Commercial insurance claims

What should a business do immediately after a loss?

Make the site safe and prevent further damage, then record everything: photographs, an inventory of damaged stock or equipment, and a note of when the incident happened and who was present. Report it to your broker or insurer promptly. If anyone was injured or a third party is involved, report it even if no claim has yet been made.

Early reporting matters more in commercial claims than most business owners expect. A liability incident reported at the time is a manageable file; the same incident surfacing a year later as a lawsuit is a much harder one.

What does business interruption insurance actually cover?

Business interruption covers lost income and continuing expenses while operations are disrupted by an insured loss. It responds to the financial consequence of the damage rather than the damage itself, and is normally calculated from historical financial records for a defined indemnity period set out in the policy.

Because it is calculated from records, the quality of the bookkeeping directly affects how quickly and how well the claim settles. Businesses with clean monthly figures fare better than businesses reconstructing a year from receipts.

The indemnity period is worth checking before a loss rather than after. It sets how long the coverage responds, and it is a common gap between what an owner assumes and what the policy says.

What happens when a third party claims against my business?

Report it to your insurer immediately, even if you believe the claim is unfounded and even before any legal action. Liability coverage generally includes the cost of defending the claim as well as any damages awarded. Do not admit liability or agree a settlement independently, as doing so can affect the coverage.

The instinct to resolve something quietly and directly is understandable and can be expensive. The defence obligation is part of what the premium bought.

What documentation does a commercial claim require?

Expect to provide financial statements, an inventory or asset schedule, invoices and receipts, and photographs of the damage. Business interruption claims usually require several years of financial records. Larger losses may involve a forensic accountant appointed by the insurer to assess the financial impact.

The documents exist either way; the difference is whether they are ready. A business that can produce them in days rather than weeks shortens the whole process.

Photographs matter more on a commercial loss than on a household one, because stock and equipment are rarely itemised anywhere else. Photograph the damage before anything is moved or cleaned up, keep the damaged items until the adjuster has released them, and hold every invoice for emergency repairs and those are usually payable even where the wider claim is still being assessed.

What is a deductible on a commercial policy?

The deductible is the amount the business carries itself on each claim, deducted from the settlement rather than invoiced. Commercial deductibles are usually higher than personal ones, and a policy can carry different deductibles for different perils: a standard figure for most losses and a separate, larger one for water, wind or theft.

Raising a deductible lowers a premium and increases what the business absorbs when something happens. That is a cash-flow decision as much as an insurance one, and it is worth revisiting as a business grows rather than leaving at whatever was set when the policy started.

How does a commercial auto or fleet claim differ?

A fleet claim follows Ontario's auto rules, including Direct Compensation Property Damage, but sits on a commercial policy where one incident can affect the fleet's overall experience. Drivers are often not the policyholder, so the report usually involves collecting an account from an employee rather than from the person calling it in.

Having a simple internal procedure (what a driver does at the scene, who they call, what they photograph) makes the difference between a clean report and a reconstructed one. It is the simplest piece of claims preparation a business can do.

Cargo, tools and equipment carried in a vehicle are frequently NOT covered by the auto policy. They usually belong under a separate coverage, and finding that out during a claim is a poor time to learn it.

What is the difference between occurrence and claims-made cover?

An occurrence policy responds to incidents that happen during the policy period, whenever the claim is eventually made. A claims-made policy responds to claims REPORTED during the policy period. Professional liability and professional liability cover is commonly written claims-made, which makes continuity of cover important.

Under a claims-made policy, letting cover lapse can leave past work unprotected even though it was insured at the time. Extended reporting periods, sometimes called tail cover, exist to address that gap when a policy ends or a business closes.

This distinction rarely matters until it matters entirely. It is worth knowing which basis each of your liability policies is written on.

What should a business do before a loss happens?

Keep an asset schedule that is current, keep financial records clean enough to support a business interruption calculation, and know which coverages the policy actually carries. Review the limits annually rather than at renewal only, because the exposure a growing business carries rarely matches the figures set when the policy was first written.

Most commercial claims that go badly do so for one of two reasons: the coverage was not there, or the documentation was not. Both are decided long before the incident.

It is worth knowing who in the business is authorized to report a claim and to speak to an adjuster. In a serious loss, the first hours involve a lot of people asking questions, and a clear answer to who speaks for the business prevents inconsistent accounts.

Who should the business tell, besides the insurer?

Depending on what happened, the list can include the landlord, the bank or lessor financing equipment, key customers whose orders are affected, and any regulator with reporting obligations for your sector. A cyber incident involving personal information carries its own notification duties under Canadian privacy law.

Leases and finance agreements frequently contain their own notice requirements, with their own deadlines, entirely separate from the insurance policy. Missing one does not affect the claim but can breach the agreement.

Where an incident affects customers, saying so early is generally better received than saying so late. That is a commercial judgement rather than an insurance one, but the two interact, particularly where a liability claim may follow.

Businesses often discover at claim time that a policy was written for the operation they ran three years ago. Adding a product line, taking on subcontractors, storing more stock, moving premises or starting to ship internationally all change the exposure, and none of them updates the policy automatically.

An annual conversation about what has changed is worth more than a careful reading of the wording once. The wording only responds to what it was told.

Sources

• Insurance Bureau of Canada: Business insurance