Commercial property insurance can be written by Admitted insurers and Surplus Lines insurers who are authorized to conduct business in Florida. Admitted insurers are those who are granted a Certificate of Authority by the Florida Office of Insurance Regulation (FLOIR) and the Surplus Lines insurers are granted a Letter of Eligibility. The major difference between the two is Surplus Lines insurers are not required to file their rates and forms with the FLOIR for approval. Another major difference is Surplus Lines insurers do not participate in the Florida Insurance Guaranty Fund. This means if a Surplus Lines insurer becomes insolvent, the policyholder is not protected under the fund. The forms and rates used by Surplus Lines insurers can be very different from those offered by the Admitted insurers and may contain unique exclusions and policy conditions. This allows the Surplus Lines policies to be tailored to cover unique risks which the Admitted insurers may be unable or unwilling to cover. Many Surplus Lines policies also contain a minimum earned premium provision which is retained by the insurer regardless of when the policy is cancelled.

Business Owners Policies (BOP)

Most companies who write commercial insurance, offer special policies that cater to small and medium sized businesses.  These are called “Business Owners Policies”.  These combine property and liability coverages and mostly include sub limits for several types of common coverages needed, such as business income, extra expense, crime, hired and non-owned automobile liability and employee dishonesty.  

Some companies may offer additional coverages which can be added to their base BOP policy.  These optional coverages may include cyber liability (covering data breaches and cyber-attacks); professional liability (covering liability arising from the professional services rendered), employment practices liability (covering liability arising from employment related issues like discrimination, wrongful termination and harassment).

Workers Compensation Insurance

Workers Compensation insurance covers work related injuries and illnesses suffered by an employee.  It pays the injured or ill employee’s wages and medical expenses based on a certain schedule.

Florida law requires certain types of businesses and/or businesses employing above a certain number of employees, to purchase WC coverage.  To verify whether or not you are required to carry this coverage, please visit Florida Workers Compensation.

Commercial Property coverage can be provided through a stand-alone (monoline) policy or written as part of a package policy providing various types of coverage, including general liability. The most common package policies providing commercial property coverage are the Commercial Package Policy (CPP) and the Business Owners Policy (BOP).

The BOP combines, in a simplified manner, most of the property and liability coverage, other than auto and workers compensation, needed by small and medium sized businesses such as stores, offices, restaurants and artisans.

The CPP includes several different coverage parts, many of which are selected by the insured. The basic components of the property coverage part are:

1. The Commercial Property Declarations
2. One or more commercial property coverage forms
3. One or more causes of loss forms
4. Commercial Property Conditions
5. Any applicable endorsements

The Commercial Property Declarations: This is a required component that provides basic information about the policyholder and the insurance provided. It contains the following information that specifically pertains to the property insured:

• A description of the property insured
• The kinds and amounts of coverage provided and the covered causes of loss (Basic, Broad, or Special)
• A list of mortgagees and lienholders, if any
• The deductible amount
• A list of the property coverage forms, and endorsements attached to the policy
• The applicable coinsurance percentage(s)
• Any optional coverages

Commercial Property Coverage Form: These forms can be any of the several commercial property forms containing an insuring agreement and related provisions, for instance, a Builders Risk Coverage Form may be added to cover buildings under construction and a Condominium Coverage Form may be used to cover condominium associations. Each commercial property coverage form contains the following elements:

• Insuring agreement
• Delineation of the property covered and not covered
• Additional coverage and coverage extensions
• Provisions and definitions applicable to the the coverage form

Cause of Loss Form: This is a required component of the commercial property coverage that specifies the perils (causes of loss) covered. The three forms typically available are Basic, Broad, and Special. These allow the insured to select, and the insurer to offer, a range of covered perils and the Basic Form covers the least number of perils, and the Special Form covers all perils that are not specifically excluded.

Commercial Property Conditions: This is a required component of the Commercial Property Coverage part. It contains conditions applicable to all Commercial Property Coverage forms. The Conditions are typically printed as a separate form and apply to all coverage forms included in a commercial property coverage part, unless a coverage form contains a condition to the contrary. The Commercial Property Conditions are not required to be restated in each coverage form.

Endorsements: Several endorsements are available to tailor commercial property coverage to meet the specialized needs of an insured or to eliminate exposures that underwriters are not willing to insure. This is not a complete list of endorsements available. A few of the most common endorsements are:

• Ordinance or Law Coverage: An endorsement that generally covers three types of losses resulting from the enforcement of building ordinances or laws: (1) the rebuild cost of the undamaged portion of a building that must be demolished, (2) the cost to demolish the building’s undamaged portion, and (3) the increased cost to rebuild the property.

• Spoilage Coverage: An endorsement that covers loss of perishable stock due to power outages; on premises breakdown; or contamination of the insured’s refrigerating, cooling, or humidity control equipment.

