Navigating Commercial Property Damage Claims: A Guide for Business Owners

Navigating Commercial Property Damage Claims: A Guide for Business Owners

jeremiah grant
By - Jeremiah Grant
Last Updated - June 7th, 2023 10:27 PM
Jun 07

We all know that running an offline business is no cakewalk. You’ve put your blood, sweat, and tears into building your commercial property.

One of the biggest headaches while running an offline business can be unexpected property damage.

Whether it’s a fire, water leakage, vandalism, or natural disaster, commercial property damage can disrupt your operations, cost you a fortune, and put your hard-earned success at risk.

That’s why understanding the ins and outs of commercial property insurance claims is essential for protecting our businesses.

In this blog, we’ll delve into the nitty-gritty of commercial property damage claims, guiding you through the daunting insurance process, documenting the damage, and ensuring you receive fair compensation. Also, we’ll see how business valuation firms with add-on expertise in insurance claims can be of help.

But before we begin, let us first understand what is commercial property damage insurance.

What is Commercial Property Insurance?

Commercial property insurance is like a safety net for your business property. It’s designed to protect you from the financial fallout of unexpected property damage.

When you have commercial property insurance in place, it means that if disaster strikes, your insurance company will help cover the costs of repairing or replacing your damaged property.

So, whether it’s a burst pipe, a break-in, or a wild storm, commercial property insurance has got your back.

But it’s not just about bricks and mortar. Commercial property insurance can also provide coverage for business interruption losses.

So, if your business operations are temporarily halted due to the damage, you won’t have to stress about lost income because your insurance might kick in to cover that too.

Commercial property insurance is an absolute must-have because, let’s be real, accidents have a knack for sneaking up on us when we least expect them.

Important Note: Remember, each policy is different, so it’s essential to understand the coverage limits, deductibles, and exclusions specific to your plan.

Commercial property damaged


Types of Commercial Property Damages

Now, let’s talk about the types of damages you need to look out for. Here is a list of common hazards that can damage your commercial property:

Fire/Explosion Damage

Well, this is a no-brainer.

Fires can break out due to electrical malfunctions, cooking accidents, or even arson.

Accidents can quickly take over your property, causing serious damage to the structure, ruining equipment, and leaving behind a path of destruction.

Even the smoke caused by the fire can result in long-lasting adverse effects.

It was revealed in a survey that fire and explosions (excluding wildfires) stand out as the leading cause of corporate insurance losses, making up a significant 21% of the total value of all claims.

Over the past five years, fire and explosion incidents have caused insurance losses exceeding a whopping $19 billion.

What’s even more shocking is that those losses came from more than 12,000 claims. And the average claim from one of these incidents adds up to nearly $1.6 million.

These incidents have been the culprits behind 13 out of the 20 biggest non-natural catastrophe loss events on record.

These numbers show just how crucial it is for businesses like yours to prioritize fire safety, have proper preventive measures in place, and, most importantly, secure comprehensive insurance coverage.

Water Damage

Commercial property water damage can be a real headache.

Imagine walking into your office or store only to discover water dripping from the ceiling or a flooded floor.

Commercial property water damage can stem from various sources: burst pipes, leaks, roof damage, or even good old-fashioned Mother Nature’s downpour.

Even if it is a small leak, with enough time, it can prove to be disastrous for business.

No matter the cause, the effects can be disastrous. It can ruin your inventory, damage equipment, destroy documents, and wreak havoc on your beautiful workspace.

Not only does water cause immediate harm, but if not properly addressed, it can lead to long-term problems like mold growth and structural issues. Yikes! That’s why swift action is crucial.

As if the cost of repairs that comes with water damage isn’t bad enough, it also halts the operation of your business, which ultimately results in revenue loss.

You might also like to read: Unmasking Fraud: Protect Your Business With Expert Fraud Consulting

Equipment Malfunction

Equipment malfunctions on commercial property can really throw a wrench into your business operations.

Every place of business needs equipment to work efficiently, such as HVAC (Heating, Ventilation, and Air-Conditioning) (HVAC) systems.

But these types of equipment do break down sometimes, and it can cost you a fortune to repair or replace them.

Equipment malfunctions can happen for various reasons. It could be due to wear and tear, electrical issues, or mechanical failures.

Not only that, the consequences of equipment malfunctions can be costly too, as They can disrupt your business operation, directly resulting in revenue loss, not to mention the potential for safety hazards if things really go sideways.

theft in commercial property


Vandalism and Theft

Dealing with vandalism and theft damage on your commercial property can be infuriating and disheartening.

Vandalism can take many forms, from graffiti defacing your walls to deliberate property destruction.

