When a small business is destroyed or damaged by fire or a severe tropical storm, the financial impact of damage to the property, equipment and inventory can undercut your profits and even threaten the viability of the business. Disruption of your business operations while repairs are conducted will typically be covered if you have business interruption coverage. However, unique issues arise when changes in building codes and ordinances increase the cost and delay associated with the repair or rebuilding of business structures.
There are a range of expenses that can be very costly and substantially increase the period of time that your business is not able to operate. New building codes might necessitate changes to meet revised flood standards and fire codes (e.g. sprinklers). This situation can be highly problematic for a commercial business that needs “code upgrades” following damage to business structure that result in the business being unable to function. The term “code upgrades” refers to ordinances and other laws that require structures that have incurred damage to comply with building codes existing at the time of damage and reconstruction.
The immediate concern for business owners following a fire or other peril will be coverage for the repairs and rebuilding. These issues are complicated by changes in building codes that mean restoring the business to its pre-loss condition might entail additional expenses. The fundamental issue associated with business interruption insurance is the “period of interruption,” which refers to the duration of time to return the commercial property to its condition prior to its loss.
Although the general rule is that lost income will only be reimbursed for repairs from the date of loss to the date the work is completed if the repairs are undertaken with due diligence. The question arises whether the period includes the additional time associated with work designed to ensure compliance with laws and ordinances. Many insurance policies contain exclusions or limitations for lost profits during the additional period of construction necessary to bring the property into compliance with building codes and other ordinances.
If you are purchasing a business policy, you will want to carefully read the policy to confirm that you have coverage for this additional period of lost profits. However, this provision generally is located in one of a couple different areas within the policy. The provision will usually be present in either the portion of the contract that defines the term “period of restoration” or the endorsement or provision that describes “law and ordinance coverage.”
Federal courts have reached conflicting opinions about whether lost profits are covered for the additional period to bring a property into compliance with local law when there is no specific language in the policy regarding this issue. If you have questions about your business insurance coverage or claim, you should speak to an experienced Florida insurance coverage attorney.
If you have questions about Miami-Dade commercial insurance claims, you are welcome to contact my law firm. As an experienced Miami insurance lawyer, I represent policyholders in claims disputes in Miami and throughout Florida. 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.