Let the insurance buyer beware

Author: Michele Lawson

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Joe Mattenley

Though premiums are rising, it’s risky to skimp on commercial coverage, says 32-year industry veteran Jeff Mitchell (pictured here), standing with two of his business clients Peggy Raymer (middle), owner of Madre Bello; and Kelly Doran, who owns Encore TeleSolutions.

“Let the buyer beware” when it comes to commercial property insurance, says Jeff Mitchell, president of the brokerage firm JC Mitchell Insurance. “Unlike your standard automobile policy, which is strictly regulated to provide standardized wordings and terms of conditions, commercial insurance has no standard policy.” Although there are pre-packaged products on the market that do fit a specific niche, he warns industrial, commercial and investment (ICI) property owners to ensure the coverage included meets the individual needs of the situation. “Having the right coverages in place is paramount,” says Mitchell. “An accounting associate of mine always reminds me that ‘everything is deductible, until you have an audit,’ to which I reply from an insurance perspective that everything is covered until you have a claim. “The list is extensive of where the ill-informed consumer can run amuck.” Are all risks covered or only named perils, he asks. What about co-insurance, warranties, business-interruption coverage, directors and officers liability, and errors and omissions liability? Bylaw coverage, for example, kicks in when municipal laws require a property owner to make repairs or undergo construction that goes above and beyond the problem spot. “Insurance companies are only obliged to pay for what was damaged,” he explains, “unless you have bylaw coverage.” The list to consider is long. “That’s why it’s important to talk to someone who specializes in commercial insurance,” he states. The time to find out about gaps in coverage is not when something happens and the insurance protection is required. “That could be a very expensive time to find out,” he says. The first step when determining adequate coverage, is collecting the data about the building, equipment and contents requiring insurance. Included in this is the value of the property, which can be complicated. Mitchell explains a client might have the assessment value, mortgage value, taxation or real estate value or an amount determined by a previous owner. “You can’t just pull a number out of your hat,” he adds. “We need the replacement value – the cost to rebuild and replace what was damaged, and that can vary greatly from the others. “It’s very important to review and update your numbers,” Mitchell says. “In a partial claim, it could impact negatively on a proportional basis.” As Mitchell approaches his 32nd anniversary in the industry, he is recognizing the beginning of cyclical change on the horizon. As claims expenses increase and investment revenue decrease, insurance costs are on their way up. “There has to be a way to balance that,” says Mitchell. The industry regulations demand a certain amount of reserves in place. For about the past six years, rates have been falling, he recalls, but we’re entering into “what’s called a hard market.” He’s already starting to see premium prices go up. The fluctuation will likely take the prices into ranges we’ve seen before, but the sudden jump will likely be somewhat shocking for everyone. Regardless, he says, it will be more expensive not to have insurance when it’s needed. For more information, visit www.jcmitchell.com