How to Protect Your Veterinary Business from Loss of Income Due to Natural Disasters

Why Veterinary Business
Property Insurance Is a Must For
Every Veterinarian Owner

Do you have veterinary business property insurance for your business? If not… or if you do not have enough… then you’ll want to read this.

Veterinarians who own their own business are often unprepared when a natural disaster strikes. A hurricane, tornado, flood, mudslide or brush fire that makes your business property unusable.

During the past ten years, there seems to be an increased number of devastating weather storms and natural disasters. The likes we have not seen before.

That’s why every veterinarian owner should have veterinary business property insurance.

Here are the facts.

The U.S. has sustained 219 weather and climate disasters since 1980 in which overall costs from damage reached or exceeded $1 billion.¹ The total cost of these 219 events exceeds $1.5 trillion. These shocking stats are per the National Oceanic and Atmospheric Administration.

You would be protected if you have veterinary business property insurance. But many veterinarians do not have enough coverage.

16 Natural Disaster Events
with Property Losses
Over $1Billion Each

During the years between 1980 and 2017, the yearly mean in the U.S. that exceed $1 billion in damages is 5.8 events. Yet the yearly mean for the past 5 years – between 2013 and 2017, is 11.6 events.

Just in 2017 alone, there were 16 weather and climate disaster events with losses exceeding $1 billion each. This occurred throughout the U.S., not just in one state or area.

The total costs from natural disasters in 2017 has exceeded $300 billion. This is a new U.S. yearly record. It shatters the previous U.S. yearly record cost of $215 billion in 2005 due to impacts of Hurricanes Dennis, Katrina, Rita and Wilma.

Here are the property damage costs from some of the natural disasters in 2017:

• $125 billion from category 4 Hurricane Harvey
• $90 billion from category 4 Hurricane Maria
• $50 billion from category 4 Hurricane Irma
• $18 billion from wildfires in many western and northwestern states, such as California and Montana.
• $15.3 billion from severe hail, high winds and tornadoes throughout 22 states
• $ 2.5 billion from the drought in North Dakota and South Dakota, forcing ranchers to sell off livestock
• $ 1.7 billion from flooding in Missouri, Arkansas and southern Illinois
• $ 1.1 billion from 79 tornadoes in 7 southern states, the 3rd most tornadoes to occur in a single outbreak during a winter month

Property Damage from
Natural Disasters
Affect Veterinarians

Veterinarians often take an increased role in their communities during natural disasters. Many clients demand advice from their veterinarians to care for their pets, horses and livestock. This can occur before, during and after the disaster.

For example, many veterinarians were protecting pets and livestock during Hurricane Irma and the wildfires in the Northwest.² Other veterinarians, such as Martha Edwards in Key Largo, FL was working under stress to print, fax and email vaccination and health records to hundreds of her clients. All of whom were under evacuation. She did so just in case Hurricane Irma would destroy her clinic. Fortunately, she was able to reopen her clinic 11 days after the hurricane.

But other veterinarians were not so lucky. A massive tree branch crashed into the roof of the Tri-County Animal Rescue, a no-kill animal shelter near Boca Raton, FL during Hurricane Irma.³ Rain entered the building through an opening in the ceiling and flooded the clinic. A clinic that housed 51 sick cats and dogs. After the disaster, experts expected it would take up to nine months to replace the shelter’s clinic.

Loss or damage to your property is just one reason why you need veterinary business property insurance. But there is an even bigger reason why you should have enough coverage.

Loss of Income from
Natural Disasters

Veterinarians who can no longer use their property to conduct business can suffer a loss of income. Even a few days of closure can greatly affect your income.

Yet when you must first repair the damage to re-open your business, or find another location, it can be weeks or months before you can be back in business. This loss of income can be in the $tens of thousands of dollars.

Such was the case of Dr. Darrell Smith. An Aggie veterinarian who has spent the past 17 years caring for big and small animals. Due to Hurricane Harvey, overflowing water from the Addicks and Barker Reservoirs flooded his Clay Road Animal Clinic with about two feet of water.

Each day his clinic was not open resulted in a loss of income. With all that damage, he expected it would take weeks or months to recover. He not only lost income, but he also lost the use of equipment and records. Some of these he could not replace.

The thing is, a natural disaster could strike at any time, and affect just about any veterinarian. Even you.

The question is, are you prepared?

Do you have enough veterinary business property insurance coverage?

Tax Relief Is Not Enough to
Offset Your Loss of Income

If you suffer economic loss due to a natural disaster, you can claim a casualty loss deduction on your federal income tax return.⁴ A casualty loss is the damage, destruction or loss of your property from any sudden, unexpected, or unusual event. That can include a winter storm, hurricane, flood, tornado, wildfire, earthquake or even volcanic eruption.

However, a casualty loss does not include normal wear and tear or damage that happens over time. Therefore, property loss may not include things such as mold or termite damage.

If the natural disaster completely destroys your business property, then the amount of your loss is your adjusted basis. This is typically what you paid for the item. Plus, any long-term improvements less any depreciation that you might have claimed before. If you could salvage your property or if your insurance reimbursed you, you must report those adjustments to the IRS.

But tax relief is not enough. You must also have insurance. The right type of insurance. One that is specific to protect your business in the practice of veterinary medicine.

The answer first starts with BOP. A BOP for veterinarian owners includes veterinary business property insurance

How a BOP Policy Protects You
from Natural Disasters?

BOP is an all-in-one business owner’s policy that covers you for general liability, business property and business interruption. Insurers design a BOP policy for small to mid-sized businesses. It is much more cost-efficient to buy a BOP policy than to get each individual type of insurance separately.

Yet your insurance may not cover some property. Not unless you get additional insurance, or a rider or endorsement to extend coverage for specific natural disasters such as floods, windstorms, or earthquakes.

For veterinarians, you must also make sure the policy covers all the different types of equipment and animals that you keep on your property.

Most BOPs provide general property coverage. But a BOP policy that is specific to veterinarians will provide you with the added protection you need for your business.

The thing is these natural disasters not only cause significant property damage. They can cause loss of income for veterinarians.

Not All BOP Policies Cover Claims by Veterinarians

Many BOPs provide business interruption coverage. Some folks call this business income insurance.

It helps protect your business in the event of a natural disaster. It provides the estimated income you lose when your business must shut down. Some BOPs also cover the additional expense to work out of another location while your permanent location undergoes repairs.

But not all BOPs include loss of income. And when they do, they may have certain provisions that you must have property damage to claim for loss of income.

Moreover, not all BOPs cover the things that veterinarians may take for granted. Things such as pets, certain equipment, electronic or paper records and other key items that can affect your ability to work and earn an income.

The thing is, while most loss of business income insurance claims are due to power outages, hardware problems and telecommunication failures, only 29% of claims are due to natural disasters.⁵

Yet surprisingly, after Hurricane Irma, less than 5% of all claims filed were for loss of business income. That’s because many business owners are either not covered or do NOT understand their policies.
“A lot of people thought they had coverage…But they didn’t read their policies or have it explained to them,” said Jeff Grady, CEO of the Florida Association of Insurance Agents.⁶

Of 644,908 insurance claims business owners filed since Hurricane Irma, just 1,931 — about one third of one percent — are business interruption claims. State insurance regulators found, analyzed and maintain this data.⁶

The reason is exclusions.

For example, many policies exclude business interruption coverage because of a flood.

Another common exclusion is if the source of a power outage is not on your property. Even if the outage occurred because the hurricane winds knocked the equipment over three blocks from your office, the exclusion could stop the insurance company from paying you.

Even if a business shutdown met the conditions for coverage, most standard policies require the shutdown would have to be at least 72 hours before the insurance company would pay the claim.

Many veterinary business property insurance policies also include a provision that will pay for mandatory evacuation of premises. But the evacuation must come from a civil authority. This is usually a fire marshal, police or building official. All because of damage to covered properties. Plus, they must physically prohibit access to the insured property. This can happen by blocking roads around the business or ordering it closed until repaired. Yet these authorities are not usually the ones who suggest evacuation before a natural disaster.

Perhaps most shocking is that your business must have some sort of property damage to receive monies to replace loss of income from a natural disaster.

For example, optometrist Thomas Arnold in Sugar Land, Texas business shut down for almost five days after Hurricane Harvey struck. That was because nearby flooding kept employees and patients from getting there. But the insurer rejected his claim because his business was not physically damaged.

Most standard BOP policies require you to do the following before they will accept your claim.

• Demonstrate the financial loss by proving how much your company would have earned had the damage or business interruption not occurred
• Show your company’s tax returns from previous years
• Submit your profit and loss statements that support your loss of income claims.
• Illustrate sales projections

What You Can Do to
Get the Right Coverage
for Loss of Income

Veterinarians can get the right veterinary business property insurance coverage by asking the right questions. Plus, to request additional policies that will provide higher coverage limits for things that standard policies often exclude.

However, while many insurance companies can do this, they may not have coverage for things specific for veterinarians.

That’s why it is so vital you talk with an insurance agent who specializes in veterinary business property insurance coverage for veterinarians. They will know the best types of policies that provide the right coverage for you.

About Veterinarian Insurance

This blog article is presented to you by Veterinarian Insurance. Founded by Jack Lungmus, a specialist in financial risk management for veterinarians for over 40 years.

Go here to schedule a FREE consultation or call Jack Lungmus at 800-860-2862.

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References

1. https://www.ncdc.noaa.gov/billions/events/US/1980-2017 National Oceanic and Atmospheric Administration Centers for Environmental Information U.S. Billion-Dollar Weather and Climate Disasters; 2018
2. http://veterinarynews.dvm360.com/fire-and-rain-veterinarians-continue-combat-natural-disasters-both-coasts DVM 360; Fire and Rain: Veterinarians Continue to Combat Natural Disasters on Both Coasts; Sarah J. Wooten, D.; September 29, 2017
3. https://www.mypalmbeachpost.com/news/local/after-irma-boca-raton-animal-shelter-clinic-damaged-beyond-repair/5CM18Y2YzqcUyoS7VzXKjL/ Palm Beach Post; After Irma: Boca Raton Animal Shelter Clinic Damaged Beyond Repair Ramadan, L.; September 22, 2017
4. https://www.forbes.com/sites/kellyphillipserb/2017/08/29/claiming-a-casualty-loss-after-a-disaster-like-hurricane-harvey/#5bd76b6e60f7 Forbes; Claiming a Loss after a Disaster Like Hurricane Harvey; Erb, K.P.; August 29, 2017
5. https://www.bulldogadjusters.com/loss-income-insurance-claims/ Bulldog Adjusters; Loss of Income Insurance Claims | Read the Fine Print November 30, 2017
6. http://www.sun-sentinel.com/business/fl-bz-irma-biz-interruption-coverage-20170928-story.html Sun Sentinel; Check Fine Print: Business Interruption Insurance Harder to Claim Than Many Think; Hurtibise, R.; September 29, 2017