Specialty Property Insurance

Specialty commercial property insurance is a type of insurance coverage that is designed to provide protection for specific types of commercial properties and the businesses that operate within them. This type of insurance is typically tailored to meet the unique needs of certain industries and businesses, such as retail stores, office buildings, warehouses, and more.

One of the key benefits of specialty commercial property insurance is that it allows businesses to customize their coverage based on their specific risks and exposures. For example, a retail store may need coverage for their inventory and equipment, while a warehouse may need coverage for their equipment and building structures. By focusing on the specific needs of a business, specialty commercial property insurance can provide a more comprehensive level of protection.

Another benefit of specialty commercial property insurance is that it can help businesses mitigate the financial impact of a loss or damage. For example, if a retail store suffers a loss due to a natural disaster, specialty commercial property insurance can help cover the costs of repairs and replacements, as well as lost income due to business interruption. This can help businesses get back on their feet more quickly and minimize the long-term financial impact of a loss.

In addition to providing coverage for specific types of commercial properties and businesses, specialty commercial property insurance can also include additional features such as liability coverage, as well as protection against cyber threats and data breaches. This can help businesses protect themselves from a wider range of risks and exposures, and ensure that they are fully protected in the event of a loss.

Overall, specialty commercial property insurance is an essential tool for businesses of all sizes and industries. It provides a level of protection that is tailored to the unique needs of a business, and can help mitigate the financial impact of a loss or damage. Whether you are a retail store, office building, warehouse, or any other type of business, specialty commercial property insurance can help protect your assets and keep your business running smoothly.

Apartment complexes provide housing to individuals who pay rent to the building owners. Amenities vary and can include community centers, golf courses, exercise facilities, and other activities. The types of structures vary, ranging from multi-unit single story frame dwellings to high-rise, sprinklered, fire resistive buildings.

New developments in technology have created loss exposures to businesses not addressed by the original boiler and machinery policy The breakdown of a wide range of equipment such as computers, machinery using computer technology, and other equipment such as ovens, stoves, furnaces, elevators, hoists and cranes can be covered. Medical diagnostic equipment such as MRIs, advanced heart monitors and other scientific equipment in hospitals, medical laboratories, and universities also need breakdown coverage. The equipment breakdown coverage forms continue to provide coverage to boilers, air conditioning systems, and machinery. Direct damage, extra expense and loss of income resulting from breakdown, burst pipes, electrical arcing, and exploding of boilers is covered. High limits can be arranged for large risks.

Bowling is a major recreational activity enjoyed by individuals, families, and groups. Bowling centers can be difficult property exposures to place because standard physical characteristics allow fires to start quickly and spread rapidly. Large, open, undivided areas, unprotected roof supports, large concealed spaces above ceilings and below the alleys, inadequate water supplies, and poor public fire protection in outlying suburbs or remote areas are the primary underwriting concerns. Lacquer, wax, and storage of other solvents add significantly to the fire load. Restaurant and/or bar exposures can provide the spark that triggers a major loss.

Brownfields are abandoned, idle, or underutilized industrial and commercial properties whose expansion or redevelopment is complicated by contamination (real or perceived). Some of these sites were contaminated when the materials discharged into the ground deemed safe and legal at the time are now considered pollutants. As more substances are determined to be harmful (such as leaded gasoline and radon), many older sites are officially designated as contaminated. Lenders and industrial corporate owners frequently allow brownfields' taxes to become delinquent and let the city take over. Some states have enacted laws that allow a certain amount of contamination to remain after a site has been cleaned up. These laws address the need for the involved parties to restore the property to active use, while still protecting the owner's, operators, and seller's liability. Brownfields package policies cover remediation stop loss, residual contamination cleanup, third-party liability, and environmental impairment liability for cleanup operations and continued operations as an ongoing business. Various limits are available.

