Whether it is caused by a burst water pipe, hurricane, or weeks of rising lakes and rivers, flooding to your building has the potential to permanently halt operations. Attorney Bill Voss explores common problems when making commercial flood damage claims, steps to take to protect against water damage, and how to get maximum coverage after floodwaters enter a commercial structure.
What Is Flood Damage and Which Policy Pays for it?
The first thing business owners need to understand is that most private insurers will not pay for flood damage caused by natural disasters. A commercial insurer may cover flooding under some circumstances, such as if a water pipe bursts or rainwater from a recent storm leaks through the roof and into the walls.
However, most commercial policies limit or prohibit claims for hurricane-related flooding, storm surge, or flooding caused by rising tides. Owners must purchase coverage under the National Flood Insurance Program (NFIP) in order to recover costs of flooding caused by an extreme weather event. If you do not have an NFIP policy, you may be able to receive disaster aid and flood repair loans from the Federal Emergency Management Agency (FEMA).
Factors That Can Influence the Amount of Flooding Losses
While there are no “good” floods, there are some flooding incidents that cause less overall damage and lead to fewer out-of-pocket costs. For example, floodwaters that are shallow and can be pumped out in a matter of hours will likely be less costly than if an owner cannot perform immediate drying and repairs.
The extent of flood damage your property suffers may vary depending on:
- Depth. The deeper the waters, the greater the risk of structural collapse. Floodwaters that gather inside a structure can create hydrostatic pressure on walls and can cause cracks in masonry and weakened foundation, especially if they are more than 3 feet deep.
- Velocity. The faster water travels, the more pressure is exerted on flood protection. The initial wave of tidal or river flooding may break windows or doors, allowing the water following behind it to enter and settle down to the lowest point inside the structure.
- Duration. The longer standing floodwaters remain inside the structure, the more potential damage the building may sustain. A breach in flood-proofing measures can compromise struts, supports, drywall, and even weaken concrete, especially if the land has not been properly graded to divert water away from the property.
- Waterborne hazards. Floodwaters are often contaminated by pollutants, sewage, pesticides, industrial waste, or other toxic materials. Debris carried along by floodwaters, such as trees and vehicles, can cause further damage to commercial buildings.
- Location. Businesses on the upper floors of a building are naturally at a lower risk of flooding than those at a lower point in the water table. Freestanding structures that are elevated on hills are less likely to flood than those trapped due to the slope of the land.
- Building design and construction. The design and materials used to build your commercial structure can significantly impact repair costs. For example, flood prevention methods (such as berms, walls, or manmade structures to divert floodwaters) on the property can both lower insurance premiums and protect against long-term damage. Your structure may also be protected if the materials used in construction are less prone to water damage, such as styrofoam installation and weather-treated lumber.
- Age. Older buildings may need extensive updates to bring them up to compliance with current building codes after an adverse event. Owners whose buildings are more than 10 years old should consider purchasing ordinance and law coverage to pay for these upgrades.
- Maintenance. Many flood insurance claims are underpaid or even denied on the basis of the owner’s failure to perform preventive maintenance. While owners and employees cannot prevent natural disasters, they can help mitigate losses by storing machinery and inventory above floor level, caulking and patching basement walls, or inspecting and performing roof maintenance to prevent losses from wind-driven rain.
- Policy options. A bare-bones policy may pay for little more than the costs of drying out and repainting the structure, leaving the owner to cover any additional costs himself. On the other hand, a comprehensive policy that includes endorsements such as mold mitigation, increased cost of construction, and line-of-sight coverage can offset costs during rebuilding and allow you to correct both structural and aesthetic imperfections.
- Business interruption coverage. When it comes to flood protection, your business interruption insurance could literally be the difference between recovery or bankruptcy. It is recommended that you select the highest amount of BII coverage possible, including extra expense and umbrella coverage, to cover your monthly operating costs temporary closure or relocation, and other ongoing expenses for up to six months.
Owners May Not Get Full Compensation for a Flood on Commercial Property
Water intrusion can result in hundreds of thousands of dollars in property damages, so it is vital that you notify your insurance company as soon as possible. Natural disasters can affect several counties at once, and there is likely to be a backlog of claims that can cause payment delays after a flood.
Once you have notified the insurer of your intent to file a claim, you should:
- Gather proof of your losses. Before you take steps to pump out the water and fix the damage, make sure you take photos and video of the condition of the property immediately after the damage occurred.
- Prevent further damage. Once you have video evidence of your losses, you should take measures to make the property safe and prevent further damage. Make only temporary repairs until an insurance agent has seen the damage firsthand.
- Compile your claim. Your claim may require extensive proof of your losses, including inventory, income estimates, payroll records, and receipts for out-of-pocket expenses.
- Be prepared to fight for full payment. If your insurer is refusing to pay for damages, it may be necessary to hire an attorney to advise you on your next steps.
Unfortunately, insurers often attempt to deny flood damage coverage by claiming that the event was an act of God or otherwise excluded from coverage. When this happens, a commercial insurance attorney can help you get fair payment for your losses. Simply fill out the form on this page today to contact an insurance attorney at the Voss Law Firm or order a free copy of our book, Commercial Property Owners Must Read This BEFORE Filing an Insurance Claim.