One of the most challenging situations in business arises when there is an event that causes major loss. The first thought at that moment is: what should be covered by the commercial insurance policy? This is a common uncertainty for entrepreneurs because not all the information is always clear or even accessible, leaving a wide possibility for oversight on crucial aspects that may reduce, or even bar, the recovery for losses that should be paid by the carriers.
To provide clear guidance on essential aspects of commercial insurance claims, I have prepared a list that can empower you as an entrepreneur to take effective action before, during, and immediately after experiencing an event that causes loss for your business:
Knowing what to do before experiencing a loss covered by your commercial insurance company is about having your ducks in a row so you can quickly state and prove that: 1. your company is in fact insured under the policy; 2. the damage happened; and 3. the damage is covered under the policy. To start, you should review and fully understand your insurance policy, verify that your business meets the policy requirements, and be up to date with your business's formalities.
First, reviewing and understanding your insurance policy goes beyond a mere reading of the documents. You should conduct an analysis to determine the extent of coverage, what to expect when filing a claim, how to fulfill your obligations, and whether this policy is the best fit for your type of business. It is your duty to evaluate these elements and seek a commercial insurance policy that meets all your requirements and needs. Ask yourself: What is my worst business fear? The answer to that question should be the start of the discussion with your insurance agent when you are shopping for a policy. Always use plain language to explain to the agent the coverage you need, for example: say “I want to get the maximum value for all my equipment in case there is a flood”, instead of asking for “equipment protection”. It is the agents’ job to translate your needs into “insurance language” and build a policy that is both efficient and affordable.
Secondly, it is crucial to verify that your business meets the specific requirements outlined in the policy. This involves ensuring that all facilities, equipment, processes, and everything encompassing your business complies with the standards set by the insurer in the contract you have entered into. If you find an element falls short of these requirements, it is essential for you to take corrective action before any incident occurs. Any omission on your part may (and will be) used against your claim to get paid.
Third, it is imperative to be aware of the formalities that your business must follow by applicable authorities. From formation documents, shareholder agreements, operating agreements and documentation related to operations, certifications, or periodic inspections. Adhering to these formalities will ensure that your claim is processed efficiently and with minimal complications, enabling you to effectively pursue your claim and safeguard your interests.
- During or Immediately After:
These duties and recommendations pertain to the moment when something happens and causes the need to use the insurance policy. From an accident to a natural disaster. It is crucial to act swiftly and take a series of measures that encompass securing property (personal integrity first), fulfilling the obligations established in the policy, and documenting the loss with photos, notes, and inventory.
One the first things that you have to do is to properly safeguarding the objects or elements comprising your business property that have been involved or affected by the accident or damage and, therefore, are the subject of the insurance claim. The goal is preventing further damage. For instance, if your business flooded, you should ensure that water is no longer entering and that items at risk are safely protected.
Likewise, you must adhere to certain obligations expressly stipulated in your policy. These essentially refer to the behaviors expected from you when an event covered by the insurance policy occurs. Among these mandatory obligations colloquially known as the “insured duties” are: to notify the insurance carrier; to mitigate; to make reasonable repairs; to submit requested documents; to allow inspections; to cooperate and assist with your insurance company to resolve the claim; and to conduct an inventory.
This last point is as important for your insurance company as it is for you. When you have suffered loss, ALWAYS document taking photographs and videos of the loss and take notes about what transpired. This is crucial evidence and helps with the claim or with potential litigation if necessary.
- After filing the claim: Understanding Your Rights and the “normal” procedures.
Once you have filed a claim, a domino of steps starts. A clear understanding of your rights and some idea of the procedures associated with commercial insurance claims is essential to receive the compensation you are entitled to.
You should provide a Proof of Loss (POL). This document officially initiates the claim and must be submitted in a timely and comprehensive manner. It contains crucial details about the insured event, including the nature of the incident and the extent of the loss. As an entrepreneur, presenting the "Proof of Loss" in a timely and accurate manner is of utmost importance, as it establishes the foundation of the claim.
Subsequently, the insurance company will investigate the factual basis of the claim. The insurance company may want to use an Examination Under Oath (EUO). This is a recorded statement under oath and becomes part of the claim and of any subsequent procedure. Anything that is said under oath should be overseen by your specialized attorney, who can ensure that the answers provided are accurate and that the rights of the entrepreneur are protected during this formal interview. Furthermore, legal representation can be instrumental in ensuring that the process is conducted fairly and that both, the insured and the insurance company, meet their obligations within the established terms and deadlines.
Finally, the involvement of a Special Investigator Unit (SIU) is of great importance as their role is to conduct a detailed and professional investigation into the claim and the damage your business has suffered. Their function also extends to verifying the validity of the claim and preventing potential fraud in which the entrepreneur may be involved. It is worth emphasizing that full cooperation with the investigator is essential to ensure transparency and integrity in the claims process.
Knowing your rights and the insurance system procedures is crucial to ensure a successful claims process and obtain the compensation to which the entrepreneur is entitled under their commercial insurance policy. It also contributes to the integrity of the insurance system and protects the interests of all.
Keep the following resources in mind, they will be useful in an event of commercial loss:
Florida Department of State division of corporations:
Florida Department of Financial Services division of commercial insurance: https://myfloridacfo.com/division/consumers/understanding-insurance/commercial-property-insurance
Florida Department of Financial Services disaster information and services:
Florida State Insurance consumer helpdesk:
- ONLINE: Get Insurance Help
- EMAIL: Consumer.Services@myfloridacfo.com
- FAX: (850) 413-1550
- FLORIDA INSURANCE CONSUMER HELPLINE
Statewide/Toll-free: 1-877-693-5236 Out of State: (850) 413-3089