Hurricanes are a constant threat to a variety of Texas businesses, but large retail operations are particularly at risk of large-loss insurance claims. Shopping malls and commercial plazas must be fully protected, since inadequate insurance coverage can prevent stores from reopening. Attorney Bill Voss explores special considerations for shopping malls damaged by a hurricane, including which property damage selections will allow owners to recoup as much of their losses as possible.
Special Coverages That Protect Your Shopping Center From Hurricane Losses
The first thing owners should know about hurricane damage risk is that most of the damage is caused by flooding, which is usually not covered under commercial policies. No matter how much property damage to the building, foundation, electrical systems, framing, drywall, and contents are ruined by flooding, an insurer may provide nothing at all if the cause of the damage is natural flooding. Owners will have to secure flood coverage separately through the National Flood Insurance Program (NFIP) in order to recover these costs.
In addition, shopping center owners may fall short of the amount needed to make repairs if their property damage policies do not include:
- Replacement cost value. A replacement cost value (RCV) policy allows owners to recover the full amount necessary to replace covered damaged items those of similar quality. In contrast, an actual cash value (ACV) policy will subtract the amount of any depreciation for covered items before issuing payment. Although RCV policies typically have higher premiums, they pay for a great deal more when a loss is sustained.
- Inland marine insurance. Transportation and cargo insurance, also known as inland marine insurance, covers goods in transit to or from your covered location. If you regularly ship materials between locations or allow your employees to store company goods in their personal vehicles, this insurance policy can provide coverage for valuables, documents and data, and other property in transit.
- New construction coverage. Builder’s risk insurance, as well as contractor’s equipment endorsements, pay to replace structures that are not fully completed as well as materials needed for their construction. Newly-acquired buildings may be temporarily covered by an existing policy, but are usually only protected for 30 days after purchase. After this time, coverage may be denied unless the owner has requested coverage for a new property under a new or existing policy. Even spaces that are empty should be covered under property damage policies.
- Service interruptions. Property damage insurance typically will not cover losses caused by a utility interruption away from your premises, such as hurricane damage to a power station or municipal sewage backup. If your business is without natural gas, phone lines, internet connectivity, or water for more than one day, utility interruption insurance can pay for losses sustained at your business due to outside forces. Coverage may include loss of refrigerated items, lost online ordering, and increased costs of cleaning due to biohazardous waste.
- Breakdown insurance. Also known as "boiler and machinery" coverage, this insurance provides payment if your equipment suffers a breakdown due to power surges, motor burnout, or boiler malfunction. Equipment breakdown insurance can be extended to cover all kinds of mechanical and electrical equipment, including computers, company phones, air conditioning and refrigeration systems, boilers, and HVAC equipment.
- Vendors and rental equipment. In addition to ensuring that your tenants have secured their own insurance policies for hurricane losses, you should have your own rental insurance for any materials you do not own. If your leased equipment or service is unable to perform, equipment breakdown insurance can provide payment for resulting business income losses.
- Special event losses. If your shopping center regularly hosts Christmas events, Easter festivities, musical acts, ceremonies, fundraisers, and other special events, you may need to invest in seasonal business insurance to replace income lost due to a hurricane at a particularly profitable time of year.
If you are struggling to get fair payment after a hurricane from an insurer, our attorneys will work to get the coverage you deserve from your commercial insurance policy. 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.