Firm-Wide blog

Overinsured Commercial Property Hurts Business Profits

By Burg Simpson
June 3, 2013
2 min read


In a recent Class Action Complaint, Burg Simpson alleges that insurance companies such as State Auto are over-insuring homes and charging unnecessary premiums for replacement cost coverage, in order to increase insurance company profits.  The motive may be to off-set losses in the Homeowners business due to recent climatic events such as hurricanes, tornados, floods, and earthquakes.  New evidence suggests that insurance companies are not limiting this practice of over-insuring property to Homeowners policies; rather, Commercial Property policies may also be affected by these phantom insurance schemes in which the cost to replace the property is vastly overestimated.


Commercial property owners do not benefit by purchasing coverage limits for replacement costs that are dramatically greater than the amount it would actually cost to replace their commercial property.  As with Homeowners’ policies, commercial insurance policies are policies of indemnity.  If a commercial property is destroyed and is insured for twice the amount necessary to rebuild, the owner will not profit from the difference.  Rather, the insurance company will only provide the amount necessary to rebuild the exact property that was destroyed. If the property cost less to rebuild than the amount for which it was insured, the owner cannot collect the difference.  As a result, if the commercial property is over-insured, then the property owner has paid increased premiums in exchange for insurance he or she could never collect.  Such unnecessary insurance premiums place a financial burden on businesses hoping to survive in an unstable economy.  Under such a program, commercial property owners are left paying unfair premiums for illusory insurance coverage, while insurance companies pocket millions of dollars.


If you or a loved one own commercial property and you believe your policy limits and premiums for replacement cost coverage for Commercial Property Insurance have increased without cause, you may be entitled to compensation. The attorneys at Burg Simpson would be happy to speak with you and review your records to determine if you have a viable case against your insurance company. Call 1-800-713-9340 or fill out our contact form for a FREE no-obligation consultation today.

Free case evaluation form