Trusted Business Interruption Claim Lawyers
A business interruption insurance claim can help when your company faces an unexpected disruption to the normal flow of business. Learn more about this type of insurance coverage here.
Author: J. Blake Ledbetter, Partner, Conoscienti & Ledbetter
Mr. Ledbetter specializes in civil litigation in metropolitan Atlanta, Georgia, and possesses vast experience in wrongful death lawsuits. Mr. Ledbetter was recognized as a SuperLawyers Rising Star in 2018 and 2019 in the area of Civil Litigation. Published on May 21, 2020, last updated on May 28, 2020.
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Business Interruption Claim
During the Coronavirus pandemic, business owners are relying on their business interruption insurance policies to cover their loss. In many cases, insurance companies are denying these claims based on “a virus” as the cause. This denial is sometimes done without reviewing the policy but rather a flat-out rejection. At the same time, most business interruption policies include coverage for losses during mandatory shutdowns as mandated by the government.
Additionally, many policies are written to include limiting coverage of losses caused by direct physical damage to or loss of property. This area of insurance coverage for business interruption is a complicated part of insurance law and requires a detailed review of your policy to determine the potential success of filing a claim.
When you need help in understanding your insurance policy and how to proceed with a business interruption insurance claim, contact the attorneys at Conoscienti & Ledbetter. We are here to help!
Business Interruption Insurance Claim
The ability to collect on lost business income due to an interruption is dependent on the specific policy and circumstances surrounding the loss. Many business insurance interruption claims are routinely denied due to exclusions in the policy. Losses due to the COVID-19 pandemic are monumental, affecting all types of businesses from large manufacturers and food suppliers around the world to mom & pop operations in our neighborhoods.
The recent suspension of business activity has been mandated by the government. Because this situation has been totally beyond the control of business owners, many believe that their business interruption insurance claim should be approved regardless of other factors.
A civil lawyer Atlanta GA at Conoscienti & Ledbetter can help protect your business interests and assist in getting financial compensation to help your business get back on the road to recovery. Give us a call today.
What Is a Business Interruption Insurance?
Business interruption insurance coverage or business income coverage is usually included in a business owners policy. As such, it can help a business owner recover after certain business losses.
For example, you can’t open your business because a fire broke and damaged your business premises and goods. In that case, a business interruption insurance policy would typically kick in and cover the costs of your losses, until everything is repaired.
Of course, there is a waiting period of usually two to three days for a business interruption insurance policy to kick in. In addition, policies typically have a restoration period. That is the amount of time your policy will help pay for covered extra expenses and losses while restoring your business. Although the restoration period usually lasts for up to a year, it’s important to finish with repairs within a reasonable time period.
What Can Business Interruption Insurance Cover?
Generally, business interruption insurance covers:
- Lost profits which would have been earned under normal circumstances
- Fixed costs/operating expenses (i.e. rent, utilities, salaries, benefits)
- Moving costs if relocating to a temporary location is necessary
Depending on your policy, additional items may be covered.
Bear in mind that in most cases, lightning, wind, theft, falling objects, as well as fire are considered a covered peril for business interruption insurance. However, damage one’s business premises suffered from an earthquake or a flood may not be. It’s essential to read your business insurance policy documents carefully, so you would know which perils your insurer can help you cover.
Also, property damage would not be included in a business interruption insurance claim; it would typically be included in commercial property insurance. But, business interruption insurance may include expenses that would cover training costs for employees to learn how to use newly purchased equipment.
At Conoscienti & Ledbetter, our expert attorneys can review your policy to determine the most advantageous resolution to your situation.
Professional advice from trusted attorneys today, for free.
Business Interruption Coverage
The current Coronavirus crisis has affected businesses around the world in unprecedented ways. Many have lost significant income during this time and of those, many expect that their business interruption insurance coverage will cover their loss.
At the same time, many insurance companies are denying claims under the “civil authority” provision in their insurance policies. This provision claims that no physical damage or loss was present outside of the insured’s commercial property despite a civil order to cease operations. This is not always true.
Attorney J. Blake Ledbetter of Conoscienti & Ledbetter can review your insurance business interruption policy and determine the best way to address this issue with your business income insurance company.
Business Interruption Worksheet
A business income interruption worksheet is vital for determining the strategy for recovering from the temporary shutdown your business has experienced. Completing the BI worksheets can be confusing and there are 3 typical mistakes business owners make:
- Establishing the actual length of the interruption
- Including all payroll in ordinary payroll – ordinary payroll should not include executives/management as their payroll & benefits are considered a fixed expense and paid out during the interruption
- Separating fixed costs from variable costs
Don’t forget that business interruption insurance has a coverage limit that represents the maximum amount an insurance company would pay towards a covered claim. That means you may end up paying expenses that excellent the coverage limit by yourself. Have that in mind when considering the business interruption insurance cost for your business.
Business Interruption Insurance Calculation
In order to calculate the amount of lost business income due to the interruption, you must first calculate your business income. To calculate your business income, you must assess your total revenue and subtract all business expenses incurred and operating costs (includes fixed costs – rent, utilities, payroll, benefits). This gives you the business’ earnings before taxes. All taxes are deducted from this amount, leaving you with net income also known as business income.
Using your business income, you can project the amount of lost income depending on the length of the interruption.
Business Interruption Calculation
The success of a business interruption insurance claim is dependent on understanding the calculation used in determining the impact on your financial situation. Calculating the financial impact of a business interruption is not always straightforward. It can be difficult to interpret the credibility of your financial projections. It is necessary to work through the gray areas surrounding the interruption and the impact on consumer demand for your business.
Generally, the formula for calculating business interruption is:
BI = T x Q x V
BI = business interruption
T = the number of time units (hours, days) operations are shut down
Q = the quantity of goods normally produced, or sold, per unit of time used in T
V = the value of each unit of production, usually expressed in profit
A business lawyer Atlanta at Conoscienti & Ledbetter can review your case and help get you on the road to financial recovery.
Don’t delay. Schedule a risk-free consultation regarding disruptions to your business operations.
Contingent Business Interruption Insurance
Contingent business interruption insurance (CBI) is a type of property insurance policy that softens the financial impact of events beyond your business’ control. The success of your business is often based in part on other businesses (availability or lack of raw materials or components from a supplier, transportation disruptions, extended computer outages).
Risk managers look at multiple factors specific to your business to determine the proper coverage you should have. A policy can be written naