BUSINESS INTERRUPTION

Your business is your lifeblood, and businesses are the lifeblood of the communities they’re located in. If your business has to shut down for any reason, your profits can quickly turn to deficits, your employees might be laid off, your future business can suffer, and all of that can snowball until the business is closed for good.

One of the many, many reasons to have a really good insurance agent, is to make sure that this type of coverage ends up in your insurance policy before this situation occurs, because it could make the difference between the life or death of your business.

Before we get into the nuts and bolts of typical claims, it’s worth noting that commercial insurance policies, their forms, terms and conditions can vary widely from company to company, so please have a professional review your policy before submitting a claim.

There are two typical situations when a business interruption could be made:

The first situation is if your business suffers direct physical loss and is unable to open. If your restaurant was damaged by a plumbing leak, or your store is damaged by a hurricane, once that damage is documented and the claim is reported you a have period of time, typically 72 hours, where the business’s damage is not compensated. It’s almost like this timeframe serves as a deductible of sorts. After that time period elapsed, if the business still is not open, you’re covered, up to the policy’s limits.

The other common situation where business interruption coverage typically applies is if there’s damage somewhere else and a federal, state, or local government authority orders an area closed. This situation is common if a fire damages a building on a street and the area is inaccessible for a period of time, either while fighting the fire, or to ensure the health and safety of the public afterward, (inspecting the structural components of the building to make sure there’s no risk of collapse). It’s also a common occurence in the aftermath of a hurricane. We saw this type of loss both in the Florida keys, following Hurricane Irma while US1 was closed by FEMA and local authorities, and the same situation in Panama City following Hurricane Michael.

Business Interruption claims are complicated, on two fronts

If and when you have to make a business interruption claim because your business has been damaged or was ordered to be closed by a governmental authority, it’s a difficult process to navigate.

On the front end (before the claim) are the terms and conditions of your insurance policies. Some policies provide for lost gross revenue, while others provide a net loss of revenue when accounting for expenses that are no longer present. Some commercial insurance policies cover wages for employees, while others do not. Some cover expenses for relocation and temporary locations. There are a whole host of issues that exist in the insurance policy before your business even needs to make a claim.

Once you do have to make a claim, there are more complications on the back end. The claims need to be documented properly and these methods are not always clearly defined by the insurance policy in effect. It may only be pursuant to what is “reasonable.” You may need to produce profit/loss sheets. You may need to produce invoices and gross sales receipts. You may need to produce proof of costs. If you run a cash business, the insurance company can put you through the ringer, and take advantage of your business style, even accusing you of insurance fraud if you make a single misstep.

Needless to say, we don’t like these underhanded tactics by insurance companies, but they work. If your insurance company can make you desperate, you might be willing to settle your claim on terms less than favorable than your insurance policy provide for, or worse, they may try to bankrupt your business in attempts to stem their own losses.

If you’ve found yourself in this situation, give us a call or contact us to discuss your situation in more detail. Don’t let your business suffer more at the hands of the insurance company than it has because of the damage it initially sustained.