The high winds and heavy rainfall from a hurricane can cause devastating losses to any business, and construction companies are no exception. Not only can a hurricane leave you in the red, it can also prevent you from providing much-needed assistance to neighboring homeowners as they rebuild. Attorney Bill Voss explores vital forms of insurance coverage for general contractors, renovation companies, and operators of public and private building services.
Important Hurricane Coverages for That Can Save Construction Companies
The best way to protect your construction business is to tailor your policy to the specific type of work you perform, and ensure that your coverage limits will be sufficient even in the worst-case scenario. Some construction insurance options you may wish to consider include:
- Business income loss insurance. Next to liability insurance, business interruption coverage is the most important coverage a commercial enterprise will need. Business income insurance will continue to pay ongoing and operational expenses (such as employee payroll, rent, mortgages, or insurance) for six months after a loss.
- Commercial auto coverage. Commercial auto insurance pays for damage to business vehicles (including pickup trucks, vans, cars, or trailers), while comprehensive coverage will pay for non-collision losses (such as vehicle flooding).
- Equipment breakdown coverage. A property damage policy may include coverage for all contents of an insured location, but only up to the policy limits. If your policy limit is only $50,000, it won’t matter how much it will cost to replace your saws, grinders, or excavators—your insurer isn’t going to cover it. However, a special equipment endorsement can provide additional funds to cover the expensive heavy machinery that is vital to your enterprise.
- Inland marine insurance. Any building materials traveling to or from your construction site are likely not covered under a standard property damage plan. Inland marine coverage will pay for tools, lumber, windows, equipment, and raw materials that have been lost on the way to your covered location.
- All-risk coverage. Although these policies are typically more expensive than basic coverage, an all-risk property damage policy can provide extra coverage for perils related to natural disasters, such as wind-driven rain or interruptions in utility services caused by a hurricane.
A Word to Contractors About FEMA Relief and Governmental Insurance Programs
The majority of hurricane losses result not from the storm itself, but from the severe flooding afterward. Open land and buildings that are filled with standing water can cause complications ranging from lost vegetation and income to weakened foundations and mold growth—and unfortunately, flooding from a natural disaster is typically not covered under commercial insurance policies. For this reason, construction companies in flood-prone areas should secure an additional policy under the National Flood Insurance Program (NFIP) to cover hurricane-related flood losses.
The NFIP also has a secondary consideration for contractors: a source of payment for the jobs they take on after a storm. You may be contracted to perform work for clients who have received money through FEMA’s Individuals and Households Program (IHP). Homeowners, business owners, and municipalities can all collect NFIP funds to rebuild, but the use of that money is still governed by FEMA rules.
FEMA grants are intended to be used to bring properties to a safe and sanitary condition—not to pay for a full restoration of the structure. For this reason, building companies entering into a contract with a client expecting FEMA reimbursement should examine the scope of work and the amount recoverable from the federal agency. Otherwise, you may be left underpaid for weeks or months as the client struggles to make up the difference.
If you are struggling to rebuild after a storm, our attorneys can work to get full and fair payment from your commercial insurance carrier. 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.