Canadian Underwriter

How to help commercial clients during mandatory business shutdowns

March 31, 2020   by Jason Contant

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As non-essential businesses shutter across Ontario, your commercial business clients can take a few common sense preventative measures to help ensure their insurance coverage remains in place and facilities are maintained.

To further contain the spread of COVID-19, Ontario Premier Doug Ford announced the mandatory closure of all non-essential workplaces effective Mar. 24 at 11:59 p.m. for 14 days, and possibly longer. (Insurance, along with a variety of other services, are deemed essential.)

But for commercial clients, the shutdowns come with insurance implications: Most commercial property policies have a 30-day vacancy or idle exclusion, meaning that losses or damage to property are excluded if the property is vacant or idle for more than one month.

It’s usually not black-and-white like that, noted Dom Lopes, assistant vice president of first party and risk control services with RSA Canada. And in light of the coronavirus pandemic, many insurers will likely be more flexible with coverage restrictions.

“We’re certainly not going to be lax on that; we’re going to do it case-by-case,” Lopes said of the 30-day period. “We understand the circumstances [that business clients] are in, but we also expect [that] insureds are going to do everything they can to secure the sites appropriately. We are talking about such a broad spectrum of companies, with thousands and thousands of locations.”

The sign in a window shows a store is closed in Ottawa, Monday March 23, 2020. Ontario Premier Doug Ford announced he would close all non-essential businesses. THE CANADIAN PRESS/Adrian Wyld

RSA is working with its broker partners to provide business owners and site supervisors some precautions they can take to protect their idle properties during a COVID-19 shutdown, and to help prevent claims and losses.

One key area of focus is sprinkler protection. Insureds should be making sure that sprinklers have the proper controls in place; that their pressures and temperatures are normal; and that they are being monitored correctly.

“The biggest concern when you have these idle, vacant facilities is water losses and water issues,” Lopes explained. Currently, he said, “we’re at a pretty good spot in the year” for water losses given the temperature.

Another consideration is daily visits to the site, just to make sure nothing looks unnatural or abnormal; this could be done simply by driving past the site. Lopes understands this may be difficult in the age of social distancing and if more stringent restrictions are put in place by provincial or federal governments. “We want to make sure they don’t have garbage hanging around or storage up against buildings.”

Lopes recommends:

  • keeping items 25 feet (about eight metres) away from the building
  • making sure there are working lights around the facility and entrances
  • securing and, if possible, blocking off parking lot areas
  • securing and locking the site

“We’re talking about idle buildings and factories and manufacturing and properties here, but also construction sites,” he said as examples.

Related: Why it matters that insurance is declared to be an “essential service”

Some companies will be very diligent taking precautions to protect their properties, but other less sophisticated clients may not even be thinking about precautions. For example, larger commercial clients may have maintenance people or security guards on site, or put in CCTVs or monitoring stations. “It also depends on individual provinces and the federal government, if they mandate that people have to be away,” Lopes added.

Once these government restrictions are lifted and non-essential businesses go back to business, they need to take the proper steps to follow start-up the business and not create other issues or losses, Lopes warned. Some facilities are very large, with complex systems and production lines that need a systematic approach to shutting down and starting up.

“If this goes on for two, three, four months, and you go back to a plant that hasn’t been worked on in months, they’ve got to check all the boxes to make sure they follow proper protocol as to how to start the business up,” Lopes said.

“Our main focus is just to help all our clients try to refresh and make them think about actions or items they need to consider before they abandon the facility or idle the facility. There’s always insurance implications.”

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