The owner of a marine supply store in Pensacola had what he thought was a complete insurance program: a business owners policy with solid property limits, general liability, and a separate workers’ compensation policy for his six employees. Then a tropical storm pushed water from the bay into his showroom and warehouse. The claim adjuster was sympathetic but clear. The wind damage to the roof and sign was covered. The water that came in at ground level was flood, and his policy excluded it. Most of the loss, including the inventory on the bottom shelves, was his to absorb.
He had not been careless. He had bought the coverages most businesses buy and assumed that, together, they covered the things that could go wrong. That assumption is common, and it is where many of the most painful uninsured losses come from. Every business policy is built around a set of covered risks, and every one of them has exclusions. Knowing where those lines fall is the only way to decide which gaps to close and which risks to accept on purpose.
Flood
Flood is the exclusion that matters most in Florida. Standard commercial property policies and business owners policies exclude damage from surface water, rising water, storm surge and overflowing bodies of water. That applies whether or not the business is in a high-risk flood zone, and many Florida flood losses happen outside those zones. Flood coverage is written separately, either through the National Flood Insurance Program or through private flood carriers, and NFIP policies typically have a waiting period before they take effect. A business that waits until a storm is forecast to buy flood coverage is usually too late.
Professional Mistakes
General liability covers bodily injury and property damage caused by your business. It does not cover a client’s claim that your advice, design, recommendation or professional service was wrong and cost them money. Accountants, consultants, real estate professionals, technology firms, engineers, insurance agents and many others need professional liability, also called errors and omissions coverage, to fill that gap. Even businesses that do not think of themselves as professionals, such as a contractor who handles design or a property manager who oversees vendors, can have this exposure.
Claims by Employees
Two kinds of employee claims fall outside general liability. Injuries to employees on the job are handled by workers’ compensation, which Florida requires for most businesses once they reach four employees, or one in construction. Lawsuits alleging wrongful termination, discrimination, harassment or retaliation are handled by employment practices liability insurance, which is a separate policy or, in some cases, a limited endorsement. These claims can be expensive to defend even when the employer did nothing wrong. Our EPLI guide explains how that coverage works.
Cyber Incidents
A data breach, ransomware attack or fraudulent wire transfer is rarely covered by a standard property or liability policy. The costs involved, such as notifying customers, restoring systems, paying forensic investigators, responding to regulators and defending lawsuits, are the domain of cyber liability insurance. Small businesses are frequent targets precisely because they hold valuable data with fewer defenses, which we explain in why small businesses are real cyberattack targets.
Employee Theft
Property policies cover theft by outsiders, such as burglary, but usually exclude dishonest acts by your own employees or owners. Embezzlement, theft of inventory by staff, payroll fraud and similar losses require crime coverage, often called employee dishonesty or fidelity coverage. Some business owners policies offer a small amount by endorsement, but businesses that handle cash or hold client funds often need more.
Equipment Breakdown, Wear and Tear and Maintenance
Insurance is designed for sudden, accidental losses. It does not pay for the gradual deterioration of a building or equipment, for rust, rot or mold that develops over time, or for a roof that fails because it reached the end of its life. Mechanical and electrical breakdown of equipment, such as a failed compressor or a burned-out motor, is also excluded from standard property forms unless equipment breakdown coverage is added. For restaurants, grocers, medical offices and any business that depends on refrigeration or specialized machinery, that endorsement is often worth the cost.
Vehicles
A general liability policy excludes auto liability. Vehicles the business owns need a commercial auto policy, and a personal auto policy usually will not respond to vehicles titled to or used heavily by a business. When employees drive their own cars or rent vehicles for work, the business itself can still be sued after an accident, and that exposure is covered by hired and non-owned auto liability. We explain it in our article on hired and non-owned auto insurance in Florida.
Lost Income Without Physical Damage
Business income coverage helps replace lost income after a covered physical loss to your property, such as a fire or windstorm. It generally does not respond when revenue drops for other reasons, such as an economic slowdown, a key customer leaving or a supplier failing to deliver, unless there is covered physical damage. Some policies offer limited extensions, such as civil authority coverage when access to the premises is blocked, or dependent property coverage for damage at a key supplier, but these have specific conditions and time limits.
Intentional Acts and Contract Disputes
Insurance does not cover losses an insured intends to cause, and it generally does not cover a business’s own failure to meet its contractual promises. A dispute over whether you delivered what a contract required, or a claim that you owe money under an agreement, is usually a business dispute rather than an insured loss. Contractual liability coverage within general liability is narrower than many owners think. It typically applies when you have agreed to assume someone else’s liability for injury or damage, not to every promise in a contract.
Underinsured Property
Some losses are technically covered but paid at less than their full value. If property is insured for less than the coinsurance clause requires, the claim payment is reduced in proportion to the shortfall. Inventory that grows during the busy season, new equipment that was never reported and rising replacement costs can all leave a business underinsured without anyone noticing.
Worth Confirming With Your Agent
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Whether you carry flood coverage, and how its limits compare to your building and contents values
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Whether you need professional liability for any advice, design or services you provide
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Whether you have workers’ compensation, employment practices liability and crime coverage where needed
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Whether a cyber policy is in place and what it covers
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Whether equipment breakdown and hired and non-owned auto are endorsed on your policy
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Whether your property limits meet the coinsurance requirement
This article is general information and is not legal advice.
Talk to Prestige Insurance Group
Prestige Insurance Group reviews business insurance programs for owners across Florida, looking for the gaps between what a business does and what its policies actually cover. If you are not sure where your coverage stops, we can go through your policies with you and explain what it would take to close the gaps that matter.
Call the office nearest you. Se habla español.
Orlando: 407-993-2331
Miami: 305-969-8776
Stuart: 772-247-3788
Prestige Insurance Group, License L057894
