize that an early and heavy spring runoff is a real possibility. This made me think about three things businesses can do to increase the chance their insurance coverage will respond to these losses.
- Make sure your business property is correctly reflected on your policy. Believe it or not, it is not uncommon for business to add new buildings, equipment, or other property to their operations without adding that property to their insurance policies. It is easy to overlook the necessity of listing new assets on your insurance policies. Before a runoff-caused flood washes your hard work away, revisit this issue.
- Review your insured values. Just as important as listing your business assets on your insurance policies is listing them at the correct value. If your property is not listed at a sufficient value, you may be very disappointed with the claim payment that you receive. Insurance companies require you to ensure your property at an appropriate percentage of replacement cost value if you want to receive replacement cost when the property is destroyed or damaged. While some insurance policies allow you to avoid a coinsurance penalty by adding endorsements, you should make sure the property is insured at an appropriate value.
- Consider Flood or DIC Coverage. If your business property is at risk of damage by flood, surface waters, or flowing debris, among other risks, you should probably have flood insurance or difference-in-conditions (DIC) insurance. Otherwise, you most likely will not be insured against these losses. Just because your building is not next to a river or creek does not mean you don’t have a flood loss exposure. In fact, most people would be surprised to learn just how broadly floodwaters can flow, particularly in extreme events. Moreover, even if your property is not listed in a high hazard FEMA flood zone, it doesn’t mean it is not subject to flooding. In recent years, municipalities have gone out of their way to avoid having large swaths of their territories classified as high hazard flood zones, to avoid a political fallout that such classifications can create. Moreover, the changing climate means actual flood patterns are changing faster than flood zone maps can be updated. Thus, you might consider buying flood or DIC coverage regardless of your property’s flood zone.
In short, businesses should get a jump start on their spring cleaning by dusting off their insurance policies and having them reviewed to make sure they adequately protect business property against flood and other water losses.
Sit down with your insurance broker and your coverage lawyer to make sure your insurance policies will respond appropriately if your business is flooded.