Theft, on the other hand, involves the unauthorized acquisition of your valuable assets, whether it’s equipment, inventory, or anything else of value.

Both situations can cause significant financial losses and disrupt your operations.

Act of God/ Natural Disasters

Natural disasters rank as the second top cause of losses worldwide in terms of insurance claims.

With climate change and increasing economic activity in natural catastrophe zones, losses are on the rise. In fact, an analysis of over 20,000 claims worth around $14.6 billion revealed some interesting findings.

It turns out that hurricanes and tornadoes are the most expensive culprits when it comes to natural catastrophe losses, accounting for a whopping 29% of all claims’ value.

This is largely due to the record-breaking and costly Atlantic hurricane seasons of 2017 and 2021. Storms come in next, making up 19% of the value, followed by floods at 14%, frost/ice/snow at 9%, and earthquakes/tsunamis at 6%.

Together, these top five causes make up a staggering 77% of all natural catastrophe claims’ value.

To learn more about natural disasters and insurance in commercial real estate, you can also refer to this blog, “Natural Disasters And Insurance In Commercial Real Estate: What Owners Need To Know.”

Accidental Damage

Accidents can happen anywhere, even at your place of business.

One moment of carelessness or a stroke of unfortunate luck can result in accidental damage to your commercial property.

Accidental damage can come in many forms. Maybe a vehicle collided with your storefront, causing structural damage and shattering windows.

Perhaps a construction mishap caused a wall to crumble or equipment to topple over. Or it could be as simple as an employee’s slip-up that leads to property damage.

How Does Commercial Property Damage Claim Process Work?

Like any other process, there are some steps that you must take to get a satisfactory outcome for your commercial property damage claim. While it may differ depending on the case, here are the steps that are usually taken in the process:

Incident Reporting

The very first thing you need to do is to let your insurance provider know right away. It’s crucially important to report the incident as soon as possible.

Just give them a call and provide them with all the details you can about what went down, when it happened, and how bad things are. The more info you can provide, the better

Remember, being prompt with your reporting is key because delays can sometimes cause problems or even result in your claim getting rejected.


Once you’ve let your insurance company know about the incident, it’s time to gather evidence, otherwise known as documentation.

This means gathering up all the proof and evidence you can find about what happened and what got messed up as a result.

Take some photos or videos of the damage as visual proof always helps, keep the receipts for any stuff that got wrecked or stolen, and collect any other useful info you can get your hands on.

If there were people around who saw the whole thing go down, their stories could be really helpful too.

And don’t forget to keep copies of any emails or letters you exchange with your insurance company about the claim. It’s all about being organized and having the evidence to back up your case.

Assessment by the Insurance Company

Once you’ve reported the incident and gathered all the necessary documentation, it’s time for the insurance company to take a closer look.

They’ll send out someone called a claims adjuster, who’s basically a pro at investigating claims for the insurance company.

They might ask some questions, gather more info if needed, and really get a good understanding of what happened.

Once they have all the facts, the adjuster will decide if your claim is legit and how much money the insurance company should pay out.

In simple words, they’re there to assess everything and make sure everything adds up.

Settlement Negotiation

Once the insurance company has done its assessment, it’ll come back to you with a settlement offer. This offer is based on what the adjuster found and the terms of your insurance policy.

Now, pay attention because this is an important step.

If you think the offer is too low, you have the right to negotiate. You have every right to push back and try to get a better deal.

You might want to gather more evidence to show the actual value of the stuff that got damaged or even get someone independent to assess it.

It could be helpful to talk to a claim expert or an attorney at this point. They can make sure you’re treated fairly and get the settlement you deserve.

Don’t be afraid to stand up for what’s right!

Payment and Restoration

If you’re happy with the settlement offer and decide to accept it, the insurance company will send you the payment. You can then use that money to fix up or replace the damaged stuff.

But here’s the thing, if you and the insurance company can’t agree on a fair settlement, there are still options.

You can go for an appraisal, which means getting someone independent to assess things. You can bring in a public insurance adjuster or even an attorney to help you out.

It really depends on your situation and what your insurance policy says.

Just remember, there are different paths you can take if you’re not satisfied with the offer.

What Does The Payment Process Look Like?

When it comes to smaller losses or personal belongings covered by your insurance policy, the payment process is straightforward.

Typically, you will receive a check made out directly to you, the named insured(s) on the policy.

This allows you full control over the funds, giving you the flexibility to handle them as needed.

However, it’s important to note that if there are any lienholders identified on your policy, such as a mortgage company or other parties with a financial interest in your property, the payment process may differ slightly.

