We are making a loan to purchase a car wash that is in a flood hazard area. My question: is the car wash equipment covered under the building policy or does it need to be covered by a separate contents policy? The mandatory purchase guidelines talk about "business movable property" requiring contents coverage. Does the car wash equipment qualify as "business movable property"? It certainly can be moved, but if it was moved the value of the property would be significantly impacted. Thanks for your thoughts

This is a good question and one I can't speak to with authority but I will offer an opinion, but take it as that, an opinion. The building policy primarily covers the structure. The washing equipment, such as the pumps, generators, coin dispensers located within the building(s) would, IMO, be contents and require coverage as such.

I would think that most of the car wash equipment is actually fixtures. But that is what a judge would need to determine. A fixture is goods that are so attached to real property that an interest in them is governed by real estate law of the jurisdiction where the property is located. To me, car wash equipment is similar to the water heater or central air conditioning equipment in a home. Those are fixtures and are covered by most flood insurance policies for damage due to rising water, if they are not located in the basement of the building.

Tom makes a good point and one I thought about concerning the sprayers etc. Still not sure about the coin machine though. My thinking is more along the lines where the main pumps and generators are stored in separate structures as "equipment".

I would call an insurance agent that you know and that would not be involved in the transaction and get their opinion.

Good points. Thanks for the replies. I am going to take a shot at contacting FEMA on this. I tried the NFIP 800 number already. The reply I got..."we don't cover car washes." Uggh.

I will post again if I get a response.

When in doubt;
Max the coverage OUT!

Seriously, just go ahead and include their value as part of the building instead of the contents. The examiners then will have no way to fault you.

(Well, they may find a way, but not with flood coverage).

I disagree. The equipment, unless they are fixtures as Tom alluded to, must be insured as contents. Over insuring the building does no one any good. You are having the borrower pay more in premiums than they should, and if there should be a loss they would only be paid for the value of the actual structure. And you violated the law by not obtaining the proper flood coverage.

ComplianceGeek is doing the proper thing my investigating to insure that he is, or will be obtaining the proper coverage.

I disagree. If the insurer determines the items are part of the structure and then extends coverage in an amount sufficient to cover building and fixtures, then they would have a hard time going back and saying, "Oh, those weren't structure, they were contents." So, if the insurer balks at including them, you have your answer...if not, you have coverage." IMHO

Well you are saying two different things:

First:
When in doubt;
Max the coverage OUT!

Second:

If the insurer determines the items are part of the structure and then extends coverage in an amount sufficient to cover building and fixtures

If they have performed the appropriate investigation and made the determination that they are indeed fixtures then I agree. But I do not agree with your first statement about maxing out the coverage if you are in doubt.

I should have been more clear intially. I assumed that it would be part of the process for the insurer to extend coverage or not. My ultimate point was, if the insurer allows it, max the coverage out.

I got a response from FEMA - "If the machinery is physically attached to the building, it is covered under the building limits."

So, now the trick is to figure out what is and what is not attached to the building and the corresponding values...easy.

The value of the building is $346,000 and the overall value of the equipment is $220,000 per the appraisal. The borrower already has contents coverage of $50,000. I think I will leave that coverage alone (seems like it would be enough to cover misc. non-attached equipment) and request that the building coverage be $500,000.

Any feedback? Thanks.

I have nothing to add, other than the thread title, itself, made me giggle...the irony of a car WASH in a flood ZONE...LOL!

Maybe MUD coverage would be more appropriate. Sorry....just couldn't help it.

We're having some difficulty determining if the equipment inside a drive-thru car wash at a gas station is covered (we're assuming they are considered under "contents" and wouldnt be covered under the bulding's flood insurance). Below are two excerpts from the Flood Manual that seem to conflict with respect to a drive-thru car wash:

1) Ineligible:Contents Located in a Building Not Fully Walled
and/or Contents Not Secured Against Flotation

2) A. Eligible Contents
Contents must be located in a fully enclosed building.
However, under the Dwelling Form, in a building that
is not fully enclosed, contents must be secured to
prevent flotation out of the building.


Thanks!

I've worked in a car wash and I can attest that almost all the equipment in the building is firmly anchored, otherwise they have a tendency to destroy a lot of cars