Builders risk coverage forms insure buildings and other structures that are under construction. They are available for a single structure or multiple structures. Premiums can be paid at inception or be based on a deposit premium and periodic reports of value accompanied by premium payments. Coverage is usually for "all risk" perils or causes of loss and may include earthquake, flood, and collapse. Endorsements are used to broaden, limit, or customize coverage as needed. Deductibles are required.

There are excess and surplus lines facilities in both the United States and Europe that cover property exposures in the Caribbean. All classes of business are eligible but condominiums, hotels and casinos, nightclubs, manufacturing facilities, and governmental entities are preferred. Wind deductibles are usually based on a percentage of insured values. The windstorm and earthquake exposures present difficult underwriting issues and these causes of loss may be excluded on some coverage forms.

Casinos and gaming risks specialize in offering gambling for adults. They include full-facility hotel/casinos and riverboats but also include pull-tabs and video poker in bars, sports books, bingo halls, and slot machine parlors. Originally limited to the state of Nevada, casinos and gaming risks are now fixtures in many states. High limits crime coverage is often a particular concern because of the amount of cash kept on the premises.

Short-term general liability coverage is often needed on Christmas tree sales lots. The primary underwriting concern is slips and falls. Some forms also cover theft or property damage to inventory. This insurance is usually available to both pre-cut tree lots and cut-your-own-tree operations and is written for a short term that matches the season.

This class of business is usually not difficult to place and is underwritten by many standard insurers. However, certain markets specialize in providing coverage for churches. Values subject to a total loss may be high. Optional coverages available include crime, theft, directors and officers liability, and clergy professional liability. Sexual misconduct coverage for the organization because of alleged actions of clergy and certain other staff positions is often available but is subject to sub-limits.

Property insurance coverage for residential and commercial properties in coastal areas often does not cover windstorms. Varieties of cooperative programs are available through state wind plans but some private carriers are available to provide this needed coverage. All coastal windstorm policies are subject to large deductibles, either as a flat amount or as a percentage of the limit of insurance. Flood coverage is also needed and available through the National Flood Insurance Plan (NFIP). Because the NFIP limits are often inadequate, excess coverage above those limits is available.

This coverage indemnifies the insured that sustains a coinsurance penalty on a first-party loss because the limit of insurance did not accurately reflect the values at risk on the date of loss. Large industrial risks, banks, and other financial institutions are prospects for this coverage written on a very limited basis by:

A condominium association is a legal entity made up of individual unit-owners who own their individual living spaces but who jointly share ownership and responsibility for maintenance and upkeep of common areas. Condominiums can present unusual and sometimes complex insurance problems with respect to property, liability, crime, and workers compensation coverages for the condominium buildings and operations.

Convenience stores are usually a combination of a grocery store, variety store, and gas station. Many standard markets provide property and general liability coverages. Liquor liability, underground storage tank (UST) liability, crime, and workers compensation coverages may only be available in a specialty market.

Difference in Conditions (DIC) insurance covers the difference in perils or causes of loss between the DIC coverage form and that provided in the underlying first-party commercial property coverage form. It can cover both property damage and loss of business income. DICs are written to cover all direct physical loss or damage subject to exclusions and limitations. The coverage provided can best be ascertained by comparing the exclusions in DIC versus the ones in the primary underlying coverage form. These policies typically provide coverage for earthquake, flood and landslide but other more unusual and unforeseen occurrences are often picked up. While traditionally used with large industrial and commercial properties, they can also be used with smaller properties.

The market for earthquake and earth movement coverage is active. Availability, pricing, and deductible requirements vary by region. Determining the insured property's susceptibility to earthquake damage and earthquake preparedness are important parts of the underwriting process. Coverage is available under specific earthquake or earth movement policies or Difference in Conditions coverage forms.

E-cigarette stores and vape shops sell battery-operated devices called electronic cigarettes or vaporizer cigarettes, which are used to simulate the experience of smoking. The vaporized emissions are believed to have fewer toxic components than the smoke generated by traditional cigarettes. While they are are generally unregulated at this time, the FDA has proposed that its authority be extended to cover them due to the use of nicotine. The exposure is similar to cigar and other smoking-related retail operations except for the uncertainty regarding the long-term effects of the product.

Breakdown of a wide range of energy-related equipment, such as computers, machinery that uses computer technology, and other equipment are covered, in addition to the traditional boiler and machinery objects such as boilers, air conditioning systems, ovens, stoves, furnaces, elevators, hoists, and cranes. Medical diagnostic equipment, such as MRIs, advanced heart monitors, and other scientific equipment in hospitals, medical laboratories, and universities can also be covered. Breakdown is the only peril or cause of loss covered. Coverage can be direct or indirect such as loss of income or extra expense.

Excess or layered property insurance may be written on any large commercial property account. This layering approach works well when the same entity owns multiple locations. Layering often starts with a primary coverage equal to the probable maximum loss (PML) followed by additional layers at a fraction of the primary layer's cost. The farther away the layer is from the working layer, the lower the rate. Limits and coverage availability can vary significantly based on geographic location.

Traditional flood insurance is obtained via the National Flood Insurance Program made available by the Federal Government. While this option can satisfy needs for basic flood insurance it may not satisfy the needs of all buyers. The private flood marketplace provides alternatives to traditional flood insurance sometimes with greater coverage limits for the same or less cost.

Nonprofit fraternal organizations and civic clubs may be insured for their property, liability, and D&O exposures. Examples are the American Legion, Veterans of Foreign Wars, Knights of Columbus, Elks, Moose, and Kiwanis. Employment-related practices liability and liquor liability are optional coverages that also are available.

The first celebration of earth day was held in 1970. Since then the public has become increasingly concerned about the environment. Government subsidies and the need to reduce operating costs have encouraged many businesses to follow their environmental consciences as a way to both reduce their operational costs and provide healthier workplaces. Green architects design buildings that use geothermal energy and other alternatives, along with garden roofs, treated glass, and other energy and water saving devices. Standard property policies may not cover these improvements.

Companies interested in writing high-valued commercial property risks usually establish minimum property values they will consider. The coverage tends to be more generous with a number of additional coverages and coverage extensions. These accounts are subject to significant deductibles and are often written with multiple layers. Unique loss prevention services are often available. Geographic, weather and climatic factors affect the coverages available and premiums charged.

Insurance coverage on historic homes is a specialty coverage that few insurers offer. It covers the insurance needs of homeowners who occupy homes of significant architectural and historical value to the area where they are located. In order to qualify for coverage, the home must be nominated for or be listed in a register of historic places or be in a federal, state, or local government designated historical district. In many cases, a home's replacement cost far exceeds its true market value because of the requirement to rebuild in such a way to preserve its historical designation. Available insurance options range from 40% to 100% of replacement cost value. Other important coverage features include valued coverage for elaborate and ornate woodwork and open house liability coverage for historic home tours.

Insurance for public libraries may be written on a stand-alone basis or as part of a municipal package that covers city and county libraries. The stand-alone package is a combination of property, commercial general liability, business auto, and other specialized insurance coverages. Inland marine coverages insure fine arts, valuable papers, books, visual aids, and other library property. Coverage for limited first-party pollution cleanup may also be included. Coverage also applies to book spoilage due to changes in temperature. Property coverage extends off premises to apply to exhibitions, outdoor sculptures and monuments, and computer equipment. Commercial general liability coverage that includes medical payments coverage for staff and volunteers is available. Directors and Officers liability, employment practices liability, and Errors And Omissions liability for librarians are optional coverages that can be purchased.

Buildings being rehabilitated in order to retain significant older structural features or historical landmarks, to obtain special tax credits, or simply to reduce the costs involved in new construction present difficult builders risk exposures and are difficult to place. Property values do not begin at zero, as in standard builders risk exposures, because rehabilitation projects already have existing foundations, frames, walls, and roofs. A sublimit usually applies to the value of the building's shell during the demolition and rehabilitation phases. Establishing partial occupancy before the project is complete can be a concern, especially in commercial rehabilitation jobs as well in some residential work. Starting with an existing structure requires fire protection, welding and cutting precautions, protective fences, lighting, and guard services that may not be required with new construction.