• Flood Coverage: The National Flood Insurance Program underwrites most insurance in high-risk zones. This is a federal program. However, private insurers offer flood insurance by endorsement or as stand-alone policies for some properties. In some cases, the private insurer may provide only excess flood insurance.

• Manufacturers’ Consequential Loss Assumption: This endorsement is typically used to cover the reduction of value of the undamaged stock when a portion of the stock is damaged from a covered cause of loss.

• Brands and Labels: An endorsement that permits the insured, when the insurer takes damaged merchandise as salvage, to stamp the word “salvage” on the merchandise or to remove its brands or labels before sale to mitigate the possibility of injury to the insured’s business reputation resulting from the sale of salvaged goods by the insurer.

• Earthquake and Volcanic Eruption Coverage: Both endorsements extend coverage to property damage from earthquake and volcanic eruption.

• Coverage for Unattached Signs: Most commercial property policies do not cover or provide limited coverage for signs not attached to the insured structure. Coverage may be added by endorsement or may be purchased on a separate Inland Marine insurance contract. The Signs Coverage Form normally covers neon, fluorescent, electronic or mechanical signs.

• Utility Services Endorsement: These provide coverage for losses due to the interruption of power, even if the interruption occurs away from the insured premises. In most cases, the cause of the power interruption must be covered by the policy and there is normally a waiting period.

• Newly Acquired Locations: Automatically extends coverage to properties acquired during the policy period. The policyholder must inform the insurer of the acquisition. Often this coverage is limited to a specified amount and for a specific number of days.

Business Income Insurance covers a reduction in income for a specified period when operations are interrupted by damage to property caused by a covered peril.

Extra Expenses insurance covers additional expenses incurred by an organization to continue their normal operations after a covered loss, such as cost of temporary relocation or leasing of additional equipment. There is typically a specified limit, stated as a percentage or an amount.

Extended Extra Expense Coverage endorsement pays for extra costs incurred by a business to continue their operations for a specified period and up to a stated limit, after the operations resume. 

Business income insurance can be purchased with or without extra expense coverage. It covers loss of business income from a covered peril, for a specified length of time. There may be maximum monthly limits and a maximum period of indemnity such as a certain number of days or up to a year.

There are several endorsements that allow a business to tailor coverages to their needs. Some of these are described below:

• Civil Authority endorsement provides coverage for loss of business income incurred when access to the premises covered by the policy is denied by civil authority because of damage to a property other than the insured's. Coverage is typically provided for a specific time after a waiting period. 
  

• Alterations and New Buildings form typically provides coverage for business income losses resulting from a delay in starting operations if the delay results from damage at the described premises by a covered cause of loss to any of the following:
  • New buildings or structures, either completed or under construction
  • Alterations or additions to existing buildings
  • Machinery, equipment, supplies, or building materials located on or within a certain distance of the described premises (provided they are used in the construction, alterations, or additions or are incidental to the occupancy of new buildings)

• Interruption of Computer Operations: This endorsement provides coverage for loss of business income or extra expense when business operations are suspended due to an interruption of computer operations resulting from the destruction or corruption of electronic data caused by a covered cause of loss.
  

• Utility Services: This endorsement extends the policy to cover loss of earnings resulting from off-premises interruptions of utilities and communications services.

Other Optional Coverages:

• Maximum Period of Indemnity: An option that deletes the coinsurance clause while limiting loss payment to the lesser of (1) the amount of loss sustained during a certain number of days (typically 120) following the beginning of the period of restoration or (2) the policy limit.

• Monthly Limit of Indemnity: An option that deletes the coinsurance clause while limiting the amount recoverable during any month of business interruption to a stipulated fraction (1/6, 1/4, or 1/3) of the insurance amount.

• Business Income Agreed Value: An option that suspends the coinsurance clause providing a limit of insurance agreed upon by the insured and the insurer.

• Contingent Business Interruption: This covers loss of income resulting from physical damage to property not owned by the insured.

• Ordinance of Law: An endorsement that covers business income loss during the additional time required to comply with building ordinances or laws.

Commercial property insurance rates are based on several factors:

• Limit of Insurance: The limit of insurance applicable to the coverage.

• Covered Causes of Loss: The selections offer several sets of covered causes of loss or perils, generally classified as Basic, Broad or Special forms. Typically the Basic form covers 11 perils. The Broad form adds an additional 6 perils that would be covered. The Special form does not specifically list the perils. Instead, it provides an “all risk” coverage unless specifically excluded.  

• Coinsurance Percentage: A coinsurance clause requires that the property be insured for a specific percentage of its value to avoid coinsurance penalty in claim payments. For example, an 80% coinsurance clause would require a $1,000,000 building to be insured for at least $800,000. If the building is insured for a value lower than $800,000, then the claim payment will be reduced. For example, if the building is insured at $700,000 and the incurred loss, after deductible, is $100,000, then the loss payment will be reduced to $87,000. The reduction in the claim payment is calculated by dividing the $700,000 (the actual coverage limit) by $800,000 (the required coverage limit) and multiplying the resulting fraction of .875 by the total claim of $100,000. 

