Business Insurance protects the assets of your business and may also protect the assets of the principals of the business. Items covered under Business Insurance may include overhead, salaries and rent as well as business property losses and liability to others.
The most important components of business insurance are:
- the terms of business interruption and overhead coverage;
- the sufficiency of the amounts of liability protection; and
- whether the insurer owes the insured or business entity a duty to defend it and indemnity a loss under the circumstances of a lawsuit filed against it.
Important components for business insurance include coverage for:
- records and files,
- business interruption and overhead,
- key person insurance,
- D and O/E and O,
- commercial auto.
Customized policies are available for:
- professional services,
- real estate firms,
- hotels, motels, hospitality,
- commercial and residential rentals,
- auto sales and service,
- and many specific businesses.
As with other types of insurance it is important to make sure that both coverages and dollar limits are sufficient for the purposes intended.
With business insurance you are talking about your livelihood.
The questions are:
- What can happen?
- What could be the financial consequences?
- Can you protect against those things?
- Is it worth the price you have to pay to do so?
Typical occurrences would include storms, fires, floods, electrical outages, equipment breakdowns, accidents, illnesses, injuries, burglaries, employee problems, allegations of wrongdoing, theft and liability creating events.
The most common problems involving business insurance include:
- Whether a loss is subject to an exclusion or limitation.
- What the reasonable cost of repair or replacement of damaged structures is.
- Whether there is a valid claim for business interruption or overhead.
- As to Claims against the insured, whether the insurer has a duty to defend or indemnify it.
Take the following hypothetical. A women’s boutique that purchases it’s stock from manufacturers at trade shows has a fire that destroys dozens of dresses and other inventory. It damages the heating and air conditioning system, and computers containing the names and contact information for hundreds of customers. The business is forced to close for repairs. In addition, four manufacturers that restrict the number of retailers they sell to in given geographical areas, terminate their contracts with the store.
First, one would never proceed on a claim of this size and complexity without a lawyer. That would be the medical equivalent of performing your own brain surgery.
That said, the business would start by obtaining a reconstruction bid and a business consultant’s calculations on the overhead and profit loss, inventory loss, loss of the value of the customer lists and loss of the key manufacturers’ contracts. These numbers and the reports supporting them would be submitted to the insurer.
The insurer would then send its claims adjuster out to meet with its insureds. A few months later, the insurer would send a lengthy letter to its insured explaining why it’s numbers came to $672,951 less than the insured’s.
Alright. So now what?
First, the insured would give copies of the insurer’s letter to its’ own experts for their response.
Next the two sides might agree to seek the assistance of a mediation firm such as First Mediation or Jams. They would attend a lengthy Show and Tell session at the mediator’s office in an effort to resolve matters.
If that is successful, the settlement agreement would be put in writing and that would be the end of it.
If not, a lawsuit would be filed. In states allowing bad faith cases, the insured would seek recovery for both the policy benefits and additional damages. Attorneys fees, losses caused by the delay, mental distress, consequential damages and possibly punitive damages.
The above is a simple example of a business claim. Again, with regard to both purchasing and claims, when there is a substantial sum involved, it is always best to get legal advice before communicating with the insurer.