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Sometimes things happen, and your business is shut down for no reason that you control.  Insurance is available to cover these eventualities.  It is called Business Interruption Insurance, and COVID-19 has made it a lively topic.

What Is Business Interruption Insurance?

Business interruption insurance is an insurance policy intended to cover your exposure and operating expenses during periods when your business cannot operate and generate revenue.  Covered exposures include:

  • Lost net income (based on financial records)
  • Mortgage, rental, and lease payments
  • Loan payments
  • Tax payments
  • Employee payroll

Limits on the policy purchased should be sufficient to cover more than just a few days’ closures.  Major disasters – or pandemic diseases – can keep your business out of operation for weeks or even months.  The typical policy allows a limited waiting period before the policy’s “period of restoration,” during which your expenses will be covered.  The typical period is 30 days, but riders or endorsements can extend it up to as many as 360 days.  

How Is It Purchased?

Business interruption insurance will usually be included in an overarching Business Owner’s Policy (BOP) that combines property, liability, and business income coverages for most small to medium-sized businesses.  This manner of obtaining coverage is usually less expensive than purchasing the coverage as a stand-alone policy.  Some businesses, such as restaurants, have unique risks and are not likely to be eligible for a BOP policy. However, some of these businesses can obtain a rider for their commercial property insurance policy to cover interrupted income.  

What Isn’t Covered?

Business interruption insurance is specifically designed to cover an interruption in a business’s income flow.  It does not cover risks like:

  • Broken items, even those resulting from a covered event
  • Flood or earthquake damage (covered under different policies)
  • Pandemics, viruses, or infectious diseases like COVID-19
  • Utility costs
  • Undocumented income – if you can’t prove you earned it, its interruption is not covered

This failure to cover pandemics has been an issue throughout the COVID-19 pandemic when so many businesses have had to close. There is ongoing litigation regarding this issue, but decisions in the cases have not yet shown a clear pattern.  Review any business interruption policies you have carefully to determine pandemic coverage.  An experienced business interruption attorney can be very helpful in undertaking this review or in purchasing your next policy.  

Filing a Business Interruption Claim

There are steps to take to make a recovery on your business interruption insurance claim smoother and faster.  Be sure to consider all of these when making a claim:

Report the Claim Immediately

Your policy, whether a stand-alone or part of a BOP, will have specific claim reporting requirements.  Even if the policy provides a phone number for making claims, be sure to file in writing.  Make sure to review the timing requirements for filing and determine which coverage sections your claim might be covered under.  An attorney knowledgeable in business interruption claims could be helpful here since sometimes the sections available for making claims may have different policy coverage limits.

Understand Your Policy

As noted above, it’s important to know and understand your policy.  Different events will trigger coverage under different endorsements or provisions of the policy.  Similarly, the coverage limits may differ as well.  If you can receive $100,000 coverage under one provision and $1,000,000 under an equally applicable provision, you should be sure to take advantage of both.  Again, an attorney familiar with business interruption insurance policies can be very helpful in making a successful claim.

Document the Causes of the Claim

If your business is interrupted by some physical cause or damage, you will need to document that damage to the fullest extent possible.  Photos and videos can be helpful, as can copies of any invoices for repairs.  Since you must prove that the damage caused the interruption, your thoroughness now can significantly impact your eventual proceeds. Structural or engineering experts might be useful here, as will an attorney who is experienced in building these supporting files for business interruption claims.  

Create an In-House Team

Different people have different viewpoints on how the damage or other disaster is interrupting your business.  Use those differences to get a better understanding of the underlying cause of the interruption.  Then bring in your accounting and legal staff – in-house or outside counsel – to help with constructing your claim file.  

Talk to Your Insurance Carrier

Virtually no insurance claim is a one-and-done situation.  Settling an insurance claim is a dance in the art of negotiation. The more you communicate with your insurance company, the more likely you will be to reach a satisfactory settlement.  Keep the carrier informed – in detail – about how the loss affects your day-to-day operations, needed repairs, and other problems you are facing.  Try to build rapport that will help the insurer understand and be sympathetic to your claim.  

Make Sure to Mitigate

Most insurance companies and courts will expect you to mitigate your damages wherever possible.  In other words, for example, if water from a burst pipe is flooding your restaurant’s dining room, rather than let it continue to do so, you should turn off the water at its source. Simply sitting back while more and more damage occurs can utterly destroy your ability to recover.  If, however, there are significant expenses involved in your proposed mitigation, make sure to keep your insurer on board with what you have planned.  Again, failure to do so could adversely impact your recovery.

Educate Your Insurer

Your claims adjuster may not understand your business very well.  Take the time to help the adjuster understand how your business works so that the impact of the business interruption event can be seen more clearly.

Make Your Case – Slowly and Deliberately

Don’t stand aside and let the insurer define your losses.  In another place where a business interruption attorney can be of enormous help to you, you will want to use your claim filing to make a case for the loss as you see and understand it.  There is no reason to rush and no reason to cave.  Take a hardline when necessary.  

Using a Business Interruption Insurance Attorney

Making a business interruption insurance claim is a long, slow, and complex process.  This statement is particularly true in the world of COVID-19, where it is entirely unclear as to whether losses engendered by a pandemic are covered at all.  Consider the impact on your operations of tying up a fairly large number of people in this process for a long time.  Then consider how much that problem could be remedied by using experienced and knowledgeable outside counsel.

The seasoned business interruption attorneys at the Iscoe Law Firm – proudly serving Miami, West Palm Beach, Palm Beach County, Fort Lauderdale, and Broward County – are well acquainted with the serious nature of your needs and have considerable experience helping clients like you. We are available to take your call 24 hours a day, seven days a week, and 365 days a year. To learn more about what we can do to help your business, please don’t wait to contact us online or call us at 800-800-6500 today.