Miniwarehouses or self-storage facilities are popular because their customers rent private storage space under their own lock and key. Coverage is available for both the property and liability exposures of the owners of these facilities. The primary coverage concerns involve buildings, business personal property, loss of business income, extra expense, commercial general liability, and legal liability coverage for customers' goods.

This program is available for habitational buildings and housing complexes that cater to senior citizens. Eligibility extends to assisted living and subsidized properties, such as HUD and HFA. Coverages available include property, commercial general liability, crime, workers compensation, hired and non-owned auto, and incidental auto exposures. Other coverages that may be provided include directors and officers, professional liability, equipment breakdown, and umbrella.

Malls: Shopping centers may qualify as a specialty insurance risk if the property limits are extremely high. High concentrations of building and contents values, extremely large undivided floor areas, windowless buildings, exposures from hazardous occupancies, and exterior exposures are some property-related considerations that must be weighed and evaluated. Shopping malls may include supermarkets, restaurants, bowling centers, and motion picture theaters that must be underwritten carefully. Public liability exposures related to crowd control inside the building and parking lot incidents outside the building are significant.

Strip Malls: A strip shopping center may have only one tenant or may have multiple tenants, but all tenants areas are entered from the parking lot or sidewalk. There is no common interior area that is the shopping center owner's responsibility. Some strip shopping center owners own multiple centers, which usually makes the overall property schedule more attractive due to the spread of risk. Parking lot exposures and vacancy are the two most difficult issues to address.

It is difficult to place fire and allied lines insurance on dwellings, apartment houses, and tenements in poor condition or in high-crime urban areas. Most insurers decline low-valued properties because the cost to issue such policies may exceed the premium available. FAIR plans handle dwellings and tenements, particularly in urban areas, but usually not low-valued dwellings and eligible properties in rural areas.

Businessowners policies are package policies for small businesses that provide more coverage enhancements than monoline coverage forms. Eligibility requirements vary based on the type of risk and the specific carrier's underwriting appetite.

Many mercantile risks, such as bars, taverns, liquor stores, drug stores, and gasoline stations may not be able to purchase burglary and robbery coverages in the standard market, especially if they are located in urban areas. Markets that implement rate surcharges are available for operations that are good moral risks, take certain precautions against burglary and robbery, and can pay several times the manual rate.

Agents and brokers find it particularly difficult to place substandard fire insurance. Commercial risk placement difficulties may be due to the fact that the property values are low, it is a prohibited class of business, or the occupancy or hazards make the risk a poor one to accept at the rates usually charged. Most, if not all, substandard fire insurance business written on commercial properties is placed in non-admitted markets at rates at least twice the manual rate. While some commercial properties are written in Fair Access to Insurance Requirements (FAIR) plans, the surcharged market still handles lines not written in these plans or writes excess coverage over FAIR plan limits. This class is underwritten very closely and is usually accepted by domestic companies on only an accommodation basis.

Businesses that do not qualify for coverage in the standard market still want the convenience of coverage written on a package basis. The specialty marketplace offers a number of these programs for such insureds.

Supermarkets are retail grocery stores that have more than 5,000 square feet of floor area. They have large open areas without fire cut-offs and extremely combustible or highly damageable contents with blank wall construction. This makes it difficult to fight fires from outside the building except from the front. There are extensive electrical requirements that place extreme demands on the electrical wiring. Another hazard in most supermarkets is large amounts of trash and waste materials that accumulate. Liability hazards are less serious than fire hazards but issues such as congested aisles, overstacked displays or shelves, poor lighting, and the physical condition of parking areas and sidewalks are present. The products liability hazards of foreign objects in prepared foods and spoilage of food in dairy and refrigerated areas must be considered.

