Nationwide Insurance Commercial Customers Should Check Their Policies for Dependent Property Lost Income Coverage
Some insurance policies have small print that can provide significant business income benefits under "dependent properties" that usually go unnoticed following a widespread catastrophe. I would encourage Nationwide and Nationwide agents to write, advertise and call their Hurricane Ike and other commercial policyholder customers about these valuable benefits because it is obvious to me that their adjusters have no clue about what this benefit means and are ignorant to advise their own policyholders about it.
The sources for my information are former Nationwide Executive General Adjuster Scott Eich and Commercial Large Loss Adjuster Dennis James, as well as interviews with various Nationwide policyholders, adjusters and public adjusters. Eich told me of a story concerning the underpayment and ignorance by Nationwide adjusters and claims management concerning this form of coverage to a fast food franchise.
Apparently, nobody in the claims department at Nationwide taught its adjusters how to inform Nationwide policyholders about this very valuable coverage. Nationwide claims executives intentionally fail to teach their catastrophe and claims adjusters about how this obscure policy provision works.
Scott Eich should know. He was a Subject Matter Expert for Nationwide and helped develop commercial training at Nationwide Insurance Company until he left Nationwide in 2006.
In reflection, he said virtually every business owner that has lost income following a catastrophe should have a dependent property claim investigated because it probably is covered---regardless if the Nationwide customer suffered any physical damage at all.
The point I want to make is that as an obligation of good faith, an insurer must train its claims adjusters about the benefits of the policy so adjusters can intelligently investigate for those damages and inform the policyholder of the benefits. How fair would it be for an insurer to intentionally not train its adjusters so benefits are never paid, and allow otherwise recoverable benefits to go uncollected? This is the effective result of feigned ignorance at Nationwide because no claims personnel understood how the policy worked regarding this coverage. I am certain the underwriters knew and agents should know as well.
Thinking about Nationwide's general claim philosophies, I wonder how many millions (if not billions) of dependent business income coverage benefits have gone unclaimed from Hurricanes and other natural catastrophes over the past decade. I would not be surprised if some major class action law firms do not read this post and try to rectify this situation soon. Maybe Nationwide will contact their customers to correct this underpayment situation and make restitution to business policyholders in catastrophe areas.
Most commercial insurance companies write "dependent" or "contingent" business income coverage as additional coverage under an endorsement. Nationwide has it in the primary business policy, and it is not subject to any policy limits other than the loss of income be incurred within twelve months of the other person's damage.
The key to this type of coverage is to remember the Insurance Company pays its policyholder for its loss of income because of damage to other people's, businesses' and governments' real and personal property. Fulcrum consultants indicate this on its website:
Contingent Business Interruption
If your business has key suppliers or customers affected by a disaster, your business could have insurance for this business interruption. This is true even though your own business property may not have sustained physical damage. This frequently occurs because of (i) strategic supplier and customer relationships, (ii) outsourcing agreements, and (iii) just-in-time inventory systems. If included in your policy, contingent business interruption covers losses caused when key suppliers or customers experience a disaster that also affects your business. Contingent insurance occurs when the physically-damaged property is NOT owned, operated or controlled by the insured. The contingent property may be specifically named, or the coverage may blanket all suppliers and customers. The type and cause of physical damage must be the same as insured under the controlling policy. The actual coverage will depend upon your policy language...
The Nationwide policy provides the coverage on a blanket basis. Essentially, hurricane damage to property owned by others who are customers of Nationwide's policyholder which result in loss of income to the policyholder results in a covered claim. The definition of dependent property is very broad under Nationwide's policy. I am certain there are many business owners with Nationwide that have lost money in many catastrophe areas that are ignorant that their policy will help soften that financial blow
I agree many times carriers do not properly train adjusters and claims go unpaid becasuse of it. Now, so to speak, that the "cat is out of the bag" for Nationwide they may respond by reducing this coverage.
Prior to hurricance Andrew in 1992 the Businessowners policies of the time had no limit on how long one could collect buisness income, and it was on actual loss sustained. This was soon corrected to the 12 month limit in use now.
I suspect Nationwide will restrict their coverage for dependant properties to something liess than blanket suppliers.
Good article though.
Jim
Jim,
Even if the Nationwide Underwriters reduce the Coverage, it may have no impact on customers of Nationwide since they have not been getting paid for it in the past. Maybe they will have to start paying it more as a result of greater awareness by public adjusters, adjusters, and customers.
Nationwide has made many changes to its policy forms limiting coverage. For example, many Nationwide commercial policyholders now have to fight much harder to get paid for water damage because of small wording changes to its policy which other insurers do not have in their policy.
In my opinion, insurers should not be advertising about "full protection" when their policies are not providing for it or their adjusters are not trying to make that happen after the loss occurs.
A very valuable point this. I agree with Chip, full protection is a wording just waiting for someone to 'interpret'