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Business Interruption Insurance - Coronavirus claim

If your business was affected by COVID-19 (Coronavirus) you may be eligible for a business interruption claim.

For business interruption insurance, the aim is to replace or protect a business from income deficits that are incurred from covered interruptions to business operations.

That means that the interruption must be provided coverage under the insurance policy. Such interruptions usually arise from direct physical loss, damage or destruction of property necessary for business operations. 

Income losses typically covered include net business income (net profit or loss before taxes) that would have been earned or incurred before the disruption and fixed operating costs, including payroll. Coverage also usually lasts for the “period of restoration”, which is the length of time needed to rectify the disruption and repair, rebuild, or replace damaged or lost property. The period of restoration is not ended by the expiration of the policy, as long as the loss occurred during the policy period.

Coverage is also provided for most businesses as “contingent business interruption” insurance, which protects them from a loss in revenue arising from shuttering of operations due to damage to the supplier’s property. It ensures financial assistance for a policyholder who is unable to carry on business opertions because of the loss of a primary supplier, partner or customer, until a replacement is made. It is usually best for businesses which:

  • Rely on a single supplier or manufacturer for materials,
  • Have a small or esoteric customer base,
  • Depend on other businesses to attract customers.

Whichever way, both forms of business interruption coverage are meant to help keep the status quo before the disruption in business operations.

Coverage

There are various coverage options attainable under a business interruption policy. In addition to basic coverage, there are additional coverage options which are tailored to business-specific needs. Thus, business usually have to weigh several considerations before purchasing coverage. Generally, business interruption insurance policies usually cover;

  • Profits
  • Fixed costs and operating expenses
  • Civil authority-mandated closures causing direct loss of revenue
  • Costs of relocation to temporary location pending expiration of period of restoration
  • Extra, reasonable expenses necessary for continuing operations

Coverage can also extend to:   

  • Rent or mortgage payments 
  • Loan payments   
  • Supplier agreements  
  • Insurance payments   
  • Taxes  
  • Utilities

Business Interruption insurance is generally not sold separately, and must be added to a property insurance policy or included in a package policy. Thus, it would ordinarily only cover the financial, and not material, costs of a disruption but will extend to material loss where added to the appropriate package policy. It can be obtained as part of or together with;

  • Commercial property insurance,
  • A business owners’ policy (bop),
  • A commercial package policy (cop),
  • A kidnap and ransom policy (in some cases).

Why you may need to enforce a claim

The standard is that the claim must arise out of a cause covered or included under the policy. Generally, a claim will arise when:

  • A disruptive event leads to loss;
  • The event resulted in physical or financial damage to the business;
  • The event causing the damage was covered under the policy

Because of the amount of cash these policies guzzle, your insurer may be unwilling or reticent to honor a business interruption policy to full value. In such situations, where insurer try to shortchange business by wrongly;

  • Declining or failing to properly investigate business insurance claims
  • Claiming that an event -like a pandemic - is not covered under the policy
  • Rewriting policies to exclude losses from certain events
  • Ignoring interruption mandated by civil authorities or governments
  • Asserting that financial loss alone does not trigger coverage

It is best in such situation to seek out skilled and experienced business interruption claims or insurance bad faith attorneys at Oshan and Associates. You can schedule a consultation at (206) 335-3880 or (621)-421-4062.

Enforcing a claim

Great care must be taken in enforcing a business interruption insurance claim. A policyholder will only be able to take full advantage of its business interruption and contingent business interruption coverage by taking the proper steps. And a claim must be brought well in time and with all the proper documentation. Policyholders, through or with the aid of a lawyer, should:

  • Acquire copies of all insurance policies,
  • Visit location and document, by visual or written evidence, the extent of property damage;
  • Record the facts -stating the time and date of the loss, and the nature of the property damaged,
  • Report the loss to insurance companies and maintain record of all communication,
  • Document any instructions given regarding alternative business operations or any mitigating expense incurred,
  • If necessary, employ an independent adjuster,
  • Establish business interruption accounts for 
    • Expediting costs on repairs and 
    • Incremental costs for alternative production
  • Obtain copies of company accounting records and documents related to the business interruption including
    • Tax returns,
    • Financial statements,
    • Bank statements,
    • Payroll records for the periods during and after the loss
    • Cost accounting records
    • Production, sales, and inventory records
  • Document costs incurred when trying to avert or reduce the loss such as
    • Expediting expenses necessary to shorten or reduce the loss
    • Extra expenses needed to continue operations

It is generally advisable to undertake these measures with the help of or instruction from an experienced attorney. Triggering coverage under a business interruption insurance policy will often need the grit and expertise that can be provided by a lawyer. A lawyer will help:

  • Review your policy and determine the strength of your claim,
  • Transmit your claim to your insurance and ensure that you are given due protection,
  • Negotiate any settlement to a fair amount,
  • Recover relief in court where your insurer does not carry through with the policy.