Commercial Property
Retail, office, industrial, warehouse. The building stops earning the day it closes.
What the building costs to put back is one claim. What the shutdown costs you, the building owner, and whether your tenants wait it out, is another. Both start on the same day, and the decisions that decide them get made in the first week.
Closing, and getting back open
The building and the shutdown are two claims, and they run on the same clock
- Report both when you report the loss. Saying the building is damaged isn’t always saying the business stopped.
- Partial closures count. A building you’re operating at half capacity is generally still a loss under most business income coverage.
- Money you spend to stay open, or to open somewhere else, is usually extra expense rather than building damage. Keep it separate from the first invoice.
- Most policies pay on the time the repairs should reasonably have taken, not the time they actually took.
- That makes the adjuster’s repair timeline the number that decides your income loss. Read it the day it arrives.
- Document every delay as it happens. Permits, engineering, long-lead materials, contractor availability, an inspection nobody scheduled.
- Ask for advances as the loss accrues rather than producing one figure at the end. §627.70131
- Give notice of the loss inside your own deadline. Missing it generally bars the claim no matter how good the claim was. §627.70132
The income side has its own page, because on most commercial losses it’s the larger of the two numbers and the one carriers examine hardest — business interruption.
Tenants, and whether they wait
If you lease the space out, their decision decides your income loss
- Pull the rent roll and every lease as they stood the day before the loss.
- Read the abatement clause. Whether rent stops while the space is unusable comes out of the lease rather than out of your policy.
- Read the termination clause too. A tenant can leave whenever they want — what this clause decides is whether leaving ends the lease or breaks it. Find the damage threshold that lets them end it, because rent released that way doesn’t come back when the repairs are done.
- A tenant who leaves during the repair is lost rent you generally have to prove, not lost rent anyone assumes.
- Improvements and betterments are a separate question, and the lease usually answers who insures them.
- A tenant’s inventory, equipment and fixtures are generally the tenant’s, under their own policy.
- Keep notes of who left, when, and what they were paying.
- Get access arranged for inspections while your tenants are still there. It gets harder once the space is empty.
What to look for in your policy
- Your deductible, and whether it’s a flat amount or a percentage of the limit. §627.701
- Coinsurance, and the figure the penalty is measured against.
- Whether an agreed value provision is in force this policy period, and when it expires.
- Ordinance and law coverage, if you have it and its limit.
- Whether the building is written replacement cost or actual cash value.
- When the limit was last supported by an independent appraisal rather than rolled forward.
- The sublimits. Debris removal, signs, outdoor property, trees and landscaping, pool and deck equipment, water damage.
- Business income and extra expense limits, the waiting period and the period of restoration. Business interruption.
- Any protective safeguards endorsement requiring an alarm or a sprinkler system to be in service.
- The vacancy provision, if a unit or a wing sits empty.
- Equipment breakdown, and whether elevators, boilers, chillers and compressors are scheduled.
- Any roof payment schedule or separate roof deductible.
- Who is named as insured, including a management entity or a landlord’s lender where that applies.
- Yearly renewals often change coverages in previous policies. Review all endorsement changes yearly.
After a commercial loss: Dos and Don’ts
Dos
- Say in writing that you’re claiming the business income loss as well as the building damage. Reporting the building isn’t always reporting the business income loss.
- Photograph and video the whole building before anything is cleaned, cut or hauled off. Interior, exterior, roof and mechanical.
- Get the roof inspected by somebody who walked it. A photograph taken from a parking lot isn’t an inspection.
- Pull the rent roll and the leases as they stood the day before the loss.
- Read the adjuster’s repair timeline the day it arrives. That timeline is your income clock.
- Keep your books in the order an accountant would want them. The income claim is proved out of records, not out of an estimate.
- Document delay as it happens. Permits, engineering, long-lead materials, contractor capacity.
- Ask for advances as the loss accrues.
Don’ts
- Don’t clean up before the damage is documented. Once it’s in a dumpster, so is the proof of it.
- Don’t make permanent repairs to get back open before somebody has recorded what was there. Temporary is fine. Permanent is evidence gone.
- Don’t let the building claim be settled while the income claim is still running. They finish at different times.
- Don’t sign a release that closes all claims from the loss to get the building money.
- Don’t assume the schedule of values is right because it’s been on the policy for years. Coinsurance is measured against it.
- Don’t let a sprinkler or alarm system stay out of service without telling your carrier in writing. A protective safeguards endorsement can turn on exactly that.
- Don’t hand a carrier a tax return and call it proof of lost income. The records behind it are what get read.
- Don’t forget what isn’t the building. Signage, fencing, parking, site lighting, outbuildings.
- Don’t agree to a repair timeline you know is optimistic. It sets the number on the income side.
- Don’t give a figure you can’t support. An estimate has to survive being read line by line.
This isn’t everything. Your policy carries conditions and duties that apply after a loss, and they’re yours to meet whether or not they appear here. Read your own policy in full. If something in it doesn’t make sense, call me — it’s a twenty-minute phone call about the loss, whether or not you hire me.
These are the ones specific to this kind of loss. Select the link for the Dos and Don’ts that apply to every claim.
The call that matters
If your building has had a loss, call or email me. It’s a twenty-minute phone call about the loss, and I’ll tell you what your provisions are likely to do to the claim and what to have documented before the cleanup starts.
You stay in control of your claim. That’s the whole point.