I Filed a Business Insurance Claim. What Happens Next? An Insurance Lawyer and Former Adjuster Explains
A storm tears through your building. A pipe bursts over your inventory. A fire forces you to close your doors.
You report the loss to your insurance company, and now your business is waiting on a process you cannot completely control while bills, payroll, and customers keep coming.
I can walk you through that process from both sides.
Today, I am an insurance lawyer representing Texas businesses and property owners in insurance disputes. Before becoming an attorney, I spent more than a decade handling and managing insurance claims, including as a licensed Executive General Adjuster. I handled commercial property and business interruption claims, including large and complex losses.
I know how commercial claims move through the insurance process, what carriers look for, and where disputes can develop.
A business claim may follow many of the same basic steps as a homeowners claim, but the issues can become significantly more complicated. Building damage may be only one part of the loss. Inventory, equipment, continuing expenses, lost income, lease obligations, and the cost of keeping the business operating can all become part of the claim.
Here is what business owners should know.
Before you read: The information below is general. Every insurance policy and claim is different. Commercial policies can vary substantially in their forms, exclusions, limitations, deductibles, endorsements, and coverage requirements. The only way to determine how coverage applies to a particular business claim is to review the actual policy and facts of the loss.
First: Know What Business Insurance You Actually Have
“Business insurance” is not one single coverage.
A commercial insurance program may include:
- Commercial property coverage;
- Business personal property;
- Business income or business interruption;
- Extra expense;
- Equipment breakdown;
- Inland marine;
- Commercial general liability;
- Crime coverage;
- Flood coverage;
- Windstorm coverage;
- Ordinance or law coverage; and
- Other specialized forms and endorsements.
A business may also have multiple policies issued by different insurers.
That is why one of the first things I want to see in a significant business claim is the complete insurance program not simply the declarations page from one policy.
Step 1: Report the Claim and Protect the Business
After a loss, notify the appropriate insurer or agent promptly.
Provide accurate basic information about what happened.
If the cause is not yet known, do not guess.
At the same time, take reasonable steps to prevent additional damage and protect business operations.
Depending on the loss, that might include:
- Emergency water extraction;
- Temporary roof protection;
- Boarding openings;
- Relocating inventory;
- Moving equipment;
- Securing the premises;
- Temporary power;
- Renting replacement equipment; or
- Temporarily operating from another location.
Document those expenses carefully.
Some may become relevant to the property, business-income, or extra-expense portions of the claim, depending on the policy.
Your First Description of the Loss Matters
The initial claim report becomes part of the file.
Be accurate.
If a pipe burst, say so if you know that.
If you arrived at the building and found several inches of water but do not know the source, say that instead.
If a fire investigator has not yet determined the cause, do not speculate.
Commercial losses often involve multiple potential causes and responsible parties.
An inaccurate assumption made during the first phone call can create unnecessary confusion later.
Step 2: Know Who Is Handling the Commercial Claim
Significant commercial losses can involve a large claims team.
You may deal with:
- A desk adjuster;
- A field adjuster;
- An independent adjusting company;
- A third-party administrator;
- A building consultant;
- An engineer;
- An accountant;
- A forensic accountant;
- A contents specialist;
- A restoration consultant;
- A cause-and-origin expert;
- Coverage counsel; or
- Other specialists.
Ask each person:
- Who do you work for?
- Who retained you?
- What are you evaluating?
- What information do you need?
- Are you making a coverage decision, or are you providing information to someone else?
Understanding the roles can make a complicated claim much easier to manage.
Step 3: Expect More Documentation Than in a Typical Homeowners Claim
Commercial claims can be document-heavy.
The carrier may request:
- Lease agreements;
- Financial statements;
- Tax returns;
- Profit-and-loss statements;
- Payroll records;
- Sales records;
- Inventory records;
- Purchase orders;
- Vendor invoices;
- Equipment records;
- Repair estimates;
- Building plans;
- Maintenance records;
- Prior loss information;
- Photographs;
- Business interruption calculations; and
- Other documentation.
That does not mean every request is necessarily relevant to every claim.
But businesses should expect a more detailed documentation process, particularly when seeking business-income benefits.
Step 4: Document the Physical Loss Immediately
Commercial properties can change quickly after a loss.
Employees clean up.
Contractors remove damaged materials.
Inventory gets discarded.
Equipment gets moved.
Temporary repairs are made.
Take photographs and video before conditions change when it is safe to do so.
Document:
- Building damage;
- Roof damage;
- Water lines;
- Fire and smoke damage;
- Damaged inventory;
- Equipment;
- Machinery;
- Furniture;
- Electronics;
- Tenant improvements;
- Exterior conditions;
- Debris;
- Emergency repairs; and
- Other affected property.
If items must be discarded for health, safety, or operational reasons, photograph and inventory them first when reasonably possible.
For losses involving commercial roof, wind, and hail damage, commercial water damage, or commercial fire and smoke damage, the relevant photographs and supporting records can help document the physical loss.
Step 5: Business Income Can Be as Important as the Building Damage
This is where commercial claims can become significantly different from homeowners claims.
A building may be repairable.
