Business Interruption insurance claims are initiated as a result of a covered peril (physical damage) as coverage for consequential damages when owners are partially or totally precluded from using their insured and affected property to conduct business. This risk management tool was developed to sustain businesses during recovery efforts and sometimes extend indemnity while an entity regains customers and market share. This is referred to as the indemnity period. The required elements to trigger coverage are:

  • Direct physical damage or property loss
  • An unavoidable business interruption because of the property damage or loss, and
  • A loss of business net income

All these elements must be present to initiate coverage. The idea is to restore an impacted business to the same economic position, as if the interruption had not occurred.

Business interruption losses are calculated by comparing operating results from before and after the loss. Reimbursement is limited to losses actually experienced. A business interruption policy can cover some or all types of losses.

A frequent result of business interruption is loss of sales. When loss of sales can be reasonably shown, the loss is usually measured as lost gross margin (revenue less cost of sales). There are circumstances where lost sales can continue after the physical damages are repaired.

Business interruption insurance may cover expenses for wages, salaries and benefits to pay and retain employees who might otherwise be laid off and find other jobs while business operations are suspended. This coverage assures the business’s trained workforce remains in place and ready to resume operations.

Insurance may also cover extraordinary expenses the business incurs because of the interruption.  Extra expenses are limited to amounts incurred during the covered property’s restoration and incurred to reduce the disruption.  Some examples of extra expense include leasing temporary space, renting equipment, and communication costs to notify clients the company remains in business, and when operations have resumed If the business must purchase goods to meet contractual commitments, any additional cost of sales may be reimbursable

RPC can assist businesses that have experienced a business interruption or are having trouble recovering amounts due from an insurance carrier in the claim preparation process. Many policies cover the cost of hiring professionals to assist policyholders in claim navigation and preparation. RPC consultants will review the business interruption loss, identify the documentation required to compute recovery, document and prepare your claim, negotiate insurance advances, and facilitate a timely submission so you can get back to focusing on your operations as soon as possible.

RPC also assists plaintiffs and defendants in business interruption litigation. We prepare damage estimates and review estimates prepared by experts for opposing parties. RPC staff have the accounting, economic and statistical expertise to prepare expert reports for use in mediation or trial. We have experience with a variety of industries and have special expertise in the healthcare industry.