In such cases, the check will likely be made payable to both you and the lienholder. This ensures that all parties involved have a stake in the usage and allocation of the funds, promoting transparency and cooperation.

Tips for Handling Business Interruption and Insurance Claims

Here are a few tips for you that can help you in case your commercial property is damaged, halting your business.

Always Be Prepared

You know what they say, it’s always better to be prepared than caught off guard.

So, before anything bad happens to your property, it’s a good idea to take a look at your insurance coverage.

Give it a little review to see what’s actually covered if something goes wrong. Take some time to get to know your coverage inside and out.

Understand what types of damage are included, what events qualify for coverage, how much is covered, and what you’re responsible for. The more you know, the better prepared you’ll be.

Prepare An Action Plan

It’s always a smart move to have an action plan in place. You never know when you might need it.

This goes especially for business owners because you want to know exactly what to do if your property gets damaged.

First off, figure out who needs to be contacted right away when damage occurs. It could be your insurance company, emergency services, or anyone else who can help.

Next, think about how you’ll handle all the employees or any clients or customers who are on-site during the incident. Finally, you want to make sure they’re safe and informed.

Now that all that is taken care of, let’s talk about being ready for that insurance claim.

Take immediate action and document everything that happened. Jot down important details, take photos or videos if you can, and gather any evidence that could be useful later.

Trust us; you don’t want to rely on memory alone when it comes to these things.

Document Everything

As we have mentioned before, document everything. Now, let’s take a look at all the necessary things that you need to organize.

First off, snap some pictures and take videos of the damage to your commercial property. Visual evidence can really help your insurance claim.

Next, create a call log. Jot down the details of every conversation you have regarding your commercial insurance claim. Note who you spoke with, what you discussed, the date of the conversation, and any outcomes or important information that came up.

Don’t forget to keep all your receipts. If you have to make immediate repairs to prevent further damage (like tarping a roof or fixing a broken pipe), hold onto those receipts.

Make sure they have the company name, a description of the service, the date, the cost, and the name of the repair technician.

This might seem like a chore, but organizing all these things would make it much easier for you when it’s time to make your insurance claim.

Don’t Throw Away Damaged Material

Here’s a little tip: When the technicians finish repairing your property, they might want to throw away the damaged materials. But! Don’t let them do that just yet.

Why? Well, your insurance policy might actually require you to keep those damaged materials for inspection.

Even small things like widgets or plastic components could be valuable evidence during the insurance claim process.

So, if your roof gets damaged and there are broken tiles, don’t toss them away. Keep them instead.

Just find a safe spot on the side of your property and carefully pile up all those materials until your claim has been settled to your satisfaction.

It might seem like a small thing, but it could make a big difference in the claim process.

Anything You Say Can Be Used Against You

It’s important to remember that you have a responsibility to tell the truth about what happened.

However, you don’t have to make assumptions.

Insurance policies can be full of complex terms and provisions that can either grant or limit coverage.

So, when explaining the cause of the damage or describing something, it’s best to stick to the facts and avoid using vague or general expressions.

Using common phrases that have specific technical meanings might give the insurance company a reason to deny your claim.

If you’re unsure about any aspect of the claim or find the policy confusing, it could be really helpful to seek professional assistance.

Getting guidance from experts in the field can make a big difference and ensure that you navigate the claim process smoothly.

It’s all about being informed and making sure you’re on the right track.

Can You File Insurance Claims for Business Interruptions?

The simple answer is yes. But it depends on whether or not your insurance policy covers business interruption claims or not.

If it does, there are some more things you need to learn about before you file for one.

When it comes to business interruption claims, business owners like you need to know how a business interruption claim works and the extent to which it will respond to your loss.

In most cases, you’ll come across three common types of business interruption insurance:

Business Interruption

Business interruption insurance is designed to provide compensation for the income you lose during the period when your business is being restored or when repairs are being made to your damaged property.

In simple terms, if your business has to temporarily shut down due to physical damage to your property, this insurance kicks in to cover the income you would have earned during that time.

It helps bridge the gap until your business is up and running again.

Extended Business Interruption

Extended business interruption insurance provides additional protection for the income you lose after your property has been repaired but before your business returns to its pre-loss level of income.

Here’s how it works:

Once your property is fixed up, there might still be a period of time during which your business hasn’t fully recovered and is not generating the same level of income as before.

Extended business interruption coverage kicks in during this transitional phase, offering financial support to bridge the gap.

Of course, there’s usually a specific time limit to this coverage, but it can be really helpful in providing financial support as your business gradually bounces back.

Contingent Business Interruption

Contingent business interruption coverage is all about protecting your business’s income when there’s physical damage to the property of your providers, suppliers, or even your customers.