But what happens while the repairs are being made?
A restaurant may lose weeks of revenue.
A warehouse may be unable to ship products.
A retail store may lose customers during its busiest season.
A manufacturer may be unable to operate a production line.
A professional office may have to relocate.
Depending on the policy and facts, business-income coverage may address certain losses resulting from a covered suspension of operations.
Extra-expense coverage may address certain additional expenses incurred to avoid or minimize that suspension.
But these coverages are highly dependent on the actual policy language.
Business Income Is Not Simply “What I Would Have Made”
Business-income claims usually require documentation.
The calculation may involve:
- Historical revenue;
- Historical expenses;
- Profit margins;
- Seasonal trends;
- Growth trends;
- Prior-year performance;
- Current-year performance before the loss;
- Continuing expenses;
- Payroll;
- Saved expenses;
- Expected sales;
- Contracts;
- Reservations;
- Orders; and
- Other financial information.
The goal is generally to determine the financial position the business would have occupied during the relevant period had the covered loss not occurred, subject to the policy’s terms and limitations.
That can become a significant accounting exercise.
Step 6: Start Documenting Business Income Immediately
Do not wait six months and then try to reconstruct everything.
Preserve:
- Monthly profit-and-loss statements;
- Bank statements;
- Tax returns;
- Sales reports;
- Payroll;
- Customer orders;
- Reservations;
- Contracts;
- Historical sales;
- Cancellations;
- Vendor records;
- Inventory records; and
- Other information showing normal business performance.
Also document what happened after the loss.
- Were orders canceled?
- Did customers go elsewhere?
- Were employees still paid?
- Did you relocate?
- Did you rent equipment?
- Did you incur overtime?
- Did you expedite shipping?
- Did you pay additional expenses to keep operating?
Those details can matter.
For more on the financial evidence involved when insurers dispute lost income or continuing expenses, see denied business interruption insurance claims.
What Is the Period of Restoration?
Business-income coverage commonly involves a defined period during which covered income losses are measured.
The precise policy language controls.
Depending on the form, the relevant period may be tied to the reasonable time necessary to repair, rebuild, or replace damaged property, subject to policy provisions and limitations.
Disputes can develop over:
- When the period began;
- When it should end;
- Whether delays were reasonable;
- Whether permitting affected the timeline;
- Whether material shortages mattered;
- Whether the insured acted reasonably to resume operations; and
- Whether extended business-income coverage applies.
Read the actual policy.
Extra Expense Can Matter
Sometimes the best business decision is not to shut down completely.
A company may spend additional money to continue operating.
Examples might include:
- Renting temporary space;
- Leasing replacement equipment;
- Paying expedited freight;
- Using temporary power;
- Outsourcing production;
- Paying overtime;
- Moving inventory; or
- Establishing temporary operations elsewhere.
Depending on the policy and circumstances, some of these costs may fall within extra-expense or another applicable coverage.
Document the reason for the expense and how it helped continue or restore operations.
Step 7: Read the Policy Provisions That Apply to the Loss
Commercial policies can be highly customized.
Important issues may include:
- Covered causes of loss;
- Exclusions;
- Deductibles;
- Coinsurance;
- Valuation;
- Replacement cost;
- Actual cash value;
- Business-income limits;
- Extra expense;
- Period of restoration;
- Waiting periods;
- Ordinance or law;
- Utility-service interruption;
- Civil authority;
- Dependent property or contingent business interruption;
- Flood;
- Windstorm;
- Equipment breakdown;
- Protective safeguards; and
- Other endorsements.
Do not assume the declarations page tells the entire story.
The endorsements can significantly change the coverage.
The Texas Department of Insurance commercial property insurance guide explains common commercial property coverage options and the importance of reviewing the policy terms.
Step 8: The Carrier Evaluates the Claim
The insurance company may prepare its own estimate or retain consultants to assist.
For the building portion, the carrier may use:
- Xactimate or another estimating platform;
- Contractors;
- Building consultants;
- Engineers;
- Architects;
- Equipment specialists; or
- Other experts.
For business income, the carrier may use accountants or forensic accountants.
The carrier may then:
- Accept coverage;
- Pay part of the loss;
- Request additional information;
- Apply a deductible;
- Apply depreciation;
- Apply a sublimit;
- Dispute the period of restoration;
- Dispute the business-income calculation;
- Reserve rights;
- Deny some portions of the claim; or
- Deny coverage entirely.
The Insurance Company’s Estimate Is Not the Final Word
A carrier estimate is an evaluation of the loss.
Your contractor, accountant, engineer, equipment vendor, or other professional may reach a different conclusion.
The important question is why.
For building damage, compare:
- Scope;
- Quantities;
- Materials;
- Labor;
- Pricing;
- Code requirements;
- Equipment;
- Access;
- Overhead and profit where appropriate; and
- Other disputed items.
For business income, compare:
- Revenue assumptions;
- Growth assumptions;
- Historical periods;
- Continuing expenses;
- Saved expenses;
- Period of restoration; and
- Other accounting inputs.
A meaningful disagreement should be reduced to specific issues rather than simply competing bottom-line numbers.
