It Was Not a Hurricane
On Monday, July 6, heavy rain caused part of the roof to collapse at a BJ’s Wholesale Club in Ocean Township, New Jersey. Security camera footage showed a portion of the roof falling near the bakery section as water flooded the interior. There were 27 people inside the store at the time, including two who became partially entrapped before freeing themselves. No one was seriously injured, but the building was shut down, the inventory was damaged, and the business was closed while investigators and engineers assessed the structure.
It was one event in a rough stretch of weather across the Northeast and Midwest between July 4 and July 6 that knocked out power to close to 800,000 homes and businesses, downed hundreds of trees, and disrupted transit systems in several states. Up to six inches of rain fell in the area in 24 hours. None of it involved a hurricane. None of it was tied to a named storm. It was a severe thunderstorm, the kind that happens dozens of times every year across the country and produces a significant share of commercial property losses annually.
For business owners in Seguin and across Central Texas, the lesson is not about New Jersey. It is about the assumptions that sit quietly inside your policy until the day you need them.
How Your Roof Is Covered Matters More Than You Think
Most business owners know their commercial property insurance covers their building. Fewer understand the specific terms that apply to their roof, and the difference matters enormously when a claim is filed.
Many commercial property policies apply a separate, higher percentage-based deductible to wind and hail damage on roofs. Instead of your standard deductible, which might be $2,500 or $5,000, a wind and hail roof claim may carry a deductible of 1 to 5 percent of the building’s insured value. On a building insured for $500,000, a 2 percent wind and hail deductible means $10,000 out of pocket before coverage begins. On a $2 million building, that number is $40,000.
In Central Texas, where hail and severe thunderstorms are a regular occurrence from spring through summer, this is not a hypothetical. Hail damage is one of the most common commercial property claims in the region, and the percentage-based deductible is the detail that determines whether the claim produces a meaningful recovery or leaves the business owner covering most of the cost.
Actual Cash Value vs. Replacement Cost
The second roof coverage detail that catches business owners off guard is how the roof’s value is calculated at the time of a loss. Some policies cover the roof at replacement cost, meaning the insurer pays what it costs to repair or replace the roof at today’s prices. Others cover it at actual cash value, which deducts depreciation based on the roof’s age and condition. A 15-year-old roof that would cost $120,000 to replace might have an actual cash value of $40,000 or less after depreciation.
Some carriers have moved to actual cash value coverage for roofs over a certain age, typically 15 or 20 years. If your roof is in that range and you have not reviewed your policy language recently, it is worth confirming how a roof claim would be settled.
Business Income Coverage Is Not Just About Building Damage
The BJ’s store in New Jersey did not just suffer roof damage. It shut down. The inventory in the affected section was likely a total loss. Customers were turned away. Revenue stopped. And the business will remain closed for as long as it takes to repair the structure, replace the inventory, and pass inspection.
Business income coverage, also called business interruption insurance, replaces lost revenue and covers ongoing fixed expenses during the period a business cannot operate due to a covered loss. It is one of the most important coverages a business owner can carry, and it is also one of the most commonly absent. Fewer than one in four small businesses with physical locations carry business interruption coverage.
But even businesses that carry business income coverage often have a gap that does not become visible until the claim is filed: the policy may not respond to a loss of power, water, or other utility services unless a specific endorsement is in place.
The Utility Service Interruption Endorsement
Standard commercial property policies exclude losses caused by the interruption of utility services. If a severe storm takes out the power grid and your business cannot operate for three days, your business income coverage may not respond, because your building was never physically damaged. The loss was caused by damage to the utility infrastructure, which is someone else’s property.
A utility service interruption endorsement closes that gap. It extends business income coverage to include losses caused by the interruption of electrical, water, gas, communications, or other utility services resulting from physical damage to the utility’s equipment or supply lines. Given that the July 4 to 6 storms knocked out power to nearly 800,000 homes and businesses, this is not an obscure endorsement. It is a practical one that addresses a scenario that happens every storm season.
The endorsement is typically available at a modest additional premium, and the coverage it provides can be the difference between a business owner weathering a multi-day outage and absorbing the full cost of lost revenue out of pocket.
What Seguin Business Owners Should Check Now
Storms in Central Texas do not wait for hurricane season. Hail, straight-line winds, heavy rain, and flash flooding are year-round risks, and the July heat brings its own pattern of severe afternoon thunderstorms. Here is what is worth confirming on your policy before the next one hits.
- Wind and hail deductible. Is it a flat dollar amount or a percentage of the building’s insured value? If it is a percentage, do you understand what your out-of-pocket cost would be on a roof claim?
- Roof valuation. Is your roof covered at replacement cost or actual cash value? If actual cash value, what would the depreciated payout look like given the age of your roof?
- Business income coverage. Do you carry it? Is the limit adequate to cover your revenue and fixed expenses during a realistic restoration period?
- Utility service interruption. Is the endorsement on your policy? If not, ask your agent about adding it. The cost is typically small relative to the exposure.
- Ordinance or law coverage. If your building is damaged and current building codes require upgrades beyond simple repair, does your policy cover the increased cost of compliance?
A Review Takes Less Time Than a Claim
Most of the coverage gaps described above are not difficult to address. They require a conversation with your agent and, in many cases, a modest adjustment to your policy. The cost of adding a utility service interruption endorsement or confirming your roof valuation method is a fraction of the cost of discovering the gap after a loss.
At Donegan Insurance, we review commercial property policies with these specific details in mind. We do not assume your current coverage is adequate just because you have a policy in place. We look at the terms, the deductibles, the endorsements, and the valuation methods to make sure the coverage you are paying for will actually perform when you need it.
Contact Donegan Insurance for a commercial property review. We will walk through your policy and identify any gaps before the next storm does it for you.
Call 830-303-8300 or request a consultation online.
