Jeremiah Welch and William Bennett
Special to Valley News
For the first time in four years many areas of California are no longer in a drought. This result comes from a season of unusually heavy rainfall and strong winds not usually seen in the dry state. December and January have been exceptionally wet months. This increased moisture has led to widespread water damage to many businesses largely resulting from building leaks. Business owners should be thinking about two things. One, is my business adequately insured? And two, is my business getting 100 percent of what it is entitled to from the insurer?
Many people think that property insurance policies only cover damage caused by forces of nature. However, that is only part of the coverage available. Most policies cover water damage resulting from faulty construction as well. If the recent heavy rains have caused water damage to a business resulting from faulty construction, the policy will typically pay the insured and even pursue the contractor. This way the business owner doesn’t have to spend the time and money chasing the contractor personally.
Depending on the policy, there may be coverage not only for repair of physical damage, but also for such items as lost business income, carrying costs and debris removal. Some policies cover increased costs associated with operating the business from an alternate location while the building is repaired.
When an insurance company receives a claim for water damage due to faulty construction, there are two scenarios that may occur. They reject the claim entirely, or they pay some, but not all of the damages submitted.
Often policies are extremely confusing and difficult to understand. Many policyholders just accept the insurer’s decision to pay some but not all of the claim because they cannot figure out how their coverage works and do not know what else to do.
Insurance companies and their policies often use different terminology than what their customers are used to seeing. Frequently, the hurdle to having the company accept an insurance claim is that the policyholder simply did not describe the loss the right way. For example, not all water is a “flood.” A “flood” is a specific term used in insurance policies. Many policies exclude “flood” coverage, defined as surface waters, but they cover sewer or drain backup. Rain that enters a building before it gets to the ground is generally not considered “flood” damage. Being able to navigate this type of nuance can mean the difference between claim acceptance or not.
Many policies also have sub-limits for different types of coverage. How the insurer classifies a particular loss according to these sub-limits can have a dramatic impact on how much of the loss gets paid. Understanding how to best present the claim in light of these sub-limits, rather than leaving it up to the insurer, can be critical.
It is also important to note that property insurance policies often have a short time frame in which to present a claim or challenge the insurer’s decision. Delay in seeking advice and assistance can result in losing rights.
Jeremiah Welch and William Bennett are attorneys who help insurance policyholders understand their policies and obtain the coverage they are entitled to receive. They are located in the Temecula office of Saxe, Doernberger & Vita.