Commercial Property Insurance in Maine

Maine's diverse business environment—from coastal tourism to manufacturing, retail, and professional services—requires comprehensive commercial property insurance. Understanding commercial property forms and Maine-specific business exposures is essential.

Commercial Property Coverage Forms

Building and Personal Property Coverage Form (CP 00 10)

The BPP Coverage Form is the foundation of commercial property insurance:

Structure:

1. Coverage A: Building
2. Coverage B: Business Personal Property
3. Coverage C: Personal Property of Others
4. Coverage Extensions: Limited additional coverages
5. Optional Coverages: Can be added for additional premium

Covered Property - Building (Coverage A)

When insured owns the building:

Included:

• Building structure
• Permanently installed fixtures (plumbing, HVAC, electrical)
• Outdoor fixtures (signs, fences, landscaping - limited)
• Additions under construction
• Materials and supplies for building maintenance
• Building equipment (heating/cooling systems)

Not Included:

• Land
• Excavations, underground pipes outside building
• Personal property
• Vehicles

Business Personal Property (Coverage B)

Typical Contents:

• Furniture and fixtures
• Machinery and equipment
• Stock and inventory
• Supplies and materials
• Computers and electronics
• Tenant improvements (if tenant)

Coverage Territory:

• Property at described premises
• Extension: Property temporarily at other locations
• Extension: Property in transit

Maine Business Example: A Portland restaurant insures its building (Coverage A) and contents including kitchen equipment, furniture, POS systems, and food inventory (Coverage B).

Causes of Loss Forms

Three Coverage Options

Commercial property can be written on three different causes of loss forms:

Basic Form Named Perils

1. Fire
2. Lightning
3. Explosion
4. Windstorm or hail
5. Smoke
6. Aircraft or vehicles
7. Riot or civil commotion
8. Vandalism
9. Sprinkler leakage
10. Sinkhole collapse
11. Volcanic action

Broad Form Additional Perils

Adds these important coverages:

• Falling objects
• Weight of snow, ice, or sleet ← Important for Maine
• Water damage from plumbing, heating, AC systems
• Collapse (broader than basic form)
• Glass breakage

Special Form (Open Perils)

• Covers all risks of direct physical loss except specifically excluded
• Most comprehensive commercial coverage
• Higher premium but fewer coverage gaps
• Preferred for high-value Maine coastal businesses

Maine-Specific Commercial Property Exposures

Coastal Business Risks

Maine's significant coastal tourism and fishing industries face unique property exposures:

Hurricane and Storm Exposure:

• Hotels, restaurants, retail along coast
• Marinas and boatyards
• Fishing industry facilities
• Wind and flood damage potential

Insurance Solutions:

• Special form coverage for comprehensive protection
• Hurricane deductibles may apply (2%-5%)
• Separate flood insurance required for storm surge
• Business income coverage essential (lost tourism revenue)

Winter Weather Exposures

All Maine businesses face winter property risks:

Common Winter Losses:

• Roof collapses from snow accumulation
• Frozen pipes and water damage
• Ice dams causing interior damage
• Slip and fall liability (covered under liability, not property)
• Parking lot snow removal (extra expense)

Coverage Needed:

• Broad or Special form for weight of snow/ice coverage
• Business income to cover closure days
• Extra expense for snow removal and emergency repairs

Tourism-Dependent Businesses

Many Maine businesses depend on summer tourism:

Seasonal Exposure:

• Heavy revenue concentration (Memorial Day to Labor Day)
• Extended closure if damage occurs during peak season
• Higher business income needs
• Vacancy/security issues in off-season

Insurance Approach:

• Higher business income limits to cover peak season losses
• Extended period of indemnity (12+ months)
• Seasonal adjustment endorsements
• Off-season security measures

Business Income Coverage

Coverage for Lost Income

Business Income (BI) coverage pays for:

1. Lost Net Income: Profits lost during suspension period
2. Continuing Expenses: Fixed costs that continue (payroll, rent, utilities)
3. Extra Expenses: Additional costs to minimize loss or continue operations

How Business Income Works

Trigger: Covered property damage causes business suspension

Suspension Period:

• Begins: At time of loss
• Ends: When property should reasonably be repaired/replaced
• Maximum: Period of restoration (typically 12 months, can extend)

Example - Maine Coastal Restaurant:

Annual revenue: $800,000 Annual expenses: $600,000 (including $200,000 payroll) Net income: $200,000

Fire damages restaurant in June (peak season), closed 3 months

Business Income Calculation:

• Lost net income: $50,000 (3 months of profits)
• Continuing expenses during closure: $150,000 (payroll, rent, utilities)
• Total BI Claim: $200,000

Extended Period of Indemnity

Standard BI coverage ends when property is repaired, but business may need more time to regain customers:

Extended Period Coverage:

• Continues BI coverage after repairs complete
• Typical extensions: 30, 60, 90, 120 days
• Pays for revenue losses during customer recovery period
• Essential for Maine seasonal businesses

Business Owner's Policy (BOP)

Package Policy for Small Business

BOP Advantages:

• Combines property and liability coverage
• Lower cost than separate policies
• Simplified coverage
• Automatic coverages included

BOP Eligibility

Typical eligible businesses:

• Retail stores
• Restaurants (under certain size limits)
• Office buildings
• Apartment buildings (under 6 units typically)
• Small manufacturers and processors

Ineligible businesses (need commercial package):

• Bars/taverns with significant liquor sales
• Auto dealers/repair shops
• Banks
• Contractors (need contractor's policy)

BOP Property Coverage

Included:

• Building coverage (if owned)
• Business personal property
• Business income (with limits)
• Extra expense
• Outdoor signs (limited)
• Personal effects of employees (limited)

BOP Causes of Loss:

• Typically Special Form (open perils)
• Some insurers offer Broad Form BOP

Maine BOP Applications

Ideal for:

• Portland area retail shops
• Small restaurants and cafes
• Professional offices (lawyers, accountants)
• Small hotels/bed & breakfasts
• Service businesses

Extra Expense Coverage

Continuing Operations

Extra Expense pays additional costs to:

• Continue operations at temporary location
• Minimize suspension of business
• Return to normal operations quickly

Examples of Extra Expenses:

• Renting temporary space
• Equipment rental
• Moving costs
• Temporary signage and advertising
• Expedited repairs (overtime labor)

Maine Example:

Portland insurance agency damaged by fire. Extra expenses:

• $5,000/month temporary office rental (3 months)
• $3,000 moving costs
• $2,000 IT equipment rental
• $1,000 expedited repairs
• Total Extra Expense Claim: $21,000

Inland Marine Coverage

Property in Transit and Special Items

Maine businesses often need inland marine coverage for:

Common Classes:

• Contractors' Equipment: Tools, machinery for contractors
• Electronic Data Processing (EDP): Computer equipment, software, data
• Valuable Papers and Records: Documents, blueprints, plans
• Accounts Receivable: Protection if records destroyed
• Commercial Articles: Goods in transit, exhibitions
• Installation Floater: Property while being installed at job sites

Maine-Specific Uses

Valuation Methods

Replacement Cost vs. Actual Cash Value

Replacement Cost:

• Cost to repair/replace with like kind and quality
• No deduction for depreciation
• Requires carrying insurance to value (typically 80% coinsurance)
• Higher premiums

Actual Cash Value (ACV):

• Replacement cost minus depreciation
• Lower payouts for older property
• Lower premiums
• May be adequate for rapidly depreciating property

Coinsurance

80% Coinsurance Clause (typical):

Formula: $\text{Payment} = \frac{\text{Insurance Carried}}{\text{80\% of Property Value}} \times \text{Loss} - \text{Deductible}$

Example:

Building value: $500,000 Required insurance (80%): $400,000 Insurance carried: $300,000 (underinsured!) Loss: $100,000 Deductible: $5,000

Calculation: \text{Payment} = \frac{$300{,}000}{$400{,}000} \times $100{,}000 - $5{,}000 = $70{,}000

Coinsurance Penalty: $25,000 (received $70,000 instead of $95,000)

Important: Maintain adequate insurance limits to avoid coinsurance penalties. Many businesses choose "Agreed Value" endorsement to waive coinsurance.