Over the years, SMW has shared information with our readers about Improvements & Betterments coverage – a complex and important topic to understand when purchasing an insurance policy for your business. We were reminded of the importance of purchasing enough of this particular coverage while adjusting a recent fire loss in the Boston area.
This local commercial client had a serious fire that took them out of commission, and went as far as affecting the neighboring stores in the plaza with residual soot and water damage. In the process of reviewing their insurance policy and taking inventory of all of their business personal property, it was quickly realized that their limited insurance would only be enough to cover their restaurant equipment and the food they had in stock. This meant that they would have no funds left to replace their Improvements & Betterments – the renovations they had undertaken to make their space more suitable for their business purposes. What’s a business to do when put in such a precarious position?
The solution that SMW came up with in this particular claim came down to having the insured contact the property owner, their landlord, to ask him to cancel their lease. Their lease contained a clause named “Damage by Fire” which allowed the landlord to terminate the lease after a fire took place in the unit. As soon as the lease was cancelled, the onus of covering those Improvements & Betterments replacements was then switched to the landlord’s insurance policy, effectively saving the insured from paying $100k out-of-pocket to make their space whole again. After all repairs had been made, the insured could then sign a new lease and carry on, business as usual.
Your takeaway: Make sure you know what you’re purchasing in terms of Improvements & Betterments coverage – it’s always better to have the right amount of coverage from the get-go, rather than look for a workaround later.
To read more about Improvements & Betterments, click here: https://swerling.com/understanding-the-complexities-of-improvements-betterments-coverage/