Both commercial and personal insurance forms—that is, for commercial property and homeowners property—generally refer to “reasonable repairs.” Since often people neglect to read this part (or any part) of their policies until after a loss, it’s a good idea to have some notion as to what the insurance carrier will require of you following a loss.
Now, I read insurance policies for fun and profit, but I can well understand reluctance to read them. However, when the insurance adjuster appears following a loss, it’s often too late to find out what you, the insured, should have done to protect your property.
So, here is what you need to know: it’s your responsibility to do the best you can following a loss to your home or office building to protect it from further damage. For example, an unusually strong blast of wind topples a large oak tree against your home, or your office building, so that some of the roofing is damaged and several windows are smashed in.
Let’s look at the commercial form first. Many coverage forms (but not all—I’m quoting one that is fairly typical), under a section of duties the insured must perform in event of a loss, state that you are to “take all reasonable steps to protect the Covered Property from further damage, and keep a record of your expenses necessary to protect the Covered Property, for consideration in the settlement of the claim. This will not increase the Limit of Insurance…”
Notice three things here. First, you, the insured, are to take all reasonable steps to protect the covered property. So, in our example, you must check the roof since it appears to have been damaged, and secure the opening, perhaps with a tarp. You must also board up or at least do your best to make sure the window openings are closed to any weather.
Second, keep a record of your expenses—the tarp, any paid labor you had to hire to secure the property, etc. This sentence goes on to say “… for consideration in the settlement of the claim.” “For consideration” is insurance-speak for payment. It does not mean the insurer might just peruse the papers; i.e., consider them. It means these expenses should be paid. It does not mean, though, that you can decide that since a portion of the roof is missing you might just as well go ahead and take the remainder of the roof off and replace it. Remember, the adjuster has yet to see the loss.
Three, the amount you spend will fall within the limit of insurance. So, if your office building has a $3,000,000 limit for the building and personal property, any repairs you make will fall within that amount.
The homeowners policies are similar; however, commonly the form will state something like the insurer will pay “the reasonable cost incurred by you for the necessary measures taken solely to protect covered property that is damaged by a peril insured against…” Caution! You, the homeowner, might suffer a loss, take all steps to protect the property, and then find out that according to the adjuster the loss isn’t covered! What then? You still should take all measures to protect your property—after all, it is your home. Then, check and recheck with your insurance professional to make sure the adjuster is correct. If your house is damaged by an earthquake and you know you did not purchase earthquake insurance, then the adjuster is probably correct. However, err on the side of caution and make sure about the loss.