Commercial Property Insurance Claims: 9 Lessons From Nearly 20 Years of Experience

9 Lessons for Commercial Property Insurance Claims

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A large commercial property insurance claim is rarely just an insurance problem. It can quickly become a construction project, a financial problem, a business interruption issue, and sometimes a coverage dispute, all happening at the same time.

After over 20 years handling property insurance claims, one thing I have learned is that the outcome of a commercial claim is often influenced by a series of decisions made throughout the process. Some of the most important decisions happen within days of the loss, long before anyone knows what the final claim will be worth.

I also want to be clear about something. I don’t believe every insurance company is trying to underpay every claim, and I don’t believe every property owner needs a public adjuster. What I do believe is that everyone involved in an insurance claim has a different role and responsibility. Understanding those roles, developing a plan, and knowing when to bring in the right professionals can make a significant difference.

These are the nine lessons I have learned representing commercial property owners through fire, water, wind, storm, business interruption, and other complex insurance claims.

1. Understand Who Represents Whom
2. The First Few Days Are About Developing a Plan, Not Just Moving Fast
3. Mitigation Is Not Reconstruction
4. A Commercial Building Is a System, Not a Collection of Estimate Line Items
5. Coverage Decisions Should Start With Facts, Not Arguments
6. Commercial Business Interruption Insurance Claims Are More Than Averaging Historical Revenue
7. Knowing Which Expert to Hire, and When, Is Part of Adjusting the Claim
8. Not Every Claim Needs a Public Adjuster
9. The Best Time to Understand Your Insurance Policy Is Before the Loss
10. Frequently Asked Questions

1. Understand Who Represents Whom

One of the biggest misconceptions I see is the assumption that everyone involved in an insurance claim is working toward the same objective.

They aren’t, and that isn’t necessarily a criticism of anyone involved.

The insurance company’s adjuster is there to investigate and adjust the claim on behalf of the insurance company. Your insurance agent or broker is there to help you purchase and maintain your insurance. A restoration contractor is there to perform work on the property. Engineers, industrial hygienists, accountants, and other professionals each have specific assignments.

A public adjuster has a different role. We are licensed to represent the policyholder in the adjustment of the property insurance claim. We represent you the owner.

This distinction becomes especially important with contractors. A contractor can inspect the property, develop a scope of work, and prepare an estimate reflecting what they are willing to perform the work for. But a contractor’s estimate is not the same thing as adjusting the insurance claim.

Insurance companies may recommend contractors or maintain preferred vendor programs. A recommendation does not mean that the contractor represents the property owner in the adjustment of the claim. Before hiring anyone, I encourage owners to understand who selected the contractor, what work is authorized, who is responsible for payment, and whether the proposed mitigation approach is appropriate for the building and was approved by their insurance adjuster. The policy, applicable law, and any emergency circumstances can affect the owner’s options. The important thing is to make an informed decision rather than assume a recommended contractor is the only available choice.

Property owners should understand everyone’s role before relying on their advice.

I’ve seen claims slowly get off track because the owner assumed the carrier’s adjuster, agent, contractor, and insured were all working toward exactly the same objective. They may all be professional and well-intentioned, but their responsibilities are different as is their loyalties.

Understanding that at the beginning of a claim can prevent a lot of confusion later.

2. The First Few Days Are About Developing a Plan, Not Just Moving Fast

Commercial property owners have an obligation to protect their property from additional damage. If water is entering a building, it needs to be addressed. If a structure needs to be stabilized, it should be stabilized.

But urgency shouldn’t eliminate planning.

One of the most important things I try to accomplish early in a significant commercial loss is establishing an agreed-upon process wherever possible.

I represented a hotel that experienced a relatively small fire, but the sprinkler system discharged for several hours. The resulting water damage was substantially more significant than the fire damage.

Rather than simply allowing demolition and drying to proceed without a defined protocol, the carrier’s adjuster and I discussed bringing in an independent industrial hygienist. We discussed several professionals and ultimately agreed upon someone I knew to be knowledgeable and straightforward.

We then documented that agreement.

