Commercial Buildings and Insurance Requirements

Many businesses with the potential of being struck by natural disasters may have questions concerning what may or may not be covered under their current policy. Insurers do their utmost to handle and settle claims in an expeditious manner, but some claims may be more complicated than others.

It may be a case of exclusions existing under certain business property and commercial building insurance policies. For example, while some components of a storm, such as wind and rain damage may be a covered cause of loss, other things such as storm surge and flood may not necessarily be covered, or with lower limits and higher deductibles, which may be very costly to the business owner. At Texas Preferred Insurance, an agent can sit down and discuss the policy language so that you have a solid understanding of how a particular policy will benefit you the most.

State laws affect how coverage is determined

Many states have adopted an “efficient proximate cause” test to determine coverage when there is both covered and excluded perils contributing to a loss. However, this has no set meaning and courts may interpret the test differently. Some courts view it as the “dominant” or “predominating” cause, while others might see it as the risk that sets other causes in motion. Without uniformity under state law, policyholders are left unsure as to whether their losses will be covered.

Provisions in some policies further complicate the issue

One factor is the ensuing loss clause found in some policies, which reduces coverage for a loss from a covered peril that follows as a consequence of an excluded peril. For example, if a policyholder suffers loss from an excluded cause, such as flood, but the building is consumed by fire shortly after, then the loss should be covered. With storms of the magnitude of Hurricane Harvey, it’s likely that insureds with certain policy provisions will remain uncertain as to their coverage, at least until a more uniformed structure is implemented.

Some policies contain what is known as an “anti-concurrent causation” provision, which provides that the insurer will not pay for any loss caused by an excluded peril, even if a covered loss contributes directly or indirectly or in any sequence to the loss. While some states agree that the provision has the fault, the majority holds that such a clause is valid and enforceable. Speak to an agent at Texas Preferred Insurance and get the exact coverage you desire.