Having the right insurance is essential when owning and operating commercial property. If a fire or major disaster damages a property, owners should be able to rest easy knowing they have the proper coverage to fully recover. Unfortunately, an insurance provider can easily deny coverage on the grounds of preexisting damage by alleging the loss claimed was already present at the property prior to the event. Because not all instances of property damage are covered under standard commercial property policies, insureds must understand what a preexisting damage exclusion is and how insurers attempt to use it as a means to deny coverage for valid causes of covered property damage.
What is a Preexisting Damage Exclusion?
When purchasing an insurance policy, business owners must consider all the potential ways the property can become damaged during its operation. While commercial property insurance policies are designed to provide owners with a means to protect their financial stake in the property they own, they are not catchall contracts that automatically cover every instance of damage. Commercial property policies often contain various exclusions for certain specific causes of damage.
Most property insurance policies exclude preexisting damage from coverage. These exclusions deal with eliminating a carrier’s liability for damage already present at the time the insurance policy was purchased. For instance, if a business owner purchased a commercial property policy after its roof was damaged in a hailstorm, the insurance company will deny a related hailstorm claim as the damage already existed before the policy went into effect.
When a property damage claim is filed, insurers will often send out specialists including adjusters to review and investigate the damage in question. Because of this, owners should fully understand their policies and know what to expect from their insurance providers to ensure a claim is not denied on the grounds the damage was caused by a preexisting condition.
Preexisting damage to a commercial property can include:
Damage that predates the purchase of an insurance policy;
Failure to properly maintain the property before the date of loss; and
Insurance companies often utilize the preexisting damage exclusion to deny claims for two main reasons. First, insurance companies are not required to cover losses that can be attributed to preexisting damage to the property. Second, insurers know that litigating claims denied based upon a preexisting damage exclusion is fact-intensive. In other words, insurance companies will use all of the information collected during the application and underwriting processes to the detriment of the policyholder.
How to Avoid a Claim Denial Due to Preexisting Damage
Policyholders must take certain steps to ensure a commercial property damage claim will not be denied due to the presence of preexisting damage, including:
Reviewing the Current Policy: Many business owners may be unaware of their policy’s coverage limitations. Not only that, but insurance policy language is often purposefully complex and difficult to decipher, giving the insurance company an upper hand over the insured. By thoroughly reviewing the policy each year with a professional like an insurance coverage attorney, policyholders will better understand where they may have gaps in coverage.
Maintaining Records and Documenting the Property Pre-Loss: While taking photos and videos is recommended after damage occurs as evidence in support of an insurance claim, it’s also important to take and maintain photos and videos from the time the property is purchased. Be sure to note the date and time when the photos and videos were taken. Policyholders should also maintain any other records about the property, its state at the time of purchase, as well as any recorded instances of damage that have occurred while it has been occupied by the policyholder. This can also include any records of improvements made at the property over the years. This is especially important, as properties must be well-maintained before a loss occurs. This will make it less likely that an insurance company can deny a claim because of preexisting damage.
Scheduling a Property Inspection: Although it’s important to inspect a commercial property each year to ensure it is in good working condition, scheduling an inspection with a licensed specialist or general contractor can help provide insight into any problem areas the property may have that the owner is unaware of. This evidence can also be used to prove the property was not previously damaged in the event of a future damage claim.
Consulting with Legal Counsel: Unfortunately, insurance providers can often be notorious for rejecting valid claims at the expense of policyholders. Ensuring commercial property owners have skilled legal representation from an insurance coverage attorney is essential in these cases. These professionals can help policyholders complete a thorough review of their policies and ensure valid claims are honored.
Insurance Coverage Attorneys
Insurers often reference preexisting issues and damages as one of the reasons for a claim denial. This can be incredibly upsetting for business owners who know the property damage was caused by anything but a preexisting condition. At Raizner Slania, our law firm knows the ways insurance providers attempt to thwart the claims process by denying, undervaluing, and delaying valid claims. If you are a commercial property owner whose valid claim has been denied due to a preexisting damage exclusion, we can help. Contact us today to get more information on how we can assist with your claim.