Dealing with property damage at your salon can be extremely frustrating. But that frustration is multiplied when another party is responsible for the damage. We see many claims of this type. One of the more common – believe it or not – is vehicles crashing through the front of the salon. Another is a neighboring tenant having water leakage or a fire that affects the salon. Many salon owners believe that their insurance won’t need to respond to these types of claims. They feel, rightfully so, that the responsible party will take care of the damage. However, that is not always the case.
When you find yourself in this type of situation you should report the damage to your insurance agent right away. Even if you believe it will be taken care of by a third party it is vital that your company is aware of the situation. File a “notice only” claim to protect yourself in the event the other party doesn’t come through.
One course of action is to have your insurance company take care of the damage and loss of income, if any. This may be the quickest path. But, you will be responsible for any deductible. And you can’t assume that your company will be able to recover what they, and you, pay from the other party. Subrogation is not always a given. The other party may not have adequate, or any, insurance. It may be determined that were not liable, meaning they didn’t do something or not do something that caused the damage. This is especially true in claims against landlords or neighbors. The insurance company also has the right to not attempt subrogation, depending on their evaluation of the cost and probable outcome. In the event subrogation isn’t an option or is unsuccessful, you will not be able to recover your deductible and it is a claim against your policy.
If the responsible party’s insurance does cover the damage it may not be at replacement cost. Most times payments of this type will be at Actual Cash Value, meaning everything will be calculated at its current depreciated value. And you may not be able to recover your loss of income.
Neither of these options is perfect. As a business owner you must make decisions every day regarding the most cost effective way to operate. This is one of those times. Weigh both options and determine the financial path that works best for you. Is the damage and loss of income substantial enough to justify going through your carrier, knowing you will have a deductible and possible premium changes or condition changes when your policy is evaluated, keeping in mind that your carrier may not be able to recover from the other party? Or do you choose to wait for the other party’s carrier to respond knowing you probably won’t be reimbursed for the full value of your loss?
The one thing you should always do is keep your agent informed. Delayed reporting for any loss could impact your ability to recover. You always want to keep all avenues open.