The current pandemic is wreaking havoc among small businesses the length and breadth of the country. Many are closing down until a particular re-opening date or indefinitely while others are preparing to shut altogether.
If you are in the position of your business closing down or about to shut, however, it is important to recognise that not everything comes to an abrupt stop when you close your doors – least of all, your need for unoccupied commercial property insurance.
Leeway granted by some insurers
In the immediate months following lockdown and the shutters going up on practically every business premises, some insurers granted temporary flexibility with respect to policy provisions about unoccupied commercial property.
On the 6th of April 2020, the Insurance Times, for example, reported that three major insurers had extended the period after which premises are considered to be unoccupied from the normal 30 days to between 60 and 90 days.
The extension is important because once commercial premises are considered to be unoccupied, insurers typically restrict cover or even regard it as lapsed altogether.
Their reasoning for such restrictions is based on the significantly increased risks to the building and its contents when the property is unoccupied. As security firm the Business Watch Group warned on the 24th of March 2020, squatting, vandalism, and arson are likely to increase while businesses are closed during the pandemic and police resources are stretched elsewhere.
For that reason, you may have chosen to contact us about the need for unoccupied commercial property insurance.
Although some insurers may have extended the period after which your own premises are likely to be considered, however, remember that not all insurers might have been so flexible – and, in any case, if your business remains closed or shut down, the premises are soon likely to have exceeded any new 60 or 90-day period.
To ensure that you maintain adequate protection for the structure and fabric of your business premises and its contents – the equipment, machinery, furnishings, and fittings, not to mention your stock in hand – you are still likely to need unoccupied commercial property insurance. Even if you are closing down for good, you may still have business premises and their valuable contents to protect.
But even with that protection of unoccupied property insurance in place, you still have a responsibility towards the insurer for mitigating any loss or damage – so there remain certain precautions you need to take.
If you employed any staff to help run your business and whether they are now furloughed or you have already let them go, remember your continuing obligations towards them as an employer. It is essential to maintain your employers’ liability insurance to meet any claims from employees and former employees who may have been injured or contracted a long-term illness whilst in and due to your employment.
As soon as you close the doors on your business whether it is temporarily closing down or shutting up shop for good, here is a suggested checklist – which may vary, depending on the policies of your particular insurer and any unoccupied property insurance you might arrange:
- notify your insurer, or insurance broker, that your business premises are about to become empty and unoccupied;
- as we have explained, after a certain period your insurer may regard this as a material change of risk – an empty property is more vulnerable than one normally occupied by an active business – and may need to respond with specific conditions, an increase in premiums, a variation of the risks covered, or other general exclusions;
- you have a responsibility for ensuring that the building is secure against intruders, vandals, and thieves – test any intruder or burglar alarms and check regularly that they continue to function as intended;
- regular safety and security inspections are critical to your mitigation of risks – these are likely to be most effectively and efficiently done by a specialist property management company and your insurers might also require that a written record or log be kept of those inspection visits;
- consider the disconnection or isolation of non-essential power services and utilities;
- regularly flush out and monitor the temperature of water outlets (at hand basins, sinks, showers, toilets, and so on) to prevent the accumulation of stagnant water or the growth of bacteria such as Legionella;
- seal up the letterboxes in your building and dispose of all rubbish and any unused combustible materials;
- remember that you continue to have a duty of care, and potential legal liability, towards anyone on your premises, including those who might have gained unauthorised access – so be sure that any insurance includes property owner’s liability indemnity cover.
Closing your business – even temporarily – may be a heart-breaking decision, but you are likely to have a continuing financial interest in the premises occupied by your enterprise and the contents on which you once relied. Unoccupied commercial property insurance is likely to be required to maintain protection of these assets.