North Bay floods alert businesses to uncover the quirks of their insurance coverage

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As North Bay business owners directly impacted by last month’s floods push through massive recovery efforts, they’re also having to deal with the fact that part of their business insurance coverage is useless.

That part of the coverage is called business interruption insurance, part of an overall business owners policy (BOP) package.

Business interruption coverage compensates business owners for lost income when their company is shut down because of disaster-related damage. It also covers ongoing operating expenses, such as electricity, when business operations are temporarily halted because of a disaster, according to the institute.

One very large footnote: Know your disasters.

“Flood is not covered under a standard business policy,” said Janet Ruiz, state representative for the Insurance Information Institute, a member-based, 501 tax-exempt-status organization headquartered in New York City.

Jennifer Heliotes, account executive at InterWest Insurance Services

“On a standard BOP, business interruption insurance is included and it’s a very common coverage for losses like fire, but if the loss comes from a flood or earthquake, it’s excluded,” said Jennifer Heliotes, account executive at the Petaluma office of InterWest Insurance.

That fact has become a painful reality for business owners impacted by the recent storms, including those who run their shops out of the hard-hit Sebastopol outdoor market, The Barlow.

Brooks Friedeman, co-owner of Friedeman Wines at The Barlow, found out firsthand.

“We do have business interruption coverage, but somewhat tragically that coverage is secondary, such that since the reason for the coverage is not covered (flood),” Friedeman said. “Then we don’t get the coverage on top of not getting any property coverage — a point we just learned, unfortunately.”

There is, however, a specialized policy available called difference in conditions (DIC), which typically offers all-in-one coverage for landslides, mudflows, earthquakes and floods, according to the insurance institute.

But DICs don’t come cheap, Heliotes cautioned.

“I haven’t seen a DIC policy for less than $7,500 (annually), and the deductible will be no less than $25,000,” she said. “And being a small business when your sales are $3 million or under, you spend your insurance dollars wisely.”

Because of the steep costs, most small-business owners choose not to purchase DIC coverage, she said.

“I have not heard of it,” Friedeman said, “but there’s no way I could afford that. No way, no how.”

Ian Douch tries to hold a hose as water pumps out of Zazu Kitchen + Farm in the Barlow business district in Sebastopol on Thursday.

A number of businesses impacted by February’s floods have started GoFundMe accounts, with many making headway toward their goals.

The following fundraisers by businesses at The Barlow represents just a handful of such efforts there: As of March 21, Zazu Kitchen + Farm had raised $71,749 of its listed $75,000 goal; The Nectary was more than one-third of the way at $8,099 of its $20,000 goal; Village Bakery raised $14,600 of its $150,000 goal; and clothier Tamarind has brought in $15,690 of its $50,000 goal.

Tamarind’s owner, Andrea Kenner, said she just began her claims process and has no information to share at this stage.

Last month’s flooding affected businesses primarily in the tourist hot spots of Sebastopol and the Guerneville area, according to The Press Democrat. It also reported that Sonoma County initially estimated 578 businesses were impacted, for a total of $35 million in damages. The figures continue to be assessed.

Also of note, the state’s Department of Insurance reported that February was the sixth-wettest month on record and that flooding is the nation’s No. 1 natural disaster.

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