Insurance coverage for manufacturers may be similar to that of any other business, since owners must consider the risks of adverse weather and make selections that will mitigate their losses. However, the sheer scale of industrial operations can make losses much more costly—and failing to select policy options carefully can put manufacturers out of business. Attorney Bill Voss explores the unique insurance risks for these manufacturers and industrial operations and how to choose the coverage options that will help you reopen your doors after a tornado.
Choosing Tornado Coverage for the Type and Scale of Your Industrial Facility
There are a few policy options that may be a good fit for industrial operations based on the nature of the products, the scale of operations, and the location of the business. If the factory is in a location with unpredictable weather, an all-risk property damage policy can pay for natural hazards and all related perils (such as flooding after a storm). Owners may also increase the limits of property damage coverage or pay an extra deductible to cover the loss of certain equipment.
Once an overall policy is chosen, the right insurance endorsements can help owners recover the costs of:
- Rebuilding. If your warehouse or facility is in violation of recent building codes, the structure will need to be rebuilt in a way that meets current building ordinances. Code upgrade coverage provides payment for the additional cost of installing new wiring, fixtures, insulation, plumbing, or even regrading and changing the existing floor plan of a structure. If you were in the process of expanding your operations when the tornado struck, builder's risk and new properties insurance can provide limited-time coverage during the construction of a new warehouse or the acquisition of a secondary location.
- Power outage losses. A tornado may cause extended power outages that may hinder your production schedule and cause the loss of perishable items. Power loss protection can pay for the cost of temporary lighting and heating, as well as the replacement of completed inventory or materials lost due to power interruption.
- Vehicle damage. Tornadoes can destroy vehicles in seconds, including commercial vehicles such as trucks, vans, forklifts, and golf carts. If you have a commercial auto policy, make sure you have selected comprehensive coverage to pay for non-collision events. This coverage should also replace specialized equipment inside the vehicles, such as GPS systems, hydraulic lifts, or dispatch radios.
- Inventory. While most property damage policies will cover the structure, grounds, and outbuildings, the amount of coverage offered for damaged inventory may vary. Without specific inventory endorsements, your expensive industrial equipment (such as conveyors, pressers, bottling machines, or other production line equipment) may not be covered at full value—or covered at all. Manufacturers who have not invested in inland marine insurance may also be forced to eat the cost of any inventory lost in transit or stored at an offsite facility.
- Income and profits. Income losses comprise the largest costs of a disaster for many businesses. Manufacturers are often forced to suspend production after a tornado due to lost materials, broken machinery, labor losses, and other consequences of a disaster. Business income insurance provides funds for employee payroll and rental of an offsite facility to fill quotas, while extra expense coverage can be used to cover increased costs of repairs. Finally, manufacturers who rely more heavily on profits from a specific time of the year may use seasonal insurance to make up the difference in profits, preventing them from going into the red at the end of the fiscal year.
If you need help with your tornado damage insurance claim, we can work to get you full and fair payment to make repairs and restart production. Please contact the Voss Law Firm at 1-888-991-3212 or simply fill out the form on this page today to get answers to your questions.
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