Coverage Questions - What Should You Do When You Have An Insured Casualty Loss?
By Scott I. Zucker, Esq.
(originally published by Mini-Storage Messenger, August 2022)
Scott Zucker, Partner, Weissmann Zucker Euster Morochnik, P.C.
Whether it be by fire, flood, or storm, there is a recognizable risk to all real estate that it could be affected by acts of God that could damage the improvements on the land and, in the case of self-storage, damage the stored contents held within the rentable spaces. The only appropriate way to protect yourself from the cost impacts from such a risk is insurance.
So, before anything happens, it is very important that you sit down with your insurance agent and discuss what you believe your coverage is in the case of a casualty incident. Do you have the appropriate endorsements to cover the cost to replace your buildings (plus code updates if applicable)? Do you have coverage for debris removal? Do you have coverage for the loss of rent that will occur between the period of damage and the time when you can re-rent the new spaces? Do you have coverage for the potential likelihood of tenant damage claims (even though you are a non-bailment landlord)? It is too late to ask these questions after an event occurs. All property owners should be comfortable talking to their insurance agent about their different coverages and what claims will be paid and not paid if an event occurs.
If a casualty event occurs, it is imperative that you contact your insurance company immediately. Your insurance agreement will require that your insurance company be given clear notice of the occurrence so it can send its adjusters to the site for coverage evaluation.
And you don’t have to go through this alone. Any casualty event will be an emotional experience that could affect the property owner personally as well (if they live nearby and are also impacted by the event). Certain insured events should involve the cooperative support of your accountant, your lawyer, and your insurance agent. Further, there are independent services that also can be retained to assist you in coordinating with the insurance company’s adjusters and contractors and help advocate on the insured’s behalf for the best return under the available insurance coverage.
One of the most stressful elements of an insured claim process is dealing with the tender and receipt of partial payments and the ever-evolving calculation of ongoing expenses and damages. This is another area where others (like your accountant and independent adjusting service) can help the insured maintain the flow of needed payments and ensure that the rights of the insured under its policy are protected. These financial differences can be seen sometimes when analyzing the differences between replacement cost value (RCV) and actual cost value (ACV) and the resolution of these valuations can be significantly important to the damaged insured who has suffered the loss.
Managing through a casualty event is bad enough, but it is important to recognize that the return to normalcy can be a long and arduous process as well. Sharing that burden with others, to independently quantify the costs and damages of the loss, can be helpful and, inevitably, can be financially significant for the insured as well.
At the end of the day, being prepared with the right policy and the right coverages is key, and the self- storage industry is lucky to have some of the best insurance companies in the country working with operators to create protections in the event of such catastrophic events. But if a claim occurs, remember that you also need a framework to sometimes help you through the process so that you can return to where you started before anything happened.
Many thanks to Scott Greenwald from Goodman-Gable-Gould for contributing to this article.