Commercial Property Insurance Claims: What Texas Business Owners Need to Know
When a Texas business suffers property damage — whether from a hurricane, fire, burst pipe, or vandalism — the financial consequences extend far beyond the cost of physical repairs. Business interruption, lost inventory, displaced employees, and damaged customer relationships can threaten the very survival of the enterprise. Commercial property insurance is designed to protect against these losses, but navigating a commercial claim is significantly more complex than a residential claim.
Commercial property policies typically provide several categories of coverage: building coverage (the physical structure), business personal property coverage (equipment, inventory, furniture), business income coverage (lost profits during the restoration period), and extra expense coverage (additional costs incurred to continue operations during repairs). Understanding which coverages apply to your specific loss — and the limits and sublimits that may restrict recovery — is the first step in maximizing your claim.
One of the most frequently disputed aspects of commercial claims is business income (also called business interruption) coverage. This coverage is designed to replace the net income your business would have earned during the period of restoration, plus continuing normal operating expenses. Calculating business income loss requires projecting what the business would have earned absent the loss — a calculation that often involves analysis of historical financial statements, seasonal trends, growth trajectories, and industry conditions.
The ‘period of restoration’ is another common point of contention. Under most commercial policies, business income coverage begins after a waiting period (typically 72 hours) and continues until the property should be repaired, rebuilt, or replaced with reasonable speed and similar quality. Insurers frequently argue for a shorter restoration period than is realistic, particularly for businesses that require specialized equipment, custom buildouts, or regulatory approvals to resume operations.
Commercial policyholders should also be aware of coinsurance provisions, which are common in commercial property policies but rare in residential policies. A coinsurance clause requires the policyholder to maintain coverage equal to a specified percentage (typically 80% or 90%) of the property’s replacement cost. If the policyholder is underinsured relative to this requirement, the claim payment is reduced proportionally — even if the loss is well within the policy limits. This penalty can be devastating and is often discovered only after a loss occurs.
If your Texas business has suffered property damage, engage qualified professionals early. Retain a public adjuster or forensic accountant to document the full scope of your loss, including business income calculations. Preserve all financial records, tax returns, and operational data that may be relevant to proving your claim. And consult with an attorney experienced in commercial property insurance disputes before accepting any settlement offer from your insurer.
About the Author: Jonathon G. Nixon is the managing attorney of Nixon Law PLLC, a Houston-based litigation firm focused on property insurance disputes, construction defects, personal injury, and commercial litigation. Contact Nixon Law PLLC at (713) 482-1523 or jnixon@nixon-law.com.