  Most policies are rated with 80% coinsurance clause. The higher the coinsurance percentage, the lower the rate will be.

• Deductible Amounts: Policyholders willing to self-insure some of the smaller losses by choosing a higher deductible, will receive a lower rate.

• Optional Coverage: The more optional coverages are selected, the higher the premium.

• Building Construction: Some construction types are more fire and/or wind resistive than others, therefore the rates would depend upon the likelihood of losses among different types of construction features. For example, a masonry noncombustible building would be cheaper to insure than a wood frame building.

• Building Occupancy: The occupancy refers to the type of activity conducted inside the building. A high hazard occupancy will necessitate higher rates than a low hazard occupancy. For example, a building where fireworks are manufactured will cost more to insure than a building used to store nonperishable food.

• Building Protections: A building with better protections against a likelihood of loss would have lower premium rates. For instance, protection systems like sprinkler or a burglar alarm are expected to reduce the severity or possibility of loss.

• Building Location: The location of a building also impacts the rates. As an example, for windstorm coverage, a building along the coastline would cost more to insure than a building located inland close to a fire station and a hydrant.

An insurance company may use a rate in excess of the rate approved by FLOIR. This is allowed under s. 627.171, Florida Statutes. This mechanism is used to rate policies where the type or the degree of loss exposure is perceived to be more severe than the Admitted insurer's approved rates or acceptable underwriting standards.

This is only allowed with a signed consent of the insured. The consent form must include the rate filed with the FLOIR and the proposed excess rate. The Admitted insurer must maintain a copy of the signed consent form for 3 years and must make it available for review by the FLOIR.

An insurance company may not use a consent to rate form for more than 10% of its commercial insurance policies written or renewed in each calendar year.

An insurer's notice of cancellation or non-renewal must be provided to the first named insured. The non-renewal or cancellation schedule for a Commercial Property policy is specified in sections  627.4133 or 626.9201, F.S., depending upon whether the policy is issued by a Surplus Lines and whether the policy is written for a commercial risk or a commercial residential risk. Additional requirements apply to policies underwritten by the Citizens Property Insurance Corporation (CPIC). 

For Commercial Property Policy Not Covering Commercial Residentials Risks:

An Admitted insure must provide a:

• 45 days advance notice of non-renewal or cancellation, after policy has been in effect over 60 days.
• 10 days advance notice for non-payment of premium.
• 20 days advance notice if cancelled within the first 60 days.

After the policy has been in force for 60 days or more, the contract cannot be cancelled except in the case of a material misstatement, a non-payment of premium, a failure to comply with an underwriting requirement established within the first 60 days, or a substantial change in the risk. This does not apply to a policy which is specifically rated having a policy term of less than 90 days.

For Citizens Property Insurance Corporation: 

The same requirements as above apply, except for risks that prior to the date of application were most recently insured by an insurer that has been placed in receivership. CPIC may immediately cancel a policy that has been in effect for 90 days or less for material misrepresentation or failure to comply with the underwriting requirements which were established before the inception of coverage.

For Commercial Residential Policies Underwritten by Admitted Insurers: 

Examples of such risks are buildings owned by a residential condominium association or an apartment building. For these risks, an Admitted insurer must give:

•  120 days advance notice before the effective date of the nonrenewal or cancellation.
•  10 days advance notice for non-payment of premium.
•  20 days advance notice if cancelled within the first 60 days.

After the policy has been in force for 60 days or more, the contract cannot be cancelled except when there has been a material misstatement, a non-payment of premium, a failure to comply with an underwriting requirement established within the first 60 days, or a substantial change in the risk. This does not apply to a policy having a term of less than 90 days that are specifically rated.

Upon declaration of an emergency pursuant to s. 252.36 F.S., and an order filed by the Commissioner of FLOIR, an Admitted insurer is prohibited from canceling or non-renewing a commercial residential property insurance policy for a period of 90 days after the property has been repaired, if the property has been damaged as a result of a hurricane or wind loss that is the subject of the declaration of emergency. The property is considered repaired when it has been substantially completed and restored to the extent that it is insurable by another insurer writing policies in Florida.

For Commercial Policies underwritten by Surplus Lines insurers:

• 45 days advance notice of non-renewal or cancellation, after policy has been in effect over 90 days. The notice must state the reasons for non-renewal or cancellation.
• 10 days advance notice for non-payment of premium.
• 20 days advance notice if cancelled within the first 90 days.

The Surplus Lines insurer must give a reason for cancellation except if there has been a material misstatement or misrepresentation or failure to comply with the underwriting requirements established by the insurer.

