You may have read in the press about postal workers suing homeowners for slipping or tripping or people suing a building owner when a tile hit their car. These are examples of claims that would fall under property owners liability. Although the claim is directed at the property owner, if they have a commercial property owners insurance policy, then the insurer foots the bill. However, in law the claim needs to go against the individual property owner.

As an owner or occupier you do have a duty of care to anyone that enters or arrives on your property, but there are limitations. In a way this is where the insurers are fighting back. With the advent of no win, no fee legislation, it was very easy for anyone to approach  a solicitor and go through the formal claims process at very little cost.

Perversely, some of the business insurance companies set up schemes, offering customers legal expenses to pursue actions, including against their own company. For a few hundred pounds you could buy a policy and make a claim for a few thousand. The solicitors took their ever increasing cut of up to 50%. But, if you tripped on a loose pavement slab or a bit of carpet in a shop you could get yourself around £1,000.

But, the insurers have started to question these claims a bit more. It used to be that it was cheaper to just pay the few thousand than fight the case. Everyone knew this, but as the number of claims spiralled, almost out of control, the insurers started to think that they could, overall save a bit of money.

If you are a property owner and have a buildings policy, you should automatically get cover for property owners liability built in to the policy, if not, have a word with your broker and get this added asap.

Before we discuss the differences, a quick note on exactly what loss of rental income is. If you, or a business, owns an asset in the form of a building, you are usually looking to rent this and receive income. The rental income is known as the yield, or earnings. The hope of course is that a combination of increasing value of the property and rental income exceeds the cost of any financing or loan that is taken out to purchase the property. Given that the first has almost been non-existent in the past four years, it is even more important to ensure adequate insurance cover for the latter.

If there is a fire, for example, your tenant will have to move out and more than likely cancel the tenancy agreement they have with you and take out another one. As you are unable to let the property, you are not fulfilling this side of the contract and your tenant is quite entitled to go elsewhere. Therefore, you are left with a property that you are not receiving any rent for. It needn’t just be a fire, it could be a flood, or burst pipe that causes your tenant to move out. This can take any number of months and sometimes years to resolve.

This is where you really need to speak to an independent business insurance broker to ensure that you have adequate protection in the form of rent paid. Certain policies that only offer a 12 month indemnity period, will only pay rent for the maximum period of one year. When you think about a disaster, with a property destroyed the time taken to clear the site, get architects, surveyors and local authorities involved and renewed planning permission and then get the property built – it can take over twelve months. You need to ensure you have cover for this extended period of time.

As the owner of the property, it is their responsibility to provide us with a current rebuild cost for the property, as opposed to basing the quote on last years renewal premium and sums insured when looking for a property owners insurance quote. You would think, but it is not always the case, that a property owner would know the age of the property and also the type of the construction of the walls, floors and roofs.

A commercial insurance company, when providing a quote, will need to know if there is any element of flat concrete or flat felt on timber roof. Where there are flat roofs, terms and conditions will apply to claims and/or losses relating to the roof. These include annual inspection clauses and repairs and many will exclude storm or water damage arising from flat roofs, don’t get caught out. When you approach us for a property or business insurance quote with buildings, we will need to know if there is any element of flat roof. Even if this is just 10% of the overall roof area. We will always aim to obtain a range of property owners quotations to ensure the best terms are found for our clients.

Another point that insurers will need to be fully aware of is whether there are any composite panels in the building. This usually only applies to food processing and cold storage plant. However, modern buildings are now more likely to include pre-formed panels with insulation built in to try and reduce the heating costs. You need to know what the material is, whether polystyrene, Rockwool or similar or some other material. Every insurance policy is based on the principle of utmost good faith, you must declare the full facts of the risk to insurers. If you fail to declare composite panelling, which can represent a higher risk of fire, then your insurance policy may not pay out in the event of a claim for fire.

You should always speak to an independent business insurance broker who will go through steps to gain the required information from you, to present to a range of insurers to get you the best terms at the best price.

One of the most important questions we need to ask is about previous claims or losses. For example, a customer looking for shop insurance, who has been trading for 10 years with no claims or losses is at an advantage to an identical business that has had three or four claims. It is not just the case that a business with claims will pay a higher premium, or have a higher excess. It is more than likely that an insurer will simply refuse to quote.

