If your business property is damaged by a fire, hurricane, hail, or another disaster, having the right insurance should give you peace of mind. But not all damage is covered. One common reason insurers deny claims is something called a preexisting damage exclusion.
This means the insurance company may claim that the damage existed before your policy began or before the event that caused your loss. Commercial property owners should know what damage is not covered and what to do if their insurance says no to a claim.
Preexisting Damage Exclusions in Commercial Property Policies
Commercial property insurance helps pay for damage that happens unexpectedly. Most policies cover things like natural disasters, bad weather, and vandalism. But insurance usually does not cover damage that was already there before you bought the property or before a covered event happened.
Preexisting damage can include things like structural problems, mold, or old wiring. Insurance does not cover damage that was already there, so you must pay to fix it yourself.
For example, if a pipe bursts and causes water damage, insurance may pay to fix it. But if the property already had a leak that was ignored and it made the damage worse, the insurance company can deny the claim or pay less.
Preexisting damage is not always easy to see, especially if the property is not checked or maintained regularly. This can let insurance companies say that a claim is for old damage, which might reduce or stop your payment. To avoid problems, property owners should document and tell their insurance company about any preexisting damage.
Some policies exclude all preexisting damage, while others may cover some new damage. For example, a policy might not cover old mold, but could cover new water damage.
It is very important to read your policy carefully so you know what is covered.
Insurance usually does not cover damage that was already there before you bought the property or before a covered event happened.
What Preexisting Damage to a Commercial Property Can Include
When looking at preexisting damage in commercial properties, insurance companies often use the preexisting damage exclusion to deny claims. They do this because they do not have to pay for damage that already existed, and because fighting these claims in court takes a lot of work. Insurers often use information from your application and policy to reduce or deny your claim.
Most often, preexisting damage to a commercial property includes:
- Damage that predates the purchase of an insurance policy;
- Failure to properly maintain the property before the date of loss; and
- Wear and tear over an extended period.
Common Commercial Property Insurance Policy Exclusions
Other types of damage to a business’s property that are most commonly excluded from coverage include:
Wear and Tear
Like preexisting damage, wear and tear means a property slowly gets worse from normal use over time. Property owners must take care of their property and fix or replace old parts.
Neglect
If damage happens because owners didn’t do needed maintenance or repairs, insurance usually will not pay.
Ordinance or Law
If building codes change after a property is built, insurance may not pay to update the building to meet the new standards after a loss.
Damage to Commercial Vehicles
Company vehicles belong to the business, but most commercial property insurance does not cover them. This is because a building and a vehicle are insured differently. To cover company vehicles, the business needs a separate commercial vehicle insurance policy.
Earthquake and Flood Damage
Damage from floods and earthquakes is usually not covered by commercial property insurance. Like vehicles, the only way to protect your business is to get a separate flood or earthquake insurance policy.
If your business is in a flood-prone or earthquake-prone area, you should get this coverage early. These policies can be added to your commercial property insurance as riders or endorsements.
Damage from floods and earthquakes is usually not covered by commercial property insurance.
Excluded Property
Certain specific types of property are commonly excluded under commercial property insurance, including:
- Any money, security, accounts, and/or bills the business has
- Land, piers, docks, and wharfs
- Vehicles, aircrafts, and watercrafts
- Animals other than stock
- Crops, hay, or grain located outside
- Building foundations
- Walkways, roads, and other paved surfaces around the property
- Electronic data
- The cost of restoring information on valuable records
Smoke and Some Fire Damage
Even though insurance policies explain their rules, the definition of “fire” can be unclear. For example, a policy may cover wildfires that reach your business. But if a fire starts from a broken or poorly maintained oven in a restaurant, the damage usually is not covered.
Smoke damage from a fire is also rarely covered, especially for businesses in farming or industrial areas. Because each policy is different, business owners should review their coverage with an experienced insurance lawyer to see if extra protection is needed and can be added.
Commercial Property Damage Lawyers
Before buying any property, owners should have it carefully inspected to find and fix any preexisting damage. This helps make sure the property is properly protected if a covered loss happens. Even with precautions, insurance companies are known for wrongfully denying or delaying valid claims to save money.
Working with Board-Certified insurance recovery lawyers at Raizner Slania can help you understand your coverage and get legal help if there is a dispute. Our experienced commercial property insurance lawyers know the tricks insurers use to avoid paying claims. If your business has property damage covered by your policy and your insurance company has wrongly denied, delayed, or underpaid your claim, we can help.