The market for terrorism coverage changed dramatically on September 11, 2001. Coverage availability and pricing varies significantly, based on geographic location and type of industry.

Timeshare/interval ownership management companies need coverage similar to that provided to condominium associations. Nonprofit companies that are established to protect the assets of the individuals who collectively own timeshare units need the same coverage. Insurance protection for eligible risks is available for commercial property, liability, automobile, crime, inland marine, equipment breakdown, electronic data processing equipment, guest property, directors and officers liability, and umbrella liability.

Vacant properties are difficult to place, especially if the owners do not maintain them properly. A major problem with a vacant property is that it may not be considered a financial asset. This problem results in a moral hazard because the insured profits more from the loss of the property than from its remaining in good condition. Vacant buildings can become havens for vagrants or drug users and fires can be started intentionally or accidentally. Small fires may go unnoticed until the building is heavily involved. Fire departments often allow such buildings to burn down rather than risk the lives of firefighters. The longer a property remains vacant, the more difficult it becomes to maintain coverage.

Unoccupied vacation property that is a financial drain to the owner can be turned into an income producer. When it is unoccupied the expenses for a caretaker to watch over it rise as does the cost to insure a vacant dwelling. However, a property management firm can be hired to oversee and rent out the property. The rental fee should pay for the property management fees, all ongoing costs required to keep the property maintained and generate a profit for the owner. The property must be property insured.

This is sometimes referred to as per diem business interruption. The insured selects a maximum amount it receives per day because of loss of income sustained following a covered direct property loss. The coverage provided is similar to other types of business income or business interruption coverage forms.

Property coverage on woodworking and lumber risks is a problem because of the high potential for fire due to the extreme flammability of wood, wood scraps, and sawdust. The danger of explosion and total conflagration is correspondingly high. Adequate safeguards such as dust collection systems, fire cut-offs, and restrictions on the use of highly volatile lacquers and paints by some operations make such risks much more appealing. Even with these and other protective safeguards, many woodworking and lumber risks are still written in specialty markets. The broad classification of lumber risks encompasses all activities connected with this industry, from logging trees in the forest to operations that process crude logs into finished boards, paneling, or pulp.

Following are some examples of Specialty Property Insurance claims and the corresponding insurance coverages that can help pay for them:

1. Historic Property Damage: If you own a historic property, you might face unique claims due to the nature and age of the building. For instance, a storm could cause damage to the original wooden beams and structures, requiring specialized restoration. With specialty property insurance, the policy can cover the cost of these highly specialized repairs, which typically exceed the coverage of standard property insurance. It can also cover legal costs if someone sued you for a failure to maintain the historic integrity of the property due to the damage.

2. Art Gallery Theft: If you run an art gallery and a high-valued painting gets stolen, you could face a lawsuit from the owner of the artwork if it was on loan or consignment. Specialty property insurance for art galleries could cover the cost of the artwork and help manage the legal costs associated with the lawsuit, thus protecting your business from potentially significant financial losses.

3. Damage to Vacation Rental Property: If you own a vacation rental property, a tenant may cause significant damage to the property beyond what's covered by a security deposit. If the damage leads to a lawsuit from subsequent guests who can't use the property or from neighbors affected by the damage, specialty property insurance for vacation rentals could cover the repair costs and legal fees associated with the lawsuit.

4. Warehouse Fire: If you own a warehouse storing unique or valuable goods and a fire breaks out, destroying part or all of the contents, you may face a lawsuit from the owners of the goods. A specialty property insurance policy for warehouses could cover the replacement cost of the goods and the legal costs associated with any lawsuits that arise from the incident.

5. Flood Damage in High-Risk Zone: If your property is in a high-risk flood zone and a flood causes significant damage to it, you could face a lawsuit if the flood damage impacts neighbors or tenants. Standard property insurance typically doesn't cover flood damage, especially in high-risk zones, but a specialty property insurance policy that includes flood coverage could cover the cost of repairs and any associated legal fees from the lawsuit.