As a business insurance broker we have access to a number of different insurers, underwriters or providers. This is why you are better speaking to us, than going direct, because we can discuss with our providers to see if a quote can be provided. If insurers A, B and C refuse to quote, it does not mean that insurer D will do the same.

Going back to the blog though, the important point is that we ask about claims or losses. You need to declare all claims that you have submitted to your insurers, whether these were settled or not. For example, on a commercial property owners insurance, you may have submitted a claim for damage to a roof that was repudiated or turned down because it was simply wear and tear. If the insurers refused to pay, this is not a valid claim on the insurance but, it is a loss that was suffered.

We do have customers that say that they have never had a claim, but then disclose that on different occasions either their insurers refused to pay out or they did not think it was worthwhile submitting a claim.

All of these scenarios or circumstances have to be declared. Yes, it may alter the acceptance of the risk by insurers or the premium and/or terms that they apply. But, it is better to let them know at the outset to then submit a substantial claim which is then turned down because you did not declare the full information at the outset.

If you are in any doubt as to what you should declare, speak to a broker. Do not fill in an online quote and make assumptions about what you should and should not declare. Speaking to a human being and getting some good old fashioned honest advice is the best way froward.

Firstly, you can phone an online provider, whether this be a broker or a commercial insurer direct.

Secondly, you can visit one of the many websites that state they will compare costs for you.

Thirdly, you can visit your local broker and obtain a quotation face to face.

In addition to these three, there are many different smaller methods such as your bank or mortgage company providing you with a quote.

Whichever of the options that you choose to follow, there will be a differing set of questions asked of you. The reason for this is that ultimately it will be a business insurance company that will provide you with the quote. The different companies all want slightly differing information, depending on their underwriting and risk acceptance criteria.

The main question though, for commercial, industrial or business building insurance is the rebuilding cost. This is the amount of money it would cost, at the inception or start of the policy, to rebuild the property in the event of a catastrophic loss. This is the type of loss, such as fire, where the whole building needs to be reconstructed. This cost, which will ultimately be your sum insured, if you take out a policy. Needs to include the following:-

1) The cost of clearing the site, including demolition of any remaining structure.

2) The cost of rebuilidng any underground, or below ground, foundations. These are normally not destroyed in a fire, but will need replacing.

3) All architects, surveyors, legal, regulatory and professional fees in rebuilding.

This is where you need to make sure that the cost is sufficient. It is not correct to base the rebuilding cost purely on the purchase price or the market value.

The best way is to get a professional valuation, by an approved building valuation surveyor. Althought there is a cost involved, at least you have a yardstick to base your policy on. If there are any problems regarding the sum insured, you will then have comeback on the surveyor.

Speaking to the last customer, the property owner, I asked what materials the roof was constructed of. To which he replied, I do not know I have never been in the roof. We did manage to ascertain though that it was a pitched, slate roof. This is what the insurers like, pitched roofs are of course designed to make water drip off, rather than go through and slates, like tiles, have a very long life span, if installed and maintained correctly.

But, when a customer says that they have a flat roof, we have to go into a different mode of questioning, which is why we need the questions in our heads, rather than on the paper, otherwise we would need a very big piece of paper. But what exactly do the insurers need to know and why? For commercial property owners insurance, one of the bigger causes of loss is water ingress from storm. If a roof is manufactrued of anything that is not as substantial as slate, tiles or metal then there is more chance of water getting in and causing damage.

Insurers will need to kow the exact material, the age, when it was last replaced (most felt roofs only last 10-15 years) and whether it is maintained either annully or bi-annually. Insurers then use this information to decide whether to load the premium and/or apply additional terms.

If the insurers know, from experience, that they can make money from a particular type of risk (say, fish and chip shops) then they will do three things. Firstly, they will design specific products to suit the industry. Secondly, they will market these products and thirdly, they will price accordingly.

I have done a few different marketing exams in the past as part of my professional qualifications. You can tell that they are not written by people in the real world, because they say that targeting niche areas is the key. This is absolute tosh. In 2011, there is very little marketing that anyone can do, that cannot be immediately replicated by A N Other.

