Rules
Part of How commercial property coverage works
Commercial property checklist: records and steps for a claim
Commercial property checklist for the record you build before a loss, the proof a business income claim needs, and the first hours and weeks after one.
A property claim is settled from records. Whatever the cause of loss, the size of the payment comes down to what you can show about what you owned, what it was worth, what it earned, and what you did after the damage.
Almost all of that has to be built while nothing is wrong. What follows is a commercial property checklist in two halves: the record you keep in calm conditions and the actions you take when the calm ends.
What to take away
- Store the evidence somewhere the fire cannot reach. A perfect inventory on a server in the damaged building is not evidence.
- Most policies place a duty on you to protect the property from further damage after a loss. Doing nothing is not neutral.
- Do not dispose of damaged property, or complete permanent repairs, before it has been seen.
- The business income part of a claim is proved from your accounts, so the bookkeeping is part of the insurance.
The record you build in advance
- An inventory of what you own, by location, with model and serial numbers for anything significant, plus purchase dates and invoices.
- Photographs and video of every space, refreshed when things change. Walk the building with a camera once a year.
- A current statement of values, matching what is on the schedule. If the two have drifted apart, the schedule wins at claim time.
- The policy itself and the schedule of forms, in a form you can read from somewhere else.
- The lease and the loan documents, since both impose obligations that surface immediately after a loss. Which obligations, and how to reconcile them, is set out in the property requirements guide.
- Plans, permits, and any records of improvementsyou have made, particularly to a leased space.
- Maintenance and service recordsfor the roof, the systems, and any protective equipment.
- A contact list.broker, insurer's claims line, landlord, lender, key suppliers, restoration and security contractors, and your staff.
- A copy of all of it off-site, in the cloud and somewhere physical. Test that you can actually open it from a phone.
The wider version of this exercise is business continuity rather than insurance, and the two support each other. The Ready.gov guide to a business continuity plan is a workable structure, and the SBA material on preparing for emergencies covers the operational side.
The proof a business income claim needs
This is where underinsured businesses discover a second problem. Interruption is often the larger loss, and it is proved from documents rather than from your account of what you would have earned. The paperwork that carries the weight is your profit and loss statements, monthly sales and payroll records, tax returns, and the records of continuing expenses — rent, debt service, key salaries — that keep running while the doors are closed. Order books and customer records matter too, because they show what the business would have done.
Business income is measured over the period of restoration, the window the policy defines: from the date of the loss until the property could reasonably have been repaired, rebuilt or replaced, or until the business resumes at a new permanent location. The forms doing the work are usually the ISO building and personal property form, CP 00 10; the business income form, CP 00 30; and the causes of loss form, CP 10 30, which decides which perils are covered at all. Whether the payout is figured on a replacement cost or an actual cash value basis, and whether a coinsurance clause is applied to the values you reported, is settled by those same forms and the declarations page.
Documents a business income claim needs
- Profit and loss statements, several years
- Monthly figures to show seasonality
- Payroll records and continuing costs
- Order books, contracts, forward bookings
- Tax filings corroborating the accounts
- Temporary operating location and its cost
If your bookkeeping could not answer those today, that is the most valuable thing on this page.
The first hours after a loss
- People first.Safety, medical care, and evacuation before anything else. Anyone injured who works for you is dealt with through a separate system entirely, covered in the workers compensation guide.
- Make the site safe and secure.Prevent access, and arrange guarding if the building cannot be closed up.
- Prevent further damage.Board up, tarp over, extract water, move undamaged stock. Most policies require reasonable steps and many contribute to the cost, so keep every receipt and photograph what you did.
- Photograph before you touch anything you do not have to touch.Wide shots and close shots, with the date.
- Notify the insurer or broker promptly,in the manner the policy's notice condition requires.
- Notify the landlord and the lenderif the lease or the loan requires it, which they often do.
- Start a log.Date, time, who you spoke to, what was said, what was agreed. Keep it for the whole claim.
The weeks that follow
- Keep damaged property until it has been inspected.Disposing of it early removes the evidence of both what it was and how bad the damage was.
- Separate emergency mitigation from permanent repair.They are treated differently, and mixing the invoices makes both harder to settle.
- Get your own estimatesas well as reading the insurer's. You are allowed to.
- Track every cost caused by the event,including the ones that feel like ordinary business: temporary premises, extra freight, overtime, equipment hire.
- Keep trading if you safely can,and record what it costs to do so.
- Read anything you are asked to sign,particularly documents from restoration contractors that assign your claim proceeds.
- Ask which provisions are being appliedto any part of the claim you disagree with, and get the answer in writing.
- Watch the deadlines in your own policyfor submitting proof of loss and for bringing any action. They are conditions, not suggestions.
The proof of loss is usually a sworn statement in proof of loss, a form the insurer supplies and you sign under oath. The policy also carries a suit-limitation clause, the contractual deadline for bringing an action, so read that clause rather than assuming a general limitation period applies. What an insurer must do, and how quickly, is set by your state's insurance code and enforced by the state department of insurance; the standard for handling claims often carries the name Unfair Claims Settlement Practices Act.
After it is over
Reopen the file while it is fresh. What was not on the schedule? What was valued on a basis you did not expect? What records did you wish you had? Feed the answers into the schedule and the renewal conversation rather than filing them.
The valuation rules that decided the number are explained in the property overview, the way to read what you were sold is in the renewal reading guide, and what varies by sector is in the industry guide.
Common questions
Can I start cleaning up straight away?
You can and should make the site safe and prevent further damage. What to avoid is discarding damaged property or completing permanent repairs before the insurer has had a chance to see them. Photograph everything as you go.
Do I have to use the insurer's contractor?
That depends on the policy and on your state's rules, and it is a fair question to ask directly. Most commercial property policies let you choose who does the work while the insurer keeps control over the amount it pays, but that split lives in the valuation clause and the duties-after-loss conditions, so read them. Getting an independent estimate is sensible either way.
Who pays for the emergency board-up?
Many policies contribute to reasonable steps taken to protect property after a loss, subject to the wording. Keep the receipts and the photographs either way, and ask before authorizing anything large.
A restoration company wants me to sign before starting. Is that normal?
Some agreements assign your right to claim proceeds to the contractor, a device called an assignment of benefits. Read anything like that carefully, and take advice before signing at a moment when you are under pressure. If the paperwork also authorizes the work before the insurer has seen the damage, that is a second reason to pause.