Here’s how it works:

If, let’s say, a fire or some other covered event damages the property of your suppliers or customers, and as a result, your business suffers a loss of income, contingent business interruption coverage steps in to help you out.

It’s like having a safety net for those situations where you rely on other businesses to keep your operations running smoothly.

The previous coverages we discussed, extended business interruption and contingent business interruption, are often offered as extensions of the basic business interruption coverage.

It’s important to note that these additional coverages usually come with an additional premium cost for each.

Consequences Of A Fraudulent Commercial Property Damage Claim

As stated by the North Carolina Department of Insurance, insurance fraud is a felony.

Committing insurance fraud, including filing a fraudulent commercial property damage claim, can have serious legal consequences.

Intentionally providing false information or misrepresenting material facts to obtain or deny insurance benefits is considered a felony offense.

Insurance fraud not only affects the individuals involved but also has broader implications. Honest insurance customers end up paying the price through increased premiums.

It is worth noting that while some individuals may knowingly engage in fraud, others may unintentionally commit fraud without realizing the severity of their actions.

For instance, they might perceive exaggerating a genuine claim as part of the negotiation or consider deceiving the insurance company as a fair game, but in reality, that is considered insurance fraud.

Just so you can get a scope of consequences, here’s a breakdown of what could happen in such cases:

Criminal Charges

Filing a fraudulent claim is considered a crime. Depending on the jurisdiction and the nature of the fraud, the individual may face felony charges.

This can lead to legal proceedings, and if found guilty, they may be subject to fines, restitution, and even imprisonment.

Restitution and Fines

If the fraudulent claim results in the person obtaining insurance payments or benefits based on false information, they can be charged with obtaining property by false pretenses.

This is another potential felony charge. If convicted, they may be required to pay back the money obtained fraudulently, along with additional fines.

Legal Consequences

Insurance companies have dedicated investigative units that look into suspicious claims. If they suspect fraud, they will likely conduct a thorough investigation.

If evidence of fraud is found, the insurance company can take legal action against the individual, seeking restitution for the damages caused by the fraudulent claim. This can result in significant financial and legal consequences.

For instance, in Utah, claims exceeding $5,000 can lead to second-degree felony charges, carrying a maximum penalty of 15 years imprisonment and up to $10,000 in fines.

Claims valued between $1,500 and $5,000 can result in third-degree felony charges, a felony punishable by up to 5 years in prison and up to $5,000 in fines.

Claims valued below $1,500 can lead to class A misdemeanor charges, punishable by up to 1 year in prison and up to $2,500 in fines. On the other hand, claims valued below $500 can lead to class B misdemeanor charges.

Denial of Claim

Once the insurance company determines that a claim is fraudulent, they will deny it. This means the individual will not receive any compensation for the alleged commercial property damage.

Additionally, the insurance policy may be canceled, making it challenging, if not impossible, for them to obtain coverage in the future.

Reputation Damage

Engaging in fraudulent activities can have long-lasting effects on a person’s reputation. If news of the fraudulent claim becomes public, it can negatively impact their personal and professional relationships.

It may also harm their credibility and make it difficult to secure future employment or conduct business.

Increased Premiums

As mentioned earlier, insurance fraud affects the overall cost of insurance for everyone. Insurance companies may increase premiums to compensate for losses caused by fraudulent claims.

As a result, honest policyholders may end up paying higher premiums due to the actions of fraudulent individuals.

To learn more about insurance fraud, you can also refer to Utah Insurance Department Fraud Division’s FY2022 Annual Report.

Final Thoughts

Commercial Property Damage Claims can be quite the challenge, but with the right tools and mindset, you can handle them with ease. In most cases, it is the best choice that you hire an expert to handle your insurance claim. With companies like Arrowfish, the process becomes a breeze, allowing you to focus on running your business.

At Arrowfish, we take immense pride in the unwavering trust and respect we’ve earned from our clients throughout the years. What sets us apart is our exceptional team of dedicated experts who specialize in handling commercial property damage claims.

With over 200+ years of combined experience across a diverse range of industries, we are well-equipped to handle the most complex cases, which is demonstrated by our work on each of our cases. With us by your side, you can rest assured knowing that your claim is in the hands of professionals you can wholeheartedly trust. Contact us and get your free expert consultation today.

jeremiah grant

Jeremiah Grant

Jeremiah Grant is the Managing Partner of Arrowfish Consulting. In addition to acting as a primary liaison for many of the firm’s engagements, He primarily focuses on business valuation and economic damages expert witness assignments, in addition to forensic accounting and insurance claims analysis.