Purchasing an insurance policy for a business must be a well-thought-out process. While one policy may appear to cover all necessary items and potential hazards a business may face, this is often not the case. Property damage liability coverage, for instance, is quite different from commercial property insurance. Knowing what is and isn’t covered under both types of policies – and others – can help keep business owners better informed when making coverage choices. 

Property Damage Liability Insurance vs. Commercial Property Insurance

When researching the types of insurance policies to purchase for a commercial property, business owners will likely find that numerous policies cover a wide variety of events. While one policy may appear to cover everything you need, this is usually not the case. Insurance policies are quite nuanced and include complex language that can be difficult to decipher. Because of this, it is often in the best interests of the policyholder to consult with legal counsel on the coverage they need to ensure they don’t run into any roadblocks. Two particular policies – property damage liability and commercial property insurance – may be similarly named but they cover very different things. 

Property Damage Liability Insurance

Property damage liability insurance is a subset of commercial general liability insurance that ultimately works to protect businesses from a variety of claims. One of the main differences between property damage liability insurance and commercial property insurance is that property damage liability insurance works to ensure a business is protected from financial loss should it be found liable for causing property damage, personal injury, or an advertising injury. 

The most common coverage associated with property damage liability insurance includes:

  • Costs for property damage claims against the business
  • Medical expenses if someone gets injured at the business
  • Advertising injury claims against the business
  • Administrative costs to handle covered claims
  • Court costs, judgments, and settlements for covered claims

While this type of insurance is important for businesses to have during their course of operation, it does not cover property damage caused by natural disasters or unforeseen events like fire, vandalism, and many other types of direct damage. In addition, this type of insurance does not cover damage to commercial vehicles, employee injury, or service errors – all of which are covered under separate policies or endorsements. While a business owner may assume property damage liability insurance provides substantial coverage, it is less comprehensive and more specific in nature. Insuring a business and its property requires purchasing multiple policies to cover a variety of liabilities, damages, and many other events. 

Commercial Property Insurance

Despite the similarities in name, commercial property insurance is quite different from property damage liability insurance. Instead of covering any liabilities, the business may be responsible for concerning damaged property, commercial property insurance covers direct damage to a business due to an unforeseen event or events. Not only that, but it also covers items located within the property that may become damaged, including equipment, furniture, product inventory, supplies, fixtures, and more. Commercial property insurance can also be used to cover the costs associated with repairing or replacing stolen, damaged, or destroyed property. 

There are three different levels of commercial property coverage that can be purchased. Each level protects against different causes of damage or loss, such as:

  • Basic form policies: Basic form policies provide the least amount of coverage out of the three. These policies cover damage caused by fire, windstorms, hail, lightning, explosions, smoke, vandalism, sprinkler leakage, aircraft and vehicle collisions, riots and civil commotion, sinkholes, and volcanoes.
  • Broad form policies: Broad form policies cover the causes of loss included in the basic form policy, as well as damage from leaking appliances, structural collapses, falling objects, and the weight of ice, sleet, and/or snow.
  • Special form policies: Special form policies provide the most coverage out of the three. These policies cover damage from all causes of loss, except those specifically listed as excluded by the policy. These are called policy exclusions and often specifically exclude coverage for damage caused by floods, earth movement, war, nuclear disaster, wear and tear, and insects or vermin.

Commercial property coverage can also be extended through the purchase of policy endorsements, the most common of which include:

  • Business interruption coverage: Business interruption coverage pays for lost income, payroll, and other day-to-day expenses that occur while a business is inoperable following property damage or destruction.
  • Newly acquired or constructed buildings coverage: Newly acquired buildings coverage insures a new building if it is added to a policy already in effect. The new building must be added within 30 days after starting construction or acquisition.
  • Valuable papers coverage: Valuable papers coverage provides limited coverage for business records and other valuable papers.
  • Ordinance or law coverage: Ordinance coverage pays for extra construction or repair costs needed to comply with current building codes.
  • Boiler and machinery coverage: Boiler and machinery coverage covers boilers, air conditioning units, compressors, steam cookers, electric water heaters, and similar machinery that has been damaged due to an unforeseen event. 

Commercial Property Coverage Attorneys

When a business suffers damage, property owners often take comfort in the fact that they have insurance in place. Despite this, they may be surprised to find that just because they purchased insurance doesn’t mean it’s the right kind of insurance. It is incredibly important for business owners to know the ins and outs of their insurance policies to ensure their insurance provider is not taking advantage of them. Even so, with the proper coverage in place, business owners may find carriers utilize bad faith tactics to avoid paying valid claims. Because of unethical methods used by the insurance industry to undermine policyholders, commercial property owners should consult with experienced legal counsel to ensure they have the right coverage when they need it most. 

At Raizner Slania, we are familiar with the myriad of methods insurance companies use to avoid paying out on claims. If you are a commercial property owner who needs assistance with an existing policy or if you find your valid claim has been wrongfully denied, delayed, or grossly underpaid, we can help. Contact our office today to see how we can best assist you.

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