Is Your Business Insured Against Water?

When your place of business is filling with water, the last thing you want to hear is that your commercial property or business owner’s policy does not cover the claim.

However, that could be the case if you’re not careful.

Commercial property insurance provides the broadest type of coverage that insurance carriers can offer to business owners.

It is a way for business owners to protect themselves from unforeseen circumstances.

It can also protect a businesses’ physical goods, like buildings, signs, equipment and other potentially valuable goods as well as employees’ personal property.

Commercial property insurance is one of the first types of insurance a business owner should look into when he or she launches a new enterprise.

The coverage protects business owners from some of the risk that the property they own could be lost, stolen or damaged.

In essence, such policies state that if it’s not excluded, it’s included.

While that provides a certain amount of peace of mind, it’s important to know what is not covered under such a policy.

Commercial insurance policies usually add a specific water exclusion endorsement to the policy.

A typical list of what is not covered could read like this:

  1. Flood, surface water, waves (including tidal waves and tsunamis), tides, tidal water, overflow of any body of water or spray from any of these, all whether or not driven by wind (including storm surge);
  2. Mudslide or mudflow;
  3. Water that backs up or overflows or is otherwise discharged from a sewer, drain, sump pump or related equipment;

Water under the ground surface pressing on, flowing, or seeping through:

  1. foundations, walls, floors or paved surfaces; basements, whether paved or not; or doors, windows or other openings; and
  2. Waterborne material carried or otherwise moved by any of the water referred to in paragraphs 1, 3 or 4, or material carried or otherwise moved by mudslide or mudflow.

Such policies can state that the exclusion applies regardless of whether any of the above in paragraphs 1 through 5 is caused by an act of nature or other event.

An example of a situation to which the exclusion may apply is when a dam, levee, seawall, or other boundary or containment system fails in whole or in part, for any reason, to contain the water.

Such policies may also state that if any of the above in paragraphs 1 through 5 results in fire, explosion or sprinkler leakage, the insurance company will pay for the loss or damage caused by that fire, explosion or sprinkler leakage (if the sprinkler leakage is a covered cause of loss).