All businesses can suffer extensive building damage and inventory losses in a flood, but flooding in a community bank can irrevocably affect the bank’s reputation and even cause the closing of the branch. Attorney Bill Voss explores the unique insurance needs of financial institutions, helping bank owners fill coverage gaps and protect their investment.
How Flooding Can Cause Significant Damage to Community Banks
Owners should be aware that the source of the flooding can affect their ability to collect compensation. Flood damage from a natural disaster (such as storm surge from a hurricane) is usually not included on commercial insurance policies, so business owners must purchase a separate policy through the National Flood Insurance Program (NFIP) to cover weather-related flooding.
Bank owners and operators should ensure that their policies protect against all types of losses, including:
- Property and inventory. Floodwaters can force the evacuation of the building, and may require the cleanup of hazardous waste before employees and customers can safely return. The longer water sits in a structure, the more damage will be done to the foundation, drywall, framing, flooring, and electrical systems. Water can damage paper records in minutes, and cause irreversible damage to computers and specialty electronic equipment.
- Looting and theft. Flooding may affect security measures, such as video surveillance, door locks and alarms, and even safe and vault systems. A policy extension may protect banks against looters who steal expensive equipment or paperwork, requiring the bank to cancel checks and increase security measures.
- Safe deposit boxes. Customers who have entrusted their most valuable items to the bank for safekeeping may see losses that are hard to put a price tag on. Banks may be forced to pay out-of-pocket to replace or restore a customer’s passports, jewelry, rare coin collections, and heirlooms stored in safe deposit boxes.
- Business income. Flooding may not only cause branches to remain closed for extended periods, it can also cause customers to close their accounts. Business income protection can help a bank recover from loan defaults, account closures, and other reductions to the amount on deposit.
If you are having trouble getting the flood insurance coverage you paid for, 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.