In a recent case that made the news in Gibraltar, tenants in a commercial property were left with hefty repair bills due to issues caused by poor maintenance, which potentially voided their insurance cover. This case serves as a timely reminder that insurance cover alone is not enough: it needs to be backed up by effective property and risk management, as well as regular reviews.
Most insurance policies exclude ‘wear and tear’, or issues caused by poor maintenance. Some require appropriate security measures and regular maintenance checks. If you haven’t met these conditions, your claim could be denied.
This matters for landlords, developers and property managers. In addition to the potential financial and legal consequences, it carries real reputational risks.
What does Commercial Property Insurance actually cover?
Commercial property insurance provides protection for landlords, developers and property managers who let property for business purposes. This could include offices, shops, restaurants, warehouses or industrial units.
Commercial property insurance will generally cover buildings, contents and more, from financial loss in the event of fire, floods, storms, theft or vandalism.
It is essential to have a clear understanding of the limitations and exclusions of your commercial property insurance policy to avoid any surprises when filing a claim. Some policies may have specific exclusions that prevent coverage for certain events or damages, such as natural disasters or acts of terrorism.
In some cases, additional coverage may be necessary to ensure adequate protection. If the business operates in a specialised industry, the building may have unique features or contain high-value equipment and machinery that also need to be valued properly to avoid any gaps in coverage.
It can also include additional cover like liability and legal expenses cover to protect against compensation claims arising from your ownership or management of the property, or business interruption insurance to provide coverage for loss of income during periods when business cannot be carried out as usual due to an unexpected event.
Local risks require local knowledge
The location of the property and the specific operations that are performed there will significantly influence the cost of your insurance and the level of cover required. Local knowledge of laws and regulations is essential for securing the appropriate insurance cover.
Local insurance professionals will also have an understanding of contractor availability and the prevailing conditions, such as salt corrosion and water ingress risks or difficulties in access, which could lead to higher rebuild costs and possible delays.
Mixed-use developments can have with complex ownership and management structures, which can often lead to regulatory overlaps or gaps between landlords and managing agents. Assessments by local insurance professionals can give landlords better clarity and control over their insurance needs and identify unnecessary expenditures on coverage that may not be essential.
What developers and building managers often overlook
- Insurance policies assume a level of maintenance; poor upkeep can void claims.
- Valuations not updated for years, especially post-construction or redevelopment.
- Shared ownership buildings lacking clarity on responsibility for insurance and repairs.
- Renovation or tenant changes not reported to the insurer.
- Communication with broker when there is a material change, even if it seems minimal.
- Insurance cannot cover every circumstance; it is important to act as though you are uninsured.
Learn lessons when things go wrong
The recent case in Gibraltar could have been avoided by:
- Regular inspections.
- Regular maintenance.
- Accurate records.
- Regular policy review.
Early notification of material facts. These should be relayed to the insurer at the earliest opportunity, either prior to renewal or mid-term through the policy. It is better to be safe than sorry. If you are not sure what constitutes a material fact, you should contact a local insurance professional for advice.
How Sovereign Insurance Services can help protect your investment or business
Sovereign Insurance Services is based in Gibraltar and our team of local insurance professionals has a deep understanding of Gibraltar’s commercial property market and of the rules and regulations that underpin it.
We can provide ‘on the ground’ support through site visits or surveys and assist clients to maintain the insurance through:
- Tailored advice and flexible insurance policies.
- Annual policy reviews, rebuild cost guidance and claims support.
- Work directly with property managers or developers on portfolio solutions.
Three questions to ask yourself today
- When was the last time your property was professionally valued for insurance purposes?
- Is your maintenance schedule documented and up to date?
- Would your insurance respond fully if a major incident occurred today?
If you are unsure about the answer to any of these questions, now is the time to act. Contact Sovereign Insurance Services for a no-obligation policy review and advice tailored to your property.