Shopping malls, retail outlets, and commercial plazas can suffer devastating losses due to a fire, and inadequate insurance coverage can prevent stores or even whole shopping centers from reopening. Attorney Bill Voss explores fire insurance options for retailers, including policy endorsements and coverage options that could help administrators prevent large-loss claims.
Special Fire Insurance Considerations for Retail Stores and Shopping Centers
Owners of retail establishments are at particular risk of fires, especially if they lease spaces to restaurants or tenants with machinery or electrical equipment that can generate a lot of heat. If owners failed in their responsibility to prevent major causes of fires in retail spaces, their insurance companies may offer much less than the full value of the claim. Similarly, if the policy only covers certain causes of fire (such as boiler explosions or electrical failure), the insurer may refuse to cover any damages at all for fires that are not considered a covered peril.
Shopping center owners should double-check their property damage policies to make sure that their selections will cover the full costs of a fire, including:
- Replacement cost value. Insurers and policyholders may have very different views on how much a claim is worth based on the type of property damage policy issued. While a replacement cost value (RCV) policy pays the full amount necessary to replace covered items with those of similar quality, an actual cash value (ACV) policy will subtract depreciation before issuing payment for the remainder. An ACV policy is typically less expensive, but they also pay far less after a loss.
- Code upgrade coverage. If there is structural damage after a fire, the structure will have to be rebuilt to maintain compliance with the most current version of the building code. If the building was first constructed over 10 years ago, the cost of adding modern upgrades can significantly increase the costs of construction.
- Inland marine insurance. Transportation and cargo insurance, also known as inland marine insurance, covers any property you own that is away from the covered location. If materials have been damaged by a fire while in transit to or from your shopping center, this coverage can pay to replace any items lost in shipping.
- Electronic data protection. Shopping centers rely on credit card machines, computerized tills, safes, phone lines, and internet access to perform daily business operations. If these systems are not properly protected, companies can suffer expensive data breaches after a fire. Business data and media coverage can prevent customer losses by paying for the equipment, software, and labor needed to protect and restore data systems after a loss.
- Rental equipment. Just as you should require all of your tenants to secure their own insurance policies against fire damage, you should purchase rental and vendor insurance to cover any items you do not own. This may include temporary stages or showrooms, specialty lighting rigs, or forklifts and grounds maintenance vehicles. If your leased equipment is damaged, this insurance can provide payment to replace the lost items with similar products.
- Seasonal or special event losses. If your shopping center regularly hosts special events, such as Christmas displays, Easter bunny visits or petting zoos, concerts, grand openings, movie premieres, or other special events, you may need to invest in seasonal business insurance to replace income lost from a fire at a particularly profitable time of year.
- Business interruption insurance. The most valuable form of coverage for any commercial operation is business interruption insurance, which pays for up to six months’ worth of lost revenue after a covered event. Additional protections such as umbrella insurance and extra expense coverage can provide additional payment once policy limits have been reached.
If you are having trouble getting the insurance coverage you paid for after a fire, the Voss Law Firm can help. Simply fill out the form on this page to get your questions answered by an insurance attorney, or learn more about filing a claim in our book, Commercial Property Owners Must Read This BEFORE Filing an Insurance Claim.