Upon declaration of an emergency pursuant to s. 252.36 F.S., and an order filed by the Commissioner of FLOIR, a Surplus Lines insurer is prohibited from canceling or non-renewing a commercial residential property insurance policy for a period of 90 days after the property has been repaired, if the property has been damaged as a result of a hurricane or wind loss that is the subject of the declaration of emergency. The property is considered repaired when it has been substantially completed and restored to the extent that it is insurable by another insurer writing policies in Florida.

• Upon 10 days’ notice for nonpayment of premium,
• Upon 45 days’ notice for a material misstatement or fraud related to the claim, an unreasonable delay in the repair of the property by the insured, if the insured has paid the policy limits or if a reasonable inquiry has been made to the insured about the status of the repair and the insured does not respond within 30 days. 

Per s. 627.43141, F.S., an Admitted insurer may change the policy terms at renewal. If a renewal contains such a change, the Admitted insurer must give the named insured a written notice of the change. This notice may be included with the notice of renewal premium required by s. 627.4133, Florida Statutes. The Admitted insurer must also provide a sample copy of the notice to the named insured's insurance agent before or at the same time the notice is provided to the named insured. The notice must be in in bold type of at least 14 points and entitled "Notice of Change in Policy Terms".

A renewal policy, which includes the addition of optional coverage that increases the premium to the insured, may not use the "Notice of Change in Policy Terms" to add the optional coverage to the policy unless the insured affirmatively indicates to the insurer or agent that they approve the addition of the optional coverage. Optional coverage is defined as the addition of new insurance coverage that has not previously been requested or approved by the policyholder.

Although not required, a proof of mailing or registered mailing through the US Postal Service of the "Notice of Change in Policy Terms" to the named insured at the address shown in the policy is sufficient proof of notice.

Receipt of the premium payment for the renewal policy by the Admitted insurer is deemed to be acceptance of the new policy terms by the named insured.

If an Admitted insurer fails to provide the required notice, the original terms remain in effect until the next renewal and the proper notice is given, or until the effective date of replacement coverage obtained by the insured, whichever occurs first.

Please note: "Change in Policy Terms" means the modification, addition, or deletion of any term, coverage, duty, or condition from the previous policy. The correction of typographical or scrivener's errors or the application of mandated legislative changes is not considered a change in policy terms.

The intent of this law is to allow an Admitted insurer to make a change in policy terms without having to non-renew the policies. Additionally, it alleviates concern and confusion to the insureds caused by the required policy non-renewal notices if the Admitted insurer intends to renew the insurance policy, but the new policy contains a change in policy terms. This notice also intends to encourage the insureds to discuss their coverage with their insurance agents.

The Florida statute (section 627.4133) requires an Admitted insurer to give a 45 days’ advance notice of renewal premium if the coverage is for a commercial residential policy. The notice must specify the following:

• Any dollar amounts recouped for assessments by the Florida Hurricane Catastrophe Fund, the Citizens Property Insurance Corporation and the Florida Insurance Guaranty Association.  The actual names of these entities must appear next to the dollar amounts.
• The dollar amount of any premium increase that occurs due to a rate increase approved by the Florida Office of Insurance Regulation.
• The dollar amount of any premium increase that occurs due to changes in coverages.  

Underwriting guidelines vary among insurers. However, below are a few of the most common factors an insurer considers when determining whether to insure a new property or how much to charge. They also use these same underwriting factors to determine whether to offer a renewal policy.

The insurer may consider the age of the building, roof, plumbing, electrical wiring and the heating and air conditioning units. They consider the condition and location of the property and who occupies it. They may refuse to insure certain types of businesses.

The loss history of the applicant is also considered. If the insurer makes an underwriting decision based on adverse information contained in a credit report, they must furnish the insured with a copy of the report or provide the name, address, and telephone number of the reporting agency.

Verify before you buy! Before you sign the application for a policy, verify the agent is licensed in Florida by searching online at licenseesearch.fldfs.com and check the status of the insurance company by clicking the "Company Search" link located at the bottom of the Consumer Services website: MyFloridaCFO.com/Division/Consumers/Home.

Make sure your business is properly insured! If you have a replacement cost policy and fail to maintain the proper amount of insurance, you may be penalized when filing a claim. Make sure your inventory is accurate. If the inventory fluctuates during the year, notify your agent.

Read your policy carefully! Insurance policies differ between insurance companies so you must review your own contract. Insurance policies do not cover everything, read the exclusions. Also, there are limitations on certain types of property. Talk to your agent about additional coverage.

Keep a copy of your important documents in another location! In the event your documents are destroyed, you would have copies including receipts you may need to settle a claim with your insurance company.

For additional information on various insurance subjects, visit the Divisions website at MyFloridacCFO.com/Division/Consumers/Home.

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