Regardless of the nature of the damage to your business, if you have to close your business doors for some time, this may cause you an even larger loss by interrupting your supply chain and sending your customers elsewhere. In case you made the right coverage selections beforehand, the insurance carrier may have to economically compensate you until your business resumes its normal operation. Attorney Bill Voss further explores the points of business interruption insurance, increasing the owners’ chance to obtain higher payouts for their covered losses.
When Will an Insurer Pay for Business Interruption?
There is a lot of misinformation about business interruption insurance (BII). It is not a “blank check” to cover all income losses related to an adverse event. Rather, on the contrary, insurance adjusters try to pay as little as possible as business income as well as try to limit their coverage for any other loss.
In the first place, business income insurance is not automatically included in a business owner’s policy. This option has to be requested by the owners and the BII has to be added to their policies as optional coverage.
Secondly, to get paid for income losses, you should have suffered an income loss. This is quite obvious but sometimes owners do not interpret this coverage correctly. Just to further explain the concept, if your business suffered damage on the weekend (outside normal business hours) and you can reopen on a limited basis on Monday, you are still entitled to file a claim for partial closure until the structure is repaired.
Thirdly, the coverage for business income only applies when the damage to the insured property is the cause of the business income loss. If your property was not physically damaged, there will be no compensation for business income.
Finally, there is a time limit to file claims for property damage losses, including business interruption. This used to be one of the main reasons why claims are underpaid or denied completely. Deadlines have to be met in all cases.
 
How much would be considered fair for Business Interruption?
Insurance companies usually calculate the pay-out of business income, by reducing the net income that would have been earned to an amount that would cover the insured’s continuing normal operating expenses. Business income coverage is usually paid in the amount that allows the business owner to continue providing payroll and other expenses while doing the necessary repairs.
There are many factors affecting the actual amount that you will receive for the business interruption portion of your claim. All those factors are expressed in your commercial property damage policy and have been chosen by you when you set the limits and exclusions your policy has.
As an example, we can mention some of the most common reasons insurers will use to reduce the BII amount:
·   Cause of loss. If the event that caused the property damage isn’t covered by the policy, it’ll be unlikely that the insurer will cover any business interruption for that event. For example, some private insurers do not cover property damage for certain causes, such as earthquakes or natural flooding.
·   Construction delays. Insurers are liable for business income lost from the date of damage to the date that the property should reasonably be repaired. Nevertheless, there are usually maximum time limits for the period of restoration (six months on average), and there are cases in which the required time for the repair exceeds this time frame.
·   Policy limits. Insurers will eventually pay up to the amount limit set in the policy, regardless of whether the damages exceed that amount.
·   Bookkeeping problems. Insurers will request proof of your income and operating costs before assuming any payment obligation. Some owners that may have lost their paperwork in a fire or don’t have a professional accounting service, will fail to provide accurate records of their earnings and payroll records, and therefore it seems unlikely that the insurance claims adjusters will pay accordingly on these cases.
 
Can I Get the Most Out of My Business Income Insurance?
As we already mentioned, when purchasing your business interruption coverage, you have to choose those customized coverage options that better suit your company’s needs. For example, if you work in a historic building or a remote location, you may wish to extend the restoration period. Insurers may offer extensions for up to 2 years, so avoid extra stress by selecting the time limit you need.
Besides extending the time limits and the policy limit, you can also purchase extra expense coverage. This might be a good option as it assures you to get paid for extra costs incurred, during the period of restoration, and related to the event that caused the damage. You may even have the option to extend coverage to business income losses resulting from:
·   Service interruption. This coverage pays for direct loss caused by an interruption in electrical, gas, water, telephone, sewer, or other utility or service, as far as it was caused by the same (or similar or related) event that caused the insured property damage.
·   Leader property. This option is crucial for businesses located near a major customer attraction, such as an amusement park, mall, or casino. This endorsement guarantees that the insurance company will pay for the owner’s business income loss if the leader property, although not owned by the same person, suffers a direct physical loss, somehow depriving the owner of prospective clients brought by the leader property.
·   Seasonal business coverage. This endorsement is ideal for businesses that make most of their money during a certain season of the year, preventing one adverse event from affecting an entire year’s profits. If the business is forced to close during the busy season, the insurer replaces income, cancellation fees, ticket sales, and other losses, allowing owners to end the year without assuming a major loss, keeping their records in the black.
·   Contingent business interruption (CBI). This coverage pays for income loss resulting from another property damage that may belong to someone else but anyway affects you as that business directly supplies you with goods or services. In this case, owners collect business income loss payments, even though they had no direct damage.
 
Contact McKinley Public Adjuster for an assessment of your Business Interruption Claim! We can help you at each step of the process until you get the compensation you deserve.