This is where commercial property insurance comes into play. You cannot get yourself a niche product, because everyone wants a piece of the action. All insurers want commercial property business, because, over the years it makes them money. There is enough of it about that they can get in some significant premiums to cover the losses. As a result, they price to get the business, which means cheap.

Over the past few years though, they have been going beyond the profitability line. We have seen two harsh winters, this means lots of burst pipes, collapsed gutters and other cold induced damage to property. So they are not making as much as they thought, and are losing out. How do they rectify this? By increasing prices. If you find that you have a commercial or business property insurance renewal that has gone up a bit too much, give us a call to see what we can do for you.

Usually, this is the case. If you have a commercial property owners insurance policy, with any insurer, then the more properties you are looking to insure, the better the overall rate you should receive. However, this can work against you as well. If you have five properties insured and you are getting, for example, a premium of £200 per property, if one of them suffers a large claim then it is likely that the overall policy is going have a rating increase applied.

The balance is, that you can have separate policies for each and every property and if one suffers a claim, it does not necessarily mean that the others will increase as well. You do of course have to declare to each and every insurer you deal with that you have had claims under different policies, but the chances are that they are going to take a fairly sensible approach to this and not penalise your other policies for a fortuitous loss.

The discounts that you do receive are not always sufficient to make you stay with a particular insurer. Every time we, as business insurance brokers, get additional quotes, we will always look not only at the existing insurers, but to see if any others will provide a better price.

The difficulty we face with insurers is, that in January they may not be looking for a particular type of business but in March they have changed their tune and are pulling out all the stops to pick up business they previously did not want. If we don’t keep a close check on this, then the customer is going to, quite rightly, drift away to a more competitive alternative.

An insurance policy is not designed to replace a normal maintenance contract. You cannot expect to have a building that is not inspected regularly and then have a claim paid against, for example, water leaking through a poorly maintained roof.

You need to consider the policy wording and see whether you have to undertake certain types of maintenance at agreed intervals. One of the main ones is in respect of flat felt roofs. These types of roofs only have a certain lifespan. Even withe advancements since the 1970’s in materials, the more modern flat roofs still get damaged over time.

Many policies will state that you have to have the roof inspected every 6 or 12 months. In addition to this any repairs need to be undertaken immediately and,by an approved repairer. It is no good to say that you inspected the roof yourself. You will need to prove that it was a proper builder or roofer and be able to show receipts that you have paid them to do the work.

Some policies will also have a gutters and drainpipes clause (believe it or not) which again proves that these are cleaned and any debris removed, on a regular basis. This, you can usually do yourself, if you wished. If you had a loss and the adjuster can prove that it was due to build up of leaf mould over many years, then you could potentially be faced with a claim repudiation.

As ever, speak to your business insurance broker and get them to interpret the policy wording for you and ask them to confirm this in writing to you.

In addition to these two, there is one other main type of cover which is not always included as standard. This is for loss of rental income. You can insure, under most policies, for rental income payable or receivable. The main one is rental income receivable. This is where you, or your business own the building and receive rental income.

Your building is insured for certain perils, such as fire, storm, flood and burst pipes. If the building suffers a loss, you many not be able to rent the property out. Of course, it needs to be a substantial loss that renders the property uninhabitable and you would need to prove this to the insurers. Your cover should also apply if you have to agree a reduced rent for your tenant due to inconvenience. For example if they cannot use the whole of the property but do not want to actually move out.

This cover does not apply, in commercial cases, if the tenant simply does not pay their rent. It only covers you if there is an insurable loss to the structure of the building.

When arranging the cover, you will more than likely be dealing with a business insurance broker. One of the questions they will ask is what is the monthly loss of rental income. You will need, in the event of a loss, to prove your received rent over a period of time, say the three preceding months and the same period in the previous year.

The other type of cover, which is seen much less frequently, is loss of rental income payable. This is only found on policies that are arranged by the tenant under a full insuring and repairing lease. This covers exactly the same thing, but because the policy is not in the name of the actual property owner, it cannot cover received rent, but rent payable.