Brokers do a great job for their customers, but sometimes theyoverlook certain coverages, said Jerry Milton, CIC in a recentInsurance Agents & Brokers Power Hour webinar. This could leadto a claim called “failure to recommend,” he explained, andincreased liability for the agent or broker in case of a loss.

Here are five property coverages that brokers may fail torecommend for their business customers.

Mistake 1: Failing to insure to 100% value and requestagreed value

A building worth $1 million could be subject to coinsurance of80%, for example, leading to a limit of $800,000. What happens atthe time of loss if the building has an actual value of $1.2million because of improvements and additions? The building owneris out $200,000.

Milton’s advice: “Always push for 100% value and request agreedvalue, which will suspend the coinsurance.”

AP Photo/Pat Sullivan

Mistake 2: Allowing the tenant to insure abuilding

If the tenant is the named insured and the building owner isadded as an additional insured, Milton explains, the owner could beexcluded for any loss if the tenant, its partners, members,officers or managers commits a dishonest act, such as arson forinstance. The dishonest acts could leave the building owner with nocoverage.

It’s much better, Milton says, for the building owner to carrythe insurance and build it into the tenant’s rent.

AP Photo/Noah Berger

Mistake 3: Failing to recommend building glasscoverage

Generally, a tenant is responsible for any building glassbreakage, Milton points out, but the tenant’s commercial propertypolicy covering business property doesn’t include building items,like glass. Even though the owner is insuring the building, it’simportant for the agent to recommend a building glass endorsementto the tenant’s policy.

Mistake 4: Failing to cover improvements and bettermentsadequately

Milton explains that improvements and betterments, although madeat the tenant’s expense, become part of the building. Theimprovements are included in the definition of “building” in theowner’s commercial property policy and also are included in thedefinition of “business personal property” in the tenant’scommercial property policy.

Who insures? Because the improvements usually are attached tothe property and increase the value of the building, Miltonrecommends that the owner increase its insurance to cover anyimprovements.

AP Photo/Nam Y. Huh

Mistake 5: Failure to advise the insured about theoccupancy and vacancy issues with builder’s riskpolicies.

“Occupancy in whole or in part voids the policy,” Milton says.But building owners don’t like vacant buildings. Carriers may givethe insured permission to occupy parts of the building asconstruction is completed, moving in floor by floor, with anendorsement and an additional premium. But this permission isusually only good for 90 days, and may need to be renewed asconstruction is completed.

A related issue is the question of vacancy. “If the building isless than 31% occupied for customary operations, it’s consideredvacant,” explains Milton. In the current economic times, tenantsmay move out leaving a building at less than 31% occupied, butstill partially rented. The broker renews the policy withoutknowing whether the building is fully occupied or not; however, ifthe building is considered vacant for more than 60 days, the ownerwill lose coverage. In that case, the policy may not pay for anyloss caused by vandalism or sprinkler leakage, for example, andother covered losses are reduced by 15%.

Jerry M. Milton, CIC, teaches and consults on industry issues.The legal profession recognizes him as an expert on insurancecoverages. He is also the education consultant for Insurance Agents& Brokers (IABforME.com), working with CISR, CIC and continuingeducation programs.

This information originated from the Insurance Agents &Brokers Power Hour webinar, presented Nov. 24, 2014. InsuranceAgents & Brokers is the partnership of independent agents'associations in Delaware, Maryland and Pennsylvania. Learn more atIABforME.com.