Three considerations when evaluating a business interruption insurance claim
Fire. Water. Natural disaster. These and other unexpected events can bring a business to a halt, lead to unpaid bills, stressful rent payments, product delivery challenges and a reputation in crisis. The unexpected is also the reason why companies of all sizes rely on business interruption insurance to provide the peace-of-mind that coverage will be available when there are sustained losses.
The coverage period is typically from the date of the incident up until the resumption of normal operations, or the damaged property has been repaired or replaced. Business owners should educate themselves ahead of a crisis and ask their broker if they have sufficient coverage. They should also ensure excellent record keeping as this information will be needed to prove the extent of loss.
Before making a business interruption claim, assess the full scope of the situation including: loss of profits from sales, customers and contracts; loss of damaged or spoiled inventory; and the costs resulting from increased operating expenses such as overtime or use of a temporary location.
Also, consider what expenses were saved during this time, such as the reduction of fixed or semi-fixed costs. Lastly, consider the ongoing financial obligations that will continue regardless of the business interruption such as loan obligations, rent and insurance premiums.
But, what happens when an insurance claim is denied? Jason Singer’s litigation practice is focused on commercial and homeowner’s insurance claims and has obtained two rare punitive damages awards of significant amounts against insurance companies in property loss claims. He suggests starting with these areas of consideration:
1) What was the basis for the denial and why? Has the insurance company claimed a material misrepresentation on the application, or a material change in risk, that could lead to the policy being voided?
2) If the insurance claim was denied, whose fault was it? Who was responsible for informing the insurance company? Was there a change in, or misrepresentation of, the risk the business was exposed to?
3) Have you been treated fairly and do you have enough coverage? Is the insurance company looking at the policy and the claim unfairly? Was there enough insurance coverage for the loss? Was there a reason for insufficient insurance?
For help navigating a business interruption or any insurance claim contact Jason Singer at firstname.lastname@example.org