Faq
FAQs About Business Interruption
How are business interruption claims typically settled?
Most business interruption (B.I.) claims are resolved through negotiation. Since these claims rely on hypothetical scenarios—what the business would have earned had the loss not occurred—they involve theoretical projections and calculations. These projections are based largely on the business’s historical performance, with adjustments for sales trends and future expectations. For this reason, it’s crucial to prepare your own claim, grounded in the specifics of your business, the coverage you have, and your assessment of the losses. Policyholders who attempt to handle these claims on their own are often at a disadvantage due to their lack of expertise in documenting, presenting, and negotiating B.I. claims. Insurance companies, on the other hand, have teams of external experts who handle these claims regularly.
Our business was destroyed in a hurricane, and we had Business Interruption coverage. The Board of Directors had plans to double sales through a plant expansion and increase the salesforce. Can we claim the lost profits we expected from this plan?
Likely not. Over the past five years, there has been significant litigation surrounding B.I. claims, particularly in hurricane-prone areas like Florida. Case law in some jurisdictions states that prospective business plans cannot be speculative. To make a claim, you would need to demonstrate that the expansion plans were concrete and actionable. This might include evidence such as secured bank loans, detailed pro-forma financial statements, signed leases, or construction contracts. Without such documentation, the plans may be deemed too speculative to qualify for compensation.
Our motel and separate restaurant building suffered a financial loss when the restaurant burned down. The fire caused a significant drop in revenue, so we filed a business interruption claim. However, the insurance company refused to cover the motel’s lost income because it wasn’t damaged. Can we claim lost income for the entire property even though only the restaurant was damaged?
This is a common scenario, and the outcome often depends on how courts in your state have ruled on similar cases. While the restaurant fire was a covered peril, and both buildings were listed on the policy, insurers often deny claims for losses to undamaged properties. In this case, the insurance company likely denied the motel’s claim on the basis that it suffered no physical damage, even though the fire caused a loss of market for the motel. Success in such cases can vary, and legal precedents in your jurisdiction will play a significant role.
Our business suffered a complete loss due to flooding in our community. Can we claim lost income under our all-risk property insurance policy?
Probably not. Standard property insurance policies typically exclude flood damage, and the National Flood Insurance Program (NFIP) does not provide Business Interruption coverage for flood-related losses. While some private insurers may offer flood insurance, it is not part of the federal flood program. If you did not purchase separate flood insurance with B.I. coverage, you are unlikely to recover lost income from a flood event.
Our business sustained a severe loss, and we plan to rebuild. Contracts have been signed, and the insurance company has acknowledged that we have a covered business interruption loss. Should we settle now or wait? What is the typical timeframe for settling such claims?
In our experience, B.I. claims are usually the last to be settled due to their complexity. Insurance adjusters often hire forensic accountants who specialize in representing insurers on B.I. claims. You can expect these experts to request extensive documentation, including financial records, tax returns, profit-and-loss statements, and state sales tax reports. Given the subjectivity involved in calculating B.I. losses, it’s essential to have your own claim prepared and evaluated by an independent expert. Relying solely on the insurance company’s assessment can put you at a disadvantage. B.I. claims are too complex to navigate without professional support on your side.
FAQs About Business Interruption
How are business interruption claims typically settled?
Most business interruption (B.I.) claims are resolved through negotiation. Since these claims rely on hypothetical scenarios—what the business would have earned had the loss not occurred—they involve theoretical projections and calculations. These projections are based largely on the business’s historical performance, with adjustments for sales trends and future expectations. For this reason, it’s crucial to prepare your own claim, grounded in the specifics of your business, the coverage you have, and your assessment of the losses. Policyholders who attempt to handle these claims on their own are often at a disadvantage due to their lack of expertise in documenting, presenting, and negotiating B.I. claims. Insurance companies, on the other hand, have teams of external experts who handle these claims regularly.
Our business was destroyed in a hurricane, and we had Business Interruption coverage. The Board of Directors had plans to double sales through a plant expansion and increase the salesforce. Can we claim the lost profits we expected from this plan?
Likely not. Over the past five years, there has been significant litigation surrounding B.I. claims, particularly in hurricane-prone areas like Florida. Case law in some jurisdictions states that prospective business plans cannot be speculative. To make a claim, you would need to demonstrate that the expansion plans were concrete and actionable. This might include evidence such as secured bank loans, detailed pro-forma financial statements, signed leases, or construction contracts. Without such documentation, the plans may be deemed too speculative to qualify for compensation.
Our motel and separate restaurant building suffered a financial loss when the restaurant burned down. The fire caused a significant drop in revenue, so we filed a business interruption claim. However, the insurance company refused to cover the motel’s lost income because it wasn’t damaged. Can we claim lost income for the entire property even though only the restaurant was damaged?
This is a common scenario, and the outcome often depends on how courts in your state have ruled on similar cases. While the restaurant fire was a covered peril, and both buildings were listed on the policy, insurers often deny claims for losses to undamaged properties. In this case, the insurance company likely denied the motel’s claim on the basis that it suffered no physical damage, even though the fire caused a loss of market for the motel. Success in such cases can vary, and legal precedents in your jurisdiction will play a significant role.
Our business suffered a complete loss due to flooding in our community. Can we claim lost income under our all-risk property insurance policy?
Probably not. Standard property insurance policies typically exclude flood damage, and the National Flood Insurance Program (NFIP) does not provide Business Interruption coverage for flood-related losses. While some private insurers may offer flood insurance, it is not part of the federal flood program. If you did not purchase separate flood insurance with B.I. coverage, you are unlikely to recover lost income from a flood event.
Our business sustained a severe loss, and we plan to rebuild. Contracts have been signed, and the insurance company has acknowledged that we have a covered business interruption loss. Should we settle now or wait? What is the typical timeframe for settling such claims?
In our experience, B.I. claims are usually the last to be settled due to their complexity. Insurance adjusters often hire forensic accountants who specialize in representing insurers on B.I. claims. You can expect these experts to request extensive documentation, including financial records, tax returns, profit-and-loss statements, and state sales tax reports. Given the subjectivity involved in calculating B.I. losses, it’s essential to have your own claim prepared and evaluated by an independent expert. Relying solely on the insurance company’s assessment can put you at a disadvantage. B.I. claims are too complex to navigate without professional support on your side.