That decision changed the direction of the claim. The industrial hygienist provided the technical guidance for the mitigation and remediation process. The contractor wasn’t deciding what should come out. I wasn’t making that determination. The property owner wasn’t being forced to make it. And the insurance company wasn’t making the technical determination by itself.

We had a qualified third party providing the roadmap.

Whenever possible, I prefer to establish these processes early and document them in writing. When immediate action is necessary and the insurance company hasn’t responded or cannot get someone to the property quickly enough, document that as well and take reasonable steps necessary to protect the property.

The important thing is to have a plan.

3. Mitigation Is Not Reconstruction

This distinction causes more problems than many property owners realize.

Mitigation is about stopping the progression of damage. Reconstruction is about permanently restoring the property.

Those are not the same thing.

After a water loss, mitigation may involve extracting water, removing materials that cannot reasonably be dried, placing drying equipment, or opening areas necessary to address trapped moisture. After a fire, it may include securing the building, protecting it from weather, and addressing immediate hazards.

Reconstruction is different. That’s when you determine the complete repair scope and the reasonable cost of restoring the property.

I frequently become involved in claims months after a loss where the owner has already completed substantial repairs and spent significantly more money than the insurance company has paid. Now we’re trying to work backward through invoices, photographs, estimates, and completed construction to establish what was damaged and why certain work was necessary.

That is much harder than documenting those issues before reconstruction.

Supplemental claims are normal. There will always be conditions that cannot be identified until construction begins. But that doesn’t mean the entire repair should be treated as one giant future supplement.

My preference is to establish as complete and well-supported a scope of damage as reasonably possible and resolve as many significant differences as possible before committing to permanent repairs.

You have an obligation to mitigate additional damage. You generally don’t have an obligation to unnecessarily rush into reconstruction before the claim has been properly evaluated and agreed upon by the insurance company.

Your Property. Our Priority.

4. A Commercial Building Is a System, Not a Collection of Estimate Line Items

When our office receives a large commercial estimate, one of the first things we do isn’t look at the total.

We look at the building.

If an estimating program was used, we may open the sketch and look at the three-dimensional model. Was the building drawn correctly? Are the dimensions right? Are the assemblies accurately represented?

Then we begin comparing estimates by trade and identifying where the largest differences exist.

Sometimes the issue is pricing. We check whether appropriate pricing for the geographic area and relevant period is being used.

Sometimes something is simply missing.

But frequently the disagreement is more fundamental: Can something actually be repaired as proposed, or does the damaged system require replacement?

We represented a large apartment property that sustained substantial wind damage affecting its roof system. One proposed repair involved replacing only part of what had previously functioned as a continuous roof system and creating a transition within the roof.

That might reduce the immediate cost, but it also changes the existing roof assembly and introduces additional transition points that did not previously exist.

That’s not simply a question of whether one roofing line item costs $8 or $10 per square foot. The real question is whether the proposed scope properly restores the damaged building system.

We see similar issues with project supervision. Commercial projects can involve multiple trades, tenants, phasing, inspections, temporary protection, safety requirements, scheduling, and substantial coordination. The supervision required for a complex commercial reconstruction project can be very different from a relatively simple residential repair.

A good estimate should ultimately answer a simple question:

Does this scope actually restore the property properly?

5. Coverage Decisions Should Start With Facts, Not Arguments

Commercial property policies are complicated. They are generally written broadly and then modified by exclusions, limitations, conditions, endorsements, and exceptions.

One of the most misunderstood areas is water damage.

People sometimes assume that if water damaged their property, they have a covered water claim. That isn’t necessarily the case.

Insurance isn’t intended to function as a maintenance or warranty program. A pipe that suddenly bursts and damages a building presents a very different set of facts from a sink that has slowly leaked for a year and eventually damages the cabinets below it.

When a coverage disagreement arises, one of the biggest mistakes I see is people trying to anticipate where the insurance company is going and immediately sending everything they can think of to argue their position.

I generally prefer a more deliberate approach.

First, understand the carrier’s position.

I handled a water claim that had been denied based on alleged long-term water damage. Photographs showed significant mold growth, which was part of the basis for the carrier’s conclusion.

