Lesser Law Group

Frequent Bay Area flooding puts business owners in a bind

From San Rafael’s flash floods in late February to an “atmospheric river” flooding the North Bay, Northern California has seen our share of rough waters in the last few months. And according to the Insurance Institute for Business and Home Safety, more than a quarter of businesses that close because of a disaster like a flood never re-open.

As local business owners assess the recent damage, here are a few things to keep in mind:

Plans through the National Flood Insurance Program provide limited coverage

The NFIP generally offers business owners flood coverage of up to $500,000 for building damage, as well as up to $500,000 for personal property (also called “contents coverage”).

Building coverage includes damage to:

  • Plumbing and electrical systems
  • The building’s foundation
  • Furnaces, water heaters and central air conditioning
  • Permanently installed carpeting, paneling and cabinets
  • Walk-in freezers
  • Sprinkler systems

Contents coverage includes:

  • Furniture
  • Stock
  • Machinery and equipment
  • Certain vehicles

But, NFIP plans only pay for “direct physical damage.” This means flooding must directly cause the damage, rather than some other structural problem. NFIP coverage also leaves out the damage caused by mold and mildew and provides limited coverage for basements.

Plus, this kind of flood insurance calculates damages according to the Actual Cash Value at the time of the flood, not the replacement cost.

Insurance companies are in a strong bargaining position

As discussed previously on this blog, insurance companies have the advantage over policyholders. So, while it is important to work with your insurance company after a flood, don’t let them steamroll you. Private insurers that misrepresent policy terms or fail to act promptly in relation to a claim can be held legally accountable.

If your business sustained damage in recent floods, review your policy before making a claim to ensure you recover the compensation you deserve.

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