Reviewing the provisions of an insurance policy can be an exercise in frustration. Multiple defined terms and seemingly contradictory clauses, inserted into text stretching 10, 20, 30, or even more pages is not necessarily something anyone wants to do. However, ensuring that you have the correct coverage for your business can protect you in the event of a loss or lawsuit. Instead of being something to ignore, your insurance policy should be required reading. Here are five things to consider:
1. Work Smarter Not Harder. Fortunately, you don’t need to read your entire policy to determine the basic outline of your coverage. You can start with the policy’s “declaration page” or “declaration sheet” or maybe just “declarations.” Consider this document to be an overview of your coverage. On your declarations page, most policies will identify the named insured; limits of coverage; date of coverage; types of coverage; and any special endorsements. Review of the declarations page should alert you to any obvious problems, such as the wrong insured.
2. Real Estate Really Insured. For any number of reasons, including for liability or tax purposes, ownership in real property is often structured differently than ownership in the actual going concern that is your business. Maybe real estate is separately held in a single asset limited liability company, while your actual business is a corporation. Whatever the circumstances, make sure your commercial property insurance lists the correct owner for your commercial property. That way, when your building and contents are destroyed in a fire you will actually have coverage. This may require have multiple named insureds (if for example, real property and personal property are held by different entities).
3. All About The Money. Insurance policies, be it a commercial general liability policy, or a directors and officers policy, may exclude coverage for volunteers. If your board of directors are unpaid volunteers or if you rely on volunteers to provide services make sure your policies cover their actions as well. This consideration applies to any entity type. For example an officer of a local non-profit embezzled funds, which would have been a covered under the applicable policy, except the policy did not provide coverage for volunteer officers. This information was either overlooked by the agent or not provided by the entity.
4. Real Estate Round Two. If your business is a commercial tenant your commercial lease likely contains some discussion of “subrogation” and could very likely contain a “waiver of subrogation” clause. Subrogation is the means by which an insurance company stands in the shoes of its insured after paying a claim and then filing suit or making a demand against the actual wrongdoer. Waiving subrogation rights could impact your coverage (e.g., the insurer will argue they are prejudiced because they cannot sue the negligent landlord) and your liability (e.g., because your landlord did not waive subrogation, his or her insurance company is now suing you).
5. Making The Claim. If the entirety of insurance law had to be reduced one word that word might be notice. Timely and proper notice of a loss can be outcome determinative. More than any other sections of your policy make sure you are familiar with notice requirements. Failure to provide proper notice, or failure to provide timely notice, may give your insurance company a basis to deny your claim – even if it is otherwise valid. Do not delay. If you have any questions or concerns contact your insurance broker or attorney.
If you need additional information regarding this article or would like to discuss your own issues please do not hesitate to contact the author at firstname.lastname@example.org.
Attorney Steve Staple’s practice areas include real estate, estate planning, elder law, and probate & trust administration. He earned his Juris Degree from Michigan State University College of Law, where he received the Jurisprudence Award for having the highest grade in Research, Writing, Advocacy, and Advanced Legal Research.