Commercial Flood Insurance

A property insurance policy requires a property owner/manager to take all reasonable steps to minimize the effect of a loss. Is there a responsibility for the property owner/manager to take all reasonable steps before a loss occurs? Absolutely.

In order to minimize the financial loss at the time of flooding, property owners/managers should:

1 – Establish the exposure to flooding

Establish, if possible, from the information available whether the property is within a 100-year flood plain or a 500-year flood plain. Have your insurance broker provide guidance as to whether the property is exposed to a potential flood.

Consider the following scenarios:

2 – Avoid shortfalls at the time of a loss by having adequate limits:

It is essential that the following questions be reviewed on a regular basis to minimize any potential shortfall at time of loss:

• What is the replacement value of the foundation and footings, the above ground component, the value of any equipment and machinery below grade, how easily could it be replaced, the value of the business personal property contained in the building, especially below grade, the value of the business personal contents?
• Do you have business interruption insurance and if so, what is the applicable period of indemnity?
• Do you have any “outside property” that needs to be insured, including any above ground storage tanks?
• Does your building meet current building codes and by-laws and do you carry this coverage in your current policy. What limits are provided? Has your property been grandfathered in? If yes, limits under the by-law wording must be carefully reviewed to ensure full coverage is available to you at time of loss.
• Obtain a property appraisal that includes an opinion that specifically addresses the type of soil beneath the structure. This would indicate whether the structure could be subject to erosion by floodwater.

3 – Extra considerations:

There are extra expenses to take into consideration after being affected by a flood that may not be covered by insurance. It is important to ask your broker what your current limits are, whether you are covered for business interruption and extra expenses and what, if any, limitations exist in the policy that will impact the amount of coverage available following a loss.

4 – Things to consider after a flood loss:

Consider the cost of removing debris after a flood loss.

• Does your policy cover just your property debris or also that of your neighbours? Who are your immediate neighbours and what are their operations? Debris may come from far away. Are you covered if you cannot establish whose material goods are now covering your property? How will your policy respond? What are your current policy limits? Does your policy including an important limitation at time of loss?

Pollution clean-up as a result of the flooding:

• How does your policy address this potential exposure at time of loss? What limitations are there including reporting requirements?

Have any concerns? We recommend that you contact our Lenders’ Insurance Advisors to ensure you have appropriate coverage in place to protect your asset before a loss occurs.

For more information on this topic, please contact:

MALCOLM ALDRIDGE
Vice President
maldridge@intechrisk.com

About INTECH

INTECH Risk Management (“INTECH”) is an independent insurance consulting company involved in the analysis, design, development, implementation and management of insurance programs. INTECH does not sell insurance, nor is it affiliated with any insurance company or brokerage.  This unique independent position in the marketplace enables our consultants to avoid conflicts of interest and provide our clients with unbiased, expert advice. INTECH has been the 2015 and 2016 winning recipient of the IJGlobal Americas Due Diligence Provider of the Year Award.