COVERAGE CORNER
COMMERCIAL PROPERTY, THE “BIG ONE,” AND DEBRIS REMOVAL By Kevin C. Amrhein, CIC When chatting with agents about commercial property insurance, I’m often surprised at (and jealous of) how many have never had an insured experience a claim of significant damage – aka the “big one.” Unfortunately, such significant losses – caused by miseries like fire, wind, sinkhole, or explosion – are horrifying and necessary reminders of the value of adequate insurance. My fear is that agents who have dodged the “big one” are poorly positioned to provide a proper property policy (alliteration is my jam). I’ll summarize my fear in a single word: debris.
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Debris – specifically, removing it from the premises after a loss – adds a cost factor that is less predictable/ quantifiable than the property values conjured up via the estimation software used to set policy limits. In some cases, the ISO Building And Personal Property Coverage Form (CP 00 10 10 12) offers respectable cover for such costs under Additional Coverage a. – Debris Removal. It’s a hefty load of policy language, so please consider the following explanation as an oversimplification: Provided all conditions are met (a few of which I’ll mention below), AUGUST 2020
the policy allocates up to 25% of the paid-loss-plus-the-deductible to cover the cost of debris removal. For example, if a fire causes $200k of damage and the policy applies a $10k deductible, the insurer will pay up to $50k to the contractor providing the debris removal service (25% of paid loss plus deductible). Further, if the $50k is not sufficient to cover the contractor’s bill for service, the policy offers up to an additional $25k to cover the cost of debris removal. In this example, the insured could receive up to $75k to cover the removal cost of debris caused by a $200k fire loss. Sufficient? Hopefully!