Instead of immediately arguing about the mold, I asked the carrier to provide the detailed factual and policy basis for its coverage determination and identify the information relied upon.

We then developed the facts.

We knew someone had occupied the property approximately 10 days before the damage was discovered. We obtained information from the person who had been there before the loss and the person who discovered it, establishing a much tighter timeline. We also addressed the assumptions being made from the observed conditions.

We presented the evidence and asked the carrier to reconsider its position.

Ultimately, coverage was accepted.

The lesson wasn’t that we “beat” the insurance company. The lesson was that we first identified the actual coverage issue and then developed evidence that addressed it.

Build the facts first. Then apply those facts to the policy.

6. Commercial Business Interruption Insurance Claims Are More Than Averaging Historical Revenue

Commercial business interruption insurance claims, often called business-income claims, can become some of the most complicated parts of a commercial property loss. The coverage, period of restoration, applicable waiting periods, and policy limitations all matter.

At its core, the question is relatively simple:

What would this business reasonably have done if the loss had never occurred?

Answering that question isn’t always simple.

Historical financial statements are obviously important, but they don’t necessarily tell the entire story.

We represented a hotel where the business-income evaluation relied heavily on averaging approximately three years of historical monthly revenue. On the surface, that sounds reasonable.

The problem was seasonality.

The hotel was experiencing its interruption during its peak season. Averaging peak and off-season periods together did not accurately reflect what the property reasonably would have generated during the affected period.

The opposite could also be true. If the loss occurred during the hotel’s slowest season, using peak-season performance without adjustment could improperly benefit the insured.

The objective isn’t to find the calculation that produces the largest number. It’s to develop the calculation that most accurately reflects what probably would have occurred.

The same issue arises with growing businesses. If a company has been consistently trending upward, simply averaging several prior years may ignore meaningful changes in the business.

A properly presented business-income claim should tell the story behind the financial statements. Depending on the business, that might include seasonality, historical trends, reservations, contracts, recent improvements, changes in operations, or other information demonstrating where the business was headed before the loss.

The numbers matter. The story the numbers tell matters too.

7. Knowing Which Expert to Hire, and When, Is Part of Adjusting the Claim

Large commercial losses frequently require specialists.

Engineers. Industrial hygienists. Accountants. Roofing consultants. Building-envelope professionals. Environmental experts. Specialty contractors.

Simply hiring an expert isn’t enough.

Experience is knowing which expert you need, when you need them, and what you need them to determine.

The hotel water loss I mentioned earlier is a good example. I understood from the building assemblies that drying would be difficult. There were areas with multiple layers of drywall, insulated assemblies, and other conditions that complicated the mitigation.

I knew we needed an industrial hygienist.

Rather than immediately retaining someone solely on our side, I discussed the issue with the carrier. We talked through several potential professionals and agreed upon someone whose work I knew and respected.

That person became a significant part of moving the claim forward because the technical remediation decisions were now being made by an appropriate professional rather than debated among people with different roles in the claim.

The same principle can apply to structural engineers after a fire or other significant structural loss.

Sometimes bringing in the wrong expert, bringing someone in too early, or asking the wrong question can create another problem rather than solve one.

This is one of the areas where experience matters most. Knowing that you need an expert is relatively easy. Knowing who, when, and why takes years of handling claims.

8. Not Every Claim Needs a Public Adjuster

I run a public adjusting firm, and I’ll say this plainly:

Not every property insurance claim requires a public adjuster.

If you have a relatively small, straightforward water loss affecting a couple of rooms, you may be able to handle the claim directly with your insurance company. The same can be true for relatively minor wind damage or another uncomplicated loss where coverage and scope aren’t seriously disputed.

Commercial losses and large residential losses are different once the complexity and financial exposure increase.

When a claim involves hundreds of thousands or millions of dollars, substantial mitigation, complicated building systems, business interruption, coverage questions, multiple experts, or significant differences regarding the scope of repair, I believe there is substantial value in having experienced representation involved early.