If the dispute concerns a significant payment shortfall, Herrera PLLC also handles underpaid commercial and business insurance claims.
Texas Insurance Claim Deadlines
Texas law contains claim-handling deadlines that may apply to insurers.
Those provisions can involve acknowledgment, investigation, requests for information, acceptance or rejection, and payment of covered amounts.
But the precise deadlines and consequences can depend on the type of policy, insurer, claim, information received, circumstances, and applicable statutory exceptions or extensions.
Significant weather events can create additional considerations.
If a commercial claim has become seriously delayed, the timeline should be evaluated under the particular policy and applicable Texas law.
The Texas Department of Insurance explains policyholder rights for commercial property insurance claims. The Texas Insurance Code Chapter 542 contains provisions governing the processing and settlement of certain insurance claims.
Protect the Property and the Business
Your obligations after a commercial loss do not necessarily stop with notifying the carrier.
Policies commonly require reasonable steps to protect covered property from additional damage.
For a business, mitigation may also involve trying to resume operations where reasonably possible.
Document what you do and why.
Preserve:
- Emergency invoices;
- Temporary repair costs;
- Rental agreements;
- Equipment leases;
- Relocation expenses;
- Overtime;
- Shipping costs;
- Payroll records; and
- Other mitigation expenses.
Do not assume an expense will be covered.
But if you incur it because of the loss, preserve the documentation so it can be evaluated.
Your Contractor, Accountant, and Insurance Lawyer Have Different Roles
A large commercial claim may require a team.
A contractor can evaluate the physical repairs and cost.
An accountant can analyze financial records and business-income loss.
An engineer can address technical causation or structural issues.
A properly licensed public insurance adjuster may assist with documenting and presenting the claim within the authority provided by Texas law.
An insurance lawyer can evaluate policy interpretation, coverage disputes, legal obligations, statutory claims, negotiations involving legal issues, and litigation.
Those roles are different.
A strong claim often depends on having the appropriate professional address the appropriate issue.
The Texas Department of Insurance guidance on public adjusters explains their role and the limitations that apply to their work.
When Should a Business Call an Insurance Lawyer?
Not every business insurance claim requires an attorney.
But legal review may make sense when:
- A significant claim has been denied;
- The carrier issues a reservation of rights;
- A major portion of the loss is excluded;
- Business-income benefits are substantially disputed;
- The carrier and business disagree significantly about causation;
- An engineering or expert report is driving a denial;
- The amount of loss is substantial;
- The carrier applies an unexpected sublimit or exclusion;
- The claim has become significantly delayed;
- Multiple policies or carriers may apply;
- A third party may be responsible; or
- Litigation appears likely.
Commercial losses can become expensive quickly.
The larger and more complex the loss, the more important it can be to identify coverage, evidence, and potential disputes early.
For businesses facing a denial, see Herrera PLLC’s page on denied commercial and business property insurance claims.
Talk to an Insurance Lawyer and Former Insurance Adjuster About Your Business Claim
My perspective on commercial insurance claims comes from both sides.
Today, I am a Texas insurance lawyer representing businesses and property owners.
Before becoming an attorney, I spent more than a decade handling and managing insurance claims, including as a licensed Executive General Adjuster. My work included commercial property and business-interruption claims, including large and complex losses.
I understand how commercial claims are investigated, what documentation carriers request, how experts and consultants become involved, and how property and business-income issues can develop into coverage disputes.
Now I use that experience on behalf of Texas businesses and property owners.
If your commercial property or business insurance claim has been denied, significantly underpaid, delayed, or has developed into a dispute over coverage, business income, causation, or valuation, let’s talk.
Herrera PLLC represents businesses and property owners in Houston and throughout Texas, in English and Spanish.
Call (832) 891-3210 for a free consultation with an insurance lawyer and former insurance adjuster.
Hablamos español.
Herrera PLLC
2339 Commerce Street, #172
Houston, Texas 77002
Phone: 832-891-3210
Email: jherrera@jh-lawpllc.com
Related Reading
Frequently Asked Questions
It depends on the policy. A commercial insurance program may include building coverage, business personal property, business income, extra expense, equipment breakdown, and other coverages. Review the complete policy and endorsements to determine what applies.
Business-interruption or business-income coverage may provide benefits for certain lost income and continuing expenses resulting from a covered suspension of operations. The exact requirements, limits, waiting periods, and period of restoration depend on the policy.
Business-income claims commonly rely on financial records such as profit-and-loss statements, tax returns, sales reports, payroll, historical revenue, contracts, customer orders, and other evidence showing how the business performed before and after the loss.
Potentially. Depending on the policy and circumstances, certain expenses incurred to continue operations or reduce the business interruption may fall within extra-expense or another applicable coverage.
Compare the carrier’s scope and estimate with detailed contractor or expert documentation. Determine whether the disagreement involves quantities, pricing, materials, scope, code-related items, or coverage. The appropriate response depends on the source of the difference.
Legal review may be appropriate when a significant commercial claim is denied, substantially underpaid, delayed, subject to a reservation of rights, or involves major disputes over causation, policy interpretation, business income, valuation, or other coverage issues.
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