Any length of time a restaurant is closed can cut into an owner’s profits, but the extended closures forced by flooding can be disastrous for restaurateurs. Whether flood damage was caused by a natural disaster or a burst pipe, it may result in the loss of hundreds of thousands of dollars’ worth of food, utensils, seating, decor, and appliances. Attorney Bill Voss explores the problems and pitfalls owners experience when filing flood damage claims and offers tips to maximize coverage.
Your Restaurant’s Future Depends on Its Flood Insurance Coverage
The selections you make while creating your business owner’s policy have the potential to affect your holdings for the rest of your life. Selecting a bare-bones policy with lower premiums and a high deductible may save money for years, only to cost millions in the long run. Some policies will only cover direct physical damage from flooding, leaving an owner to pay for other losses—such as lost income—out of pocket.
Without adequate insurance, restaurateurs may suffer significant flooding losses due to:
- Natural causes. Flooding caused by severe storms, runoff, or other weather-related causes are typically not covered under private insurance. Texas restaurants owners may only be able to get coverage through the National Flood Insurance Program (NFIP), which provides up to $500,000 in property damage and an additional $500,000 for lost inventory to commercial properties.
- Contaminated water. Flood waters can carry sewage, chemicals, and biological pathogens that can contaminate all equipment and surfaces. Proper procedures for pumping out flood water and drying the structure must be observed to protect employees and customers, and steps must be taken to discourage wood warping and mold growth that can cause problems weeks after the waters have receded.
- Interruption of municipal services. A large-scale disaster may cause interruption in supply chains and government services, leaving you underwater and unable to move forward. The lack of a potable water supply and sewage drainage can make the site hazardous to workers, while interrupted waste disposal may make it difficult for cleaning and sanitation efforts to succeed.
- Electrical problems. Submersion not only destroys electrical equipment, it also creates an electrocution hazard. Depending on the location of the restaurant and the extent of damage, power may be out for several weeks, significantly hindering cleanup and repairs.
- Food losses. If items are contaminated, restaurants may lose produce and fresh items, but also bulk foods, alcoholic beverages, and items contained in aluminum cans and glass jars. The loss of imported delicacies, wines and spirits, and specialty foods can be costly to replace, especially if they grow seasonally or are especially rare.
- Inspections. Many regulatory agencies must be consulted before a restaurant may be cleared to reopen. Health inspectors may be particularly involved during the repair process to ensure that the structure and business are safe for daily operations.
- Upgrade costs. A structure that is several years old may not be compliant with current building codes. Once a structure has been compromised, it must be rebuilt according to local and federal building ordinances—a cost that is typically not covered under standard property damage policies.
- Business interruption. Many flood insurers will provide payment for lost and damaged items, but offer no compensation for the time in which the business cannot operate due to repairs. This form of insurance may be offered as an endorsement to a policy, and its cost will vary greatly depending on what is covered. Restaurateurs should always purchase business interruption coverage that will last from the day of an adverse event to the reopening of the property.
If you are filing a flood damage claim, you will be asked to provide evidence of all of your losses. The insurer may require a great deal of information, including serial numbers and models of lost appliances, income projections, and receipts for restoration and temporary repairs. Failure to keep good records and keep in contact with an insurer can greatly reduce payment amounts, and may even result in claim denial.
If you have suffered major losses due to flood damage, we can examine your policies to determine how much you may be owed, getting you maximum payment from your coverage. Fill out the form on this page today to contact the Voss Law Firm or order a free copy of our book, Top 10 Mistakes You Cannot Afford to Make When Filing Your Insurance Claim.