Many business owners don’t realize that the Property Damage Liability coverage only protects you against claims of third-party property damage. Here is an explanation of property insurance coverage broken down so you can understand what you have, and make adjustments to your insurance coverage if needed.
What is Liability?
I’ll begin with a definition of liability. Liability is defined as, “the state of being responsible for something, especially by law”. As a business owner and lessee, certain things are “assigned” to you as your responsibility. As the person or entity “assigned” as responsible, issues that arise with things that are your responsibility could put you in danger of a lawsuit. And most business structures are such that your personal assets are at risk in a lawsuit. Even if you have an LLC, your personal assets may not protected if you are held responsible for someone’s injury.
Property Damage Liability Insurance
Here are some example claims we see on Property Damage Liability coverage.
Say you rent a recital venue for the short term (7 days or less), and something your staff or students do (fail to do) damages the venue’s property. Your property damage liability insurance will cover the costs of the claim for the damage to the venue’s property.
Property Damage Liability also covers you if you damage the property of a neighboring tenant. If you left the sink on all night, and water leaks into your neighbor below, you are covered for that tenant’s property damage. But your Property Damage Liability Insurance does not cover your own property damaged from the water! This is where most business owners get confused.
Inland Marine Insurance
You have the option to add coverage to your base policy called “Inland Marine”. It covers you for damage to yourproperty inside the walls of your rented space. Some Inland Marine policies offer optional coverage for plate glass (i.e. structural glass) and business interruption (business income and extra expense).
Example claims would be for the floors, wall mirrors, lighting, or equipment. Here are a couple example claims for Inland Marine coverage. We recently had a claim for smoke damage from a fire in another unit in our client’s building. Due to the smoke, our client’s yoga studio was stinky and dusty. The paint and mats needed replacing, and luckily for her, she had Inland Marine insurance to cover the out-of-pocket expense.
Let’s look at the reverse of an example above. A tenant above you has a leak and damages your dance floor. As we said above, if that tenant has Property Damage Liability insurance, you would file a claim against their (the tenant responsible for the damage) insurance, but that is a process. You have to go through their insurance and wait to get paid, and meanwhile you may need a dance floor and be unable to operate until your dance floor is replace or repaired. You may be able to get paid more quickly by your own Inland Marine coverage, and then you let the insurance companies work out the rest between them.
Get Coverage Advice
We had a claim resulting from kids running into a studio mirror and breaking it. The owner had specified in his policy that his Inland Marine coverage go to dance floors and plate glass. When his mirrors broke, he wasn’t worried because the thought he was covered, only to find out that plate glass is for structural windows, not mirrors.
Make sure you ask advice on how set up coverage, how much you need, what you should consider covering (laptops, dance floors, costumes, barres, sound systems, waiting area). You will use replacement cost when considering how much coverage to get. Inland Marine insurance is replacing the cost it would take you to buy the item again.
For more dance studio insurance questions, contact Caitlyn at 877-811-2271.
Image Credit Link: https://www.flickr.com/photos/brendan-c