Tag: Property Insurance

Flood Insurance Versus Water Damage

Is it covered by flood insurance or is it water damage covered by property insurance? Over the past year, we saw how many storms devastated many parts of the country, flooding homes and businesses, destroying roads, and ruining many lives.

From those storms, we received many calls about how insurance will respond to help law firms recover from the tragedies. So with that in mind, we want to share some insight into how a property insurance policy responds to a water damage claim and where flood coverage comes into play.

How your firm’s insurance policy will respond to these claims depends on how the water entered your office. And while every law firm’s property insurance policy differs, there are basic features common to all property policies.

WATER DAMAGE

A firm’s property policy doesn’t provide coverage for flood damage, but it does cover many types of water damage to your office.

For insurance purposes, the damage is considered to occur when water damages your office before the water comes in contact with the ground.

Your property policy would cover the following scenarios as they would be considered water damage:

• A hailstorm smashes your window, permitting hail and rain access into your firm.
• Heavy rain soaks through the roof, allowing water to drip through your ceiling.
• A broken water pipe spews water into your firm.

FLOOD INSURANCE

As the name implies, a standard flood insurance policy, which the National Flood Insurance Program writes, provides coverage up to the policy limit for damage caused by a flood. The dictionary defines “flood” as the rising and overflowing of a body of water onto normally dry land.

For insurance purposes, the word “rising” in this definition is the key to distinguishing flood damage from water damage. Generally, damage caused by water on the ground at some point before damaging your firm is considered flood damage.   A handful of examples of flood damage include:

• A nearby river overflows its banks and washes into your office.
• A heavy rain seeps into your office because the soil can’t absorb the water quickly enough.
• A heavy rain or flash flood causes the hill behind your office to collapse into a mud slide that oozes into your building.

Flood damage to your home can be insured only with a flood insurance policy — no other insurance will cover flood damage.

FINAL NOTE

If, for some reason, a water-related claim is not covered by a flood or property insurance policy, losses from theft, fire, or explosion resulting from water are covered.

For example, if a nearby creek overflows and floods your office, and looters steal some of your furnishings after you evacuate, your property policy would cover the theft because it directly results from the water damage. H wever, the flood damage would be covered only if you have flood insurance.

We hope this provides you with insight into how both flood and property insurance will respond to water damage claims.
If you have any questions or would like to submit a claim, please feel free to give our office a call.

Boiler and Machinery Insurance

Boiler and Machinery Insurance is an often overlooked insurance that can help protect your law firm from potential insurance claims.

To help provide some insight into what Boiler and Machinery Insurance are, we have compiled a list of the most common questions associated with the coverage.

What is Boiler and Machinery (Equipment Breakdown) Insurance? 

Equipment breakdown insurance for the financial losses incurred when equipment breaks down suddenly and accidentally.  Causes of loss can include power surges, short circuits, motor burnout, and mechanical breakdown.

Why Do I Need this Coverage? 

The costs associated with your equipment breaking down can be significant enough to affect the normal operations of your law firm.

Who Needs It? 

Suppose your law firm has or owns any type of large equipment like heating and air conditioning equipment, communication networks, or any other large pieces of equipment. In that case, you should consider this coverage.

What Does this Coverage Pay For? 

Equipment Breakdown coverage pays for the cost of repairing or replacing damaged equipment. It can also provide coverage for any income or extra expenses you incur to get your firm back up.

Our Law Firm Just Rents Our Building. Do I Still Need Boiler and Machinery Insurance? 

Even if you don’t own your building, you still face potential losses associated with equipment within your building that could break down. For example, damage to your phone systems, fax machines, computers, and air conditioning units can cause significant financial damage.

If your firm has any additional questions on how this insurance can help, please give our office a call.

What is coinsurance?

A common but seldom understood provision in a property insurance policy is coinsurance.   We have found that many law firms don’t know what coinsurance is and how it affects their insurance policy.

Coinsurance is a “penalty” from insurance companies for underinsuring property.   Only 2% of property losses are total losses, while 86% of property losses are less than 20% of the property’s value.   So to make sure that clients don’t provide limits of insurance that are less than the values of the property, the insurance company has a coinsurance penalty.

Insurance companies will require clients to insure their property up to a specified percentage of the property’s value (usually 80%, 90%, 0r 100%).   If the insured amount is less than the appropriate percentages, the insurance company will invoke the coinsurance penalty in the event of a claim.

Example:

The best way to explain coinsurance is with an example of how it works.   Let’s say that a law firm has a building that is worth $1,000,000.   However, to save money on their premiums, the firm decides to insure the building for only $500,000, knowing that its chances of a total loss are minimal.

Now let’s say the law firm experiences a fire that will cost $150,000 to repair.   When the adjuster arrives to assess the damage, he realizes the building’s value is $1,000,000 instead of the $500,000 provided by the firm.   Since the firm only purchased limits equal to 50% of the building’s value, the insurance company will invoke a coinsurance penalty and pay for only 50% of the claim.

It becomes readily apparent with the example that it simply is not worth it to try and insure the property for amounts less than their actual value.   Doing so will not save you much on your insurance premiums while causing you significant headaches in the long run.

Storage Unit Insurance

One of the questions we receive from a number of the law firm we work with is about properly insuring items inside a storage unit.   Many firms will have excess property they don’t want to keep on campus, so they will typically keep it in a storage unit for a temporary or even permanent basis.

 If the property in the storage unit is stolen or destroyed, how your insurance company will respond is really dependent on how your property insurance policy was written.  Handling the claim could (and should) be as simple as the property adjuster confirming the claim is covered, determining the amount of coverage, and cutting your law firm a check.  

Unfortunately, there are situations where the claim isn’t covered, or the coverage is at a highly reduced amount from the actual value of the property located within the unit. 

Insuring a Storage Unit Properly

When we see problems arise with property claims stemming from a storage unit, it is usually because the insurance agent was unaware the storage unit existed. The law firm didn’t know it needed to notify its agent of the location.  So the best way to ensure you have coverage for the items located within your firm’s storage unit is to have your insurance agent add the storage unit as if it were another location for the law firm.  

With a location address and limit listed on the policy, you can eliminate any claims-related headaches associated with the unit.  (Make sure you talk with your agent about the type of property stored in the unit.  Old tables, desks, and chairs are insured very differently from old firm files and records.) 

Is There Coverage If I Forgot To Include The Location On My Policy?

If you forget to include your storage unit located on the policy and your storage unit is vandalized or destroyed, you may still have coverage on your policy.   Many property policies will include a coverage called “Off-Premises Property” that will provide your law firm with some protection in the event of a claim.   This limit is usually capped at $5,000 or $10,000, so you shouldn’t use this coverage as a safety net.