Kim Nevinger, CIC's Blogs

In the tough economy more and more commercial buildings are sitting vacant more than 30 consecutive days. Your current insurance policy does have coverage limitations and exclusions you need to be concerned with.

Policy Vacancy Definition
• Tenant – unit or suites does not contain enough business personal property to conduct customary operations.
• Building Owner or General Lessee – building is vacant unless at least 31% of the entire building’s total square footage is rented and/or used to conduct customary operations.
• Buildings under renovation are not considered vacant

No Coverage for six Causes of Loss
• Vandalism
• Sprinkler leakage
• Building glass breakage
• Water damage
• Theft
• Attempted theft

Loss Payment reduced by 15% for all other covered causes of loss

Please call us to discuss your Commercial Building. We can help you properly insure your exposure.

Commercial General Liability (CGL) Policy Exclusion (l) Damage To Your Work

Liability coverage is not a replacement for a warranty or a guaranty of the performance to be given to an insured’s client. It does not replace faulty work or products, but it does cover the Bodily Injury and Property Damage caused by the faulty work or products. The exclusion of faulty work often referred to as “your work”.

The Commercial General Liability Coverage Form CG 00 01 excludes coverage for property damage to the insured’s completed work.

Exclusion (l) Damage To Your Work states:

“Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard”.

This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.

Claim Scenario:

A contractor remodeled an upstairs bathroom for one of his clients. After the bathroom was complete and while the homeowner was away from the home, the connection to the bathtub came apart and flooded the house. Damage to the interior of the homes floors, baseboards, walls, contents, etc.

The claimant contacts the contractor, who calls, his insurance broker. An Adjuster is assigned, goes out and determines that there was a lot of water damage. It appears the contractors connection failed at the pipe, despite using the proper fittings, the connection just failed and came apart.

The claim is covered in full for the damages to the floors, baseboard, walls, contents, etc. as a result of the water damage. The contractor will not recover the pipe fitting or the labor.

Note~ Work is completed when:
• Contract work is complete
• Work at the site is completed
• Work has been put to intended use

You have personal liability coverage through your homeowners and auto insurance policies. Why would you need a personal umbrella policy as well? One word: lawsuit.

Accidents can be costly. A minor fender-bender in which no one is injured will in all likelihood be covered by your auto policy. But what if you are at fault for an accident that leaves another person seriously injured? What if your child’s friend falls off a swing in your yard, is seriously injured, and her parents sue you for damages? How would you protect your assets?

If you are sued, you could be forced to pay a legal judgment from your current assets and future earnings. These judgments can far exceed the coverage limits of your existing automobile and homeowners policies, leaving you financially devastated.

Extend Your Personal Coverage With an Umbrella Policy
A personal umbrella policy is coverage that protects your existing and future personal assets from devastating losses if you are sued. These policies are an extension of the coverage you already have through your auto and homeowners policies. The umbrella policy kicks in where the other policies leave off (e.g., after your auto policy’s $300,000 liability limit) and pays for damages up to its limit (typically $1,000,000 or more, depending on your assets).

What is Covered Under an Umbrella
A personal umbrella policy will provide coverage above and beyond that in your other insurance policies. For example, if you are sued for $900,000 and your auto policy provides $300,000 in coverage and you have a $1,000,000 umbrella policy, the auto policy would pay $300,000 of the damages and the umbrella would pay the remaining $600,000.

In addition to providing coverage for automobile accidents caused by you or accidents that take place on your property, an umbrella policy can protect against car accidents caused by your dependent children, accidents caused by you or your dependent children while operating a watercraft, accidents that occur on a rental property you own, and personal injury lawsuits arising from slander, libel, defamation of character, false arrest, detention or imprisonment, abuse of process, malicious prosecution, shock/mental anguish and more. Policy specifics will vary by state and insurer, so be sure to read and become familiar with precisely what your policy covers.

When Your Umbrella Can’t Cover You
Because it is a form of personal insurance, an umbrella policy will not provide coverage for judgments made against you related to any business that you own. It will not provide coverage for injuries or damages caused while you are performing any high-risk activities with your vehicle (e.g., drag racing), and it may exclude certain types of vehicles, such as recreational vehicles, farm tractors, or other types of heavy vehicles or equipment. It also will not cover the cost of damages to your own car or property (this would be covered by your auto or homeowner’s policy).

In addition, a personal umbrella policy will not cover you for damages or injuries caused while you are committing a crime (e.g., driving under the influence) or if the damage or injury has been caused by willful or malicious acts. It will also not provide excess health insurance coverage for you or your family.

Underlying Insurance Requirements
A personal umbrella policy is a form of secondary insurance. Remember, it kicks in after your auto and homeowner’s policies have paid to their limits. Requirements for umbrella coverage vary by insurer, but typically you will be required to carry the following coverage in order to purchase an umbrella:

• Auto insurance bodily injury coverage of $250,000 per person/$500,000 per accident


• Auto insurance property damage coverage of $100,000 per accident


• Homeowners insurance personal liability coverage of $500,000

How Much do Umbrella Policies Cost?
Considering the level of coverage, umbrella policies are quite affordable. The cost depends on how much coverage you need, the number of properties you own and the number of vehicles or watercraft you own (your level of risk). A person with one house and two cars would generally pay around $200 per year for the first $1 million in umbrella coverage and another $100 per year for the next $1 million in coverage. This is a relatively inexpensive way to protect your finances from devastating lawsuits.