[lg policy] Understanding Commercial Policies: Not So Easy

Harold Schiffman haroldfs at gmail.com
Wed Jun 12 10:38:02 EDT 2019

Understanding Commercial Policies: Not So Easy
Berger Singerman LLP
[image: Berger Singerman LLP logo] <http://www.bergersingerman.com/>
[image: Michael Higer]
USA <https://www.lexology.com/hub/usa> June 11 2019

All that glitters isn’t gold when it comes to analyzing coverage with
respect to a commercial claim as distinguished from a homeowner’s claim. By
that we mean, there are many subtleties, nuances and complexities to a
commercial claim which make it far more challenging to analyze than a
homeowner’s claim. Let us enumerate/highlight just a couple.

The first and most typical distinction is that a commercial policy for an
operating business generally covers business interruption losses. That
means a critical member of the team assisting the insured with the claim
should include a forensic accountant. Because the language of the policy
controls how the insurance company will determine how to calculate the
business interruption loss, the forensic accountant should be someone whose
expertise goes beyond the general analysis of a business income loss. This
professional should have an expertise in analyzing such a loss according to
the definitions and terms of the controlling policy language.

Another significant difference is the language and application of
deductibles, sub-limits, and statements of value. Commercial policies use
some or all of these tools to limit the amount of coverage in commercial
policies in ways that do not exist in a homeowner policies. One glaring
example is with respect to statements of value. The insured provides a
schedule of the value of multiple structures to the insurance company. The
insurance company will rely on those values to limit the amount of coverage
to only the amount provided in the schedule. However, the gross coverage
may be substantially greater for the property as a whole.

Yet another major difference is that more and more commercial policies are
including an arbitration provision as opposed to an appraisal provision. By
doing so, the insurance company is creating an alternative means for
dispute resolution not just as to a disputed amount of loss but as to all
issues concerning the claim. And as if that was not enough to change the
playing field, insurance companies are literally doing so by providing for
a forum for the arbitration in a location other than where the property is
located and for laws of some other jurisdiction to apply.

One final overriding difference which often affects the analysis of a
commercial policy occurs when it has multiple layers of coverage. That
means instead of analyzing just one policy, multiple policies need to be
analyzed and reconciled to determine not just the coverages but the rights
and obligations of the insured depending on which layer is being implicated.


 Harold F. Schiffman

Professor Emeritus of
 Dravidian Linguistics and Culture
Dept. of South Asia Studies
University of Pennsylvania
Philadelphia, PA 19104-6305

Phone:  (215) 898-7475
Fax:  (215) 573-2138

Email:  haroldfs at gmail.com

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