5 Coverages You Need in Your Commercial Insurance Policy Before Hurricane Season

Each year property owners in Texas expect the winds from the Gulf of Mexico to blow in from June 1 through November 30, hurricane season. This summer we are expecting to have multiple hurricanes blowing through so it pays to be prepared.  At the hardware stores we can find a shortage of tarps, boards for  windows and  generators as folks prepare for the expected storm season.  

It’s important to protect your property, both inside and out. This post will focus on the 5 things to look for in your commercial property insurance policy before hurricane season. 

1. Wind Coverage 

 If your business is on the Texas coast or in Harris County on Galveston Bay, your commercial property insurance policy more than likely excludes coverage for hail and wind damage. The Texas Windstorm Insurance Association (TWIA) provides wind and hail coverage for coastal businesses. TWIA coverage can be purchased from local insurance agents. If your business is located in a flood zone, TWIA may not sell you wind coverage until you purchase flood insurance first. For TWIA coverage, check out: twia.org or call 800-788-8247. 

2. Inland Marine Coverage 

 Businesses use property that isn’t typically covered in the standard commercial property insurance policy.  To keep Business Use property covered, owners need inland marine coverage.  Inland marine coverage protects business property that is kept inside the business.   Here is a shortlist of inland marine coverages: 

•  Computers 

• Valuable Papers 

• Accounts receivable 

• Contractor Equipment 

• Property held for others 

• Property in transit 

• Fine art 

If you utilize any of the items listed in your business, call your agent and add the coverage.  You will be glad you did. 

 3. Crime Coverage 

 Crime is on the rise so make sure your business is protected.  We can’t avoid being hit by a crime wave, but we can definitely protect our businesses from criminals.  Burglar bars, security systems, alarms and guards may prevent crime, but when it happens, you need your policy to protect you from a significant loss. 

Here are a few crime coverages to consider: 

• Safe Burglary (cracked or stolen all together) 

• Money & Securities (securities that insure the money) 

• Cyber Crime  

• Forgery 

• Employee Theft 

• Document Alteration

  4. Flood Insurance 

 At the top of our list is wind and hail coverage.  Flood insurance may be applicable if your business is located in a flood zone.  Even when you are not in a flood zone, it’s a good idea to consider a flood policy.  Many Texas businesses were flooded during Hurricane Harvey and they weren’t in a flood zone.  Again, better safe than sorry. You have a couple of options for flood coverage.  You can shop around or get flood coverage from the National Flood Insurance Program. For flood insurance coverage offered by the federal government visit: FloodSmart.gov. 

 Please be mindful that there is a 30-day waiting period before your flood policy kicks in. Now is a good time to add it if you don’t have it already.    

5. Business Interruption 

 When disaster strikes, your business can suffer from a temporary shut down. When it’s hard to make payroll, employees can quit if the shut down lasts too long.  If you are a small business owner you need to maximize your business interruption coverage.  Business interruption coverage pays for the money your lose if your business cannot continue normal operations due to damage or closing down. After the global pandemic, insurance companies tightened the coverage on business interruption.  Make sure you read the fine print, a COVID like shut down, may be specifically excluded.   

In Texas, a statute may appear to read very specifically but courts can construe it very liberally. A liberal interpretation is the construction Judge Harmon of the Southern  District assigned to Section 542 of the Texas Insurance Code. The court provided a  certain degree of latitude when determining whether prompt means by a certain deadline or just a bit after the deadline has passed. 

In Mag-Dolphus, Inc. v. Ohio Casualty Insurance Company,1 the court held an insurer’s issuance of the first payment to the insured for hurricane damage satisfied the statutory provision requiring payment of claim within 60 days after the insurer received all reasonably requested and required documents, although insurer did not complete its payments to insured until 17 months after the hurricane. The Mag-Dolphus insureds asserted a claim for violation of the Texas Insurance Code’s prompt payment of claims requirements based on the carrier’s failure to promptly pay the claim, failure to acknowledge receipt of insureds’ claim, commence an investigation of the claim, request all necessary documents within fifteen business days, failure to notify insureds of carrier’s acceptance of the claim within fifteen business days after receiving all necessary documents, and failure to pay the claim within five business days after sending notice of acceptance. 

Ruling in favor of the carrier, the Southern District court explained the purpose of § 542  is to obtain prompt payment of claims pursuant to policies of insurance, and its provisions are to be liberally construed to promote this purpose.2 If an insurer delays  payment of a claim after receiving “all items, statements, and forms reasonably  requested and required” for more than sixty days, the insurer “shall pay damages and  other items as provided for in § 542.060.”3 In addition, an insurer must, within fifteen business days after receiving a claim, commence an investigation, request documentation that the insurer reasonably believes will be required from the claimant, and acknowledge receipt of the claim.4 If the insurer does not acknowledge receipt of the claim in writing, the insurer “shall make a record of the date, manner, and content of the  acknowledgment.”5 Further, the insurer must notify the claimant in writing of the acceptance or rejection of the claim within fifteen days after it receives the required documentation for proof of loss.6 Finally, the insurer must pay a claim within five business days after the insured gives the claimant notice that the claim, or part of the claim, will be paid.7

The Mag-Dolphus insureds alleged that the carrier violated the Texas Insurance Code when it made the appraisal award payment over seventeen months after Hurricane Ike,  well after the statute’s sixty-day limit.8 Under Texas law, however, “full and timely  payment of an appraisal award under the policy precludes an award of penalties under  the Insurance Code’s prompt payment provisions as a matter of law.”9 

In 2008, Hurricane Ike brought a rise in carriers defending actions for failing to promptly pay insureds’ claims as required by § 542. Since violating the statute can require the insurer to pay an 18% penalty, the insureds closely monitor the statutory deadlines. With the 2012 ruling in Mag-Dolphus, Texas courts may have put the breaks on the insured’s dash to the courthouse when the claim surrounds violation of the prompt payment statute. 

1 Mag-Dolphus, Inc. v. Ohio Casualty, Inc. Co., 906 F. Supp.2d 642 (S.D. Tex 2012). 2 Tex. Ins. Code Ann. § 542.054. 

3 Id. § 542.058. 

4 Tex. Ins. Code Ann. § 542.055(a). 

5 Id. § 542.055(c). 

6 Id. § 542.056(a). 

7 Id. § 542.057. 

8 Tex. Ins. Code Ann. § 542.058. 

9 In re Slavonic Mut. Fire Ins. Ass’n, 308 S.W.3d at 556, 563–64 (Tex.App.-Houston [14th Dist.] 2010).