One of the most difficult situations for our office is being retained after a claim has been underway for six months and significant problems have already developed.

By then, construction may be completed. Evidence may no longer exist. Experts may have issued reports. Money has been spent. Coverage positions have been established. Both sides may have become entrenched in their positions.

We can still help in many of those situations, but it is much harder to unwind a problem than to prevent it.

For a significant commercial property insurance claim, early representation allows a qualified public adjuster to help develop the claim strategy, coordinate the necessary professionals, document the loss, evaluate the policy and advocate for the policyholder before major decisions become irreversible.

9. The Best Time to Understand Your Insurance Policy Is Before the Loss

If I could convince commercial property owners to do one thing differently, it might be the simplest recommendation in this article:

Spend 30 minutes to an hour every year actually reviewing your insurance.

Too many insurance programs are renewed primarily based on premium.

The declarations page comes in. The renewal price looks acceptable. The policy renews.

That’s risky.

Make sure the named insured is correct. If the property has been transferred into a separate LLC or ownership structure, make sure the insurance program reflects it. Review the building limits. Look at deductibles. Understand business-income coverage. Review important sublimits and endorsements. Ask what has changed from the prior policy.

I’ve encountered commercial claims where the entity identified as the named insured no longer matched the entity holding title to the building. In one instance, we were ultimately able to establish the insured entity’s insurable interest and obtain coverage, but the discrepancy created a coverage issue that could have been addressed before the loss ever happened.

I’ve also recently gone through this exercise with insurance on my own property.

I asked my broker to shop the coverage and initially received basic declarations information. I compared the options but eventually requested the actual specimen policies. Once I reviewed the policy forms themselves, the differences between the options were substantial.

I’m seeing more limitations and restrictions in property policies today, which makes this review increasingly important. One example I am seeing more often is a very low (ie 10K) flat water damage limit.

Technology can help. AI tools can organize policy documents, compare forms, identify differences, and generate questions to discuss with your broker or insurance professional. I have used these tools when reviewing my own insurance. They shouldn’t replace professional advice or careful policy review, but they can make a comparison that once required hours of manual work substantially easier.

Don’t wait until there’s a million-dollar loss to discover what you purchased.

The Common Thread: Good Claims Require Good Decisions

If there is one theme connecting nearly 20 years of handling commercial property insurance claims, it’s that these claims are rarely won or lost because of one estimate, one meeting, or one disagreement.

They develop over time.

The decisions made during the first few days affect the mitigation. The mitigation affects the repair scope. The repair scope affects reconstruction. Coverage decisions affect what gets paid. Business-income decisions affect the financial recovery. The experts selected along the way can influence all of it.

That’s why I frequently tell clients not to rush simply because everyone feels pressure to do something.

Protect the property. Document the damage. Understand the policy. Establish the facts. Bring in the right professionals when they’re needed. Develop a reasonable scope. And whenever possible, resolve significant questions before making decisions that cannot easily be undone.

Sometimes the right answer is telling a client that an item isn’t supported. Sometimes it means correcting an inventory because the age or value of an item has been overstated. And sometimes we have to explain that a coverage position may be wrong, but the economics of litigating the issue simply don’t make sense.

The objective shouldn’t be to make an insurance claim as large as possible.

The objective should be to present the most accurate, well-supported claim possible and obtain what the policyholder is entitled to under the insurance policy.

That’s what good adjusting is supposed to accomplish.

About the Author

Justin R. Skipton, AIC, SPPA is a second-generation public insurance adjuster and Executive Vice President of Skipton & Associates, Inc. dba SKIPTON Claims Management. He has nearly 20 years of experience handling residential and commercial property insurance claims and has been involved in claims totaling more than $100 million. Skipton has served as President of the National Association of Public Insurance Adjusters (NAPIA) and currently serves as Immediate Past President. SKIPTON Claims Management represents policyholders in complex property insurance claims in Arizona and multiple states throughout the country

Frequently Asked Questions About Commercial Property Insurance Claims

If you’re dealing with a commercial insurance claim, we’re here to help. Whether it’s your home or your business, you don’t have to face the system alone.

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