Almost all homeowners and businesses purchase insurance policies to provide financial protection from direct damage to businesses and residences resulting from an unanticipated peril. Because many policyholders focus on coverage for property damage, there is a tendency to pay less attention to the importance of the liability portion of a policy. Liability coverage under a homeowners’ policy or commercial general liability (CGL) policy yield protection from damages pursued in third party lawsuits. This blog post provides important information for policyholders about an insurance carrier’s duty to tender a defense and indemnify insured parties against such liability claims.
Does the Claim Fall under the Policy?
When analyzing whether a claim falls under the liability coverage of a policy, an insured’s inquiry should begin with whether a “suit” exists. This term refers to a proceeding in a civil lawsuit commenced by filing a summons and complaint. However, the language used to define “suit” is fairly broad under most policies, so the term generally encompasses alternate dispute resolution (ADR) proceedings like mediation or arbitration. Depending on the specific facts and circumstances, the term might even be broad enough to include certain types of proceedings brought by government agencies.
The next hurdle is to establish that the “suit” requesting damages was caused by an “occurrence,” which generally is defined as an “accident.” The term “accident typically” includes ongoing or repeated exposure to the same harm. Accidents in this context refer to unanticipated events, so intentional acts of the insured are expressly excluded. In other words, the claim generally will not be covered if the insured intentionally causes injury, or the harm suffered was the anticipated and natural result of the policyholder’s actions.
Another important issue is whether the “suit” seeks categories of damages covered under the policy. While liability coverage under CGLs and homeowners’ policies extend to personal injury and property damage, there are many nuances and exclusions that might apply, so careful review of the policy is important.
When a business suffers damage to its facility caused by a hurricane, fire, or other catastrophe, the first priority for most business owners is to take appropriate steps to mitigate ongoing damage, so the company can resume normal production. However, the process of resolving a commercial property damage claims dispute is a complex business transaction. This process should be approached with the same caution and diligence used in negotiating contracts with customers, vendors, and others. Business owners seeking to obtain the full value of their claim cannot rely on the insurance adjuster’s opinion regarding the nature and value of the loss. Business owners should be aware of the full range of types of commercial coverage for property loss which include:
- Property Damage: This type of coverage will provide funds to repair or replace structures, furnishings, machinery, inventory, and raw materials.
- Ordinary Payroll Coverage: This coverage enables business owners to avoid the loss of employees during repairs by providing funds to continue paying hourly wage employees for a designated period of time until business operations resume.
- Business Interruption: This form of compensation is intended to place the business in the financial position that it would have been in had a loss not occurred. Money is provided to sustain the company during the time that operations are suspended due to a covered peril. This form of coverage typically will extend to lost profits and operating expenses for a specified duration.
- Extended Period of Indemnity: This coverage provides for business interruption and extra expenses beyond the period of restoration.
- Extra Expense Coverage: This form of coverage applies to additional expenses incurred because of the inflated cost of operating the business in the wake of a loss. The cost incurred to mitigate damages also is included within this type of coverage. An example of this type of expense includes costs associated with temporary relocation until property damage can be repaired and operations resumed. The objective of this form of coverage is to cover the additional costs related to returning to ordinary operations.
- Utility Service Coverage: This coverage extends to extra expense and business income to insure against losses associated with an interruption of utility services resulting from a covered peril.
- Ingress or Egress: This coverage compensates for losses associated with the inability to enter or leave the property.
- Civil Authority: This coverage is most relevant to situations where public authorities impose mandatory evacuation. Income benefits are paid if a civil authority prohibits access to the property arising from damage to the premises or direct physical loss.
- Loss of Rents: Compensation is paid under this provision when damage caused by a covered peril makes rental premises uninhabitable, and the tenant has no legal obligation to pay the rent.
- Contingent Business Interruption: This coverage essentially amounts to an extension of business interruption coverage in most commercial property policies. It also provides benefits to cover extra expenses and lost profits arising from damage to a third party’s property in certain situations.
If your insurance carrier is refusing to comply with its contractual obligation, you are invited to contact our law firm to speak to an experienced Miami insurance claims attorney. My law firm specializes in representing policyholders in claims disputes in Miami and throughout Florida. Click here to read about some of our case results. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.