When it comes to Property Insurance, prevention and mindfulness are often better than cure.

John Bourke
NTI/Thompson

John Bourke of NTI/Thompson insurances passes on his insurance prowess to Hardware Journal readers.

In all my years working in the Insurance business, I have never come across a policyholder who was happy to report a claim. However, when that claim is reported, and it is settled quickly and
fairly, policyholders tend to be pleased that they have bought a level of cover that saw them get back to business without fuss.

Minor property claims can cause serious disruption to a business, but a severe fire, flood or even a break-in can have a very negative impact. An insurance policy provides monetary protection, and
the aim is to get the business back up and running as quickly as possible. Having said that, loss prevention measures implemented by a policyholder can reduce the severity of a loss, and can often
mean that while a claim is being adjusted and settled, a business can continue to trade, albeit on a restricted basis. Methods of reducing property damage, risk and consequential loss are;

• Installation of a monitored fire and burglar alarm.
• Having a sufficient number of serviced fire extinguishing appliances available and training all staff and management in their use.
• Ensuring water pipes are lagged and in good condition.
• Having the wiring and electrics regularly checked by a qualified and registered electrician.
• Restricting the use of cutting equipment and hot works to confined, appropriate areas.
• Having strong physical security on all access points.

There are a number of misconceptions about key areas of insurance cover i.e. property damage and consequential loss, also known as business interruption. When seeking cover, you should note;

• Cover for stock or goods stored in the open and in open sided buildings is generally restricted to fire, lightning, aircraft and explosion only. Storm and flood are generally not available.
• Also, insurers will generally not provide theft cover for stock stored in the open or in open sided buildings. If cover is to be considered the applicant will need to show a high standard of security, including, but not limited to: CCTV, static or mobile patrol and good physical security.
• During the period of heavy snow in March 2018, a number of claims were made where snow had gathered on the roofs of buildings, and the sheer weight had caused those roofs to collapse, sometimes bringing the building down with it. This did not cause a problem as the weather event was a storm and therefore standard property damage policies will have provided cover, assuming the peril of storm was included. However, there have been claims presented where a snowfall, not deemed to be storm, has caused damage to buildings in poorer condition and this is often not insured.
• Flood cover is becoming a big issue for insurers and many have invested heavily in flood mapping technology and will always refer to this when deciding whether to grant flood cover at a particular location. What was approved for flood cover in the past may no longer be suitable.
• For a business interruption policy to provide cover, there must have been underlying property damage. This is known as the material damage proviso or warranty.
  • Example 1 – an insured party suffers burst pipes at their business following a cold spell. As a result, stock is destroyed and beyond use; and there is some damage to contents and the building itself. The business has to close while repairs are carried out and therefore loses turnover and profit as a consequence. This business interruption cover will operate for the duration of the indemnity period or to when the policyholder gets back to a pre-loss turnover position.
  • Example 2 – Referring back to the snow earlier this year, a business had to close for concerns over staff safety and although staff wanted to do so, they simply could not make it in to work. As a result, the business lost four or five days’ turnover and profit. The business interruption policy will not cover this loss as there was no damage to the property.
• Another misunderstanding relates to loss of rent receivable. This cover protects the policyholder if the premises becomes uninhabitable or unusable following damage caused by an insured peril.
  • Example 1 – following a fire, the premises is wholly or partly unusable. The tenant moves out and as a result the landlord is not in receipt of rental income. This is covered until the end of the indemnity period or when the landlord lets the premises again, whichever comes first.
  • Example 2 – A tenant stops paying rent and refuses to leave the premises. This is not a situation that loss of rent insurance is designed to cover. The only way this can be resolved is by the landlord and the tenant.

Understanding your exposures as a business person or in a personal capacity is vital when deciding what insurance cover you need and should definitely have. It is a worthwhile exercise to review your cover every year, be aware of the exposures your business has, ensure your sums insured are adequate and discuss the cover you have, or don’t have, with your broker or insurer at least once per year. Liability claims can also be prevented, and I will delve in to this difficult topic in my next contribution.

This Business Support article featured in the November/December 2018 edition of The Hardware Journal.