Ambulatory Surgery Centers (ASCs) are highly specialized healthcare facilities with significant investment in real estate, build-outs, and medical equipment. Yet one of the most overlooked property insurance issues impacting ASCs is coinsurance—a provision that can dramatically reduce a claim payment even when a loss appears fully covered.

What is Coinsurance?

Coinsurance is a clause in most commercial property policies requiring the insured to carry coverage equal to a certain percentage of the property’s true replacement value—commonly 80%, 90%, or 100%. If the insured does not meet that requirement, the carrier applies a penalty and pays only a portion of the loss.

In plain terms: coinsurance exists to encourage accurate insurance-to-value. It prevents property owners from intentionally underinsuring a building or contents and hoping for full payment on smaller losses.

Why Coinsurance Exists for Buildings

Buildings are typically insured on a replacement cost basis. Carriers expect the insured to declare a realistic value that reflects today’s construction costs, which have increased substantially over the past several years.

Example:
An ASC building has a replacement cost of $10,000,000, but the policy is written for $6,000,000 with a 90% coinsurance clause. The policy should have carried at least $9,000,000 to avoid penalty.

A fire causes $1,000,000 in damage.

The carrier may pay only:
($6,000,000 ÷ $9,000,000) × $1,000,000 = $666,667 (minus deductible)

Even though the ASC had “millions in coverage,” the claim payment is reduced by over $330,000 due to coinsurance.

Coinsurance Also Applies to Business Personal Property (BPP)

Business Personal Property includes furniture, computers, tenant improvements, and medical equipment not scheduled separately. For ASCs, BPP values can be extremely high due to surgical, imaging, and sterilization equipment.

Coinsurance penalties are common when ASCs underestimate equipment value or fail to update values after expansions or acquisitions.

Example:
An ASC carries $2,000,000 in BPP coverage, but the true replacement value is $3,500,000. A water loss causes $500,000 in damage. With a coinsurance clause, the carrier may only pay a proportional share, potentially leaving the ASC with a six-figure out-of-pocket expense.

Why Scheduling High-Value Medical Equipment is Advisable

High-value equipment—such as surgical lasers, anesthesia machines, endoscopy towers, imaging units, and autoclaves—should often be scheduled separately on the property policy.

Scheduling provides several advantages:

• Establishes an agreed or stated value for key equipment
• Reduces coinsurance-related disputes
• May broaden coverage for transit, off-premises use, or specialty breakdown exposures
• Helps streamline claim adjustment and documentation

Example:
A scheduled CT scanner valued at $850,000 suffers electrical damage. Because it is scheduled, valuation is clear, claims handling is faster, and the risk of undervaluation penalties is reduced.

Bottom Line

Coinsurance is not a technical footnote—it is a major financial risk. ASCs should conduct regular property valuations, update building and BPP limits annually, and strongly consider scheduling high-value medical equipment. In today’s inflationary environment, proper insurance-to-value can be the difference between a manageable loss and a catastrophic financial setback.

For any questions, please contact Ed Foley at efoley@thefoleyinsurancegroup.com or 860-559-6964.

Is Your ASC’s Risk Management as Strong as Your Patient Care? - Summit Financial Group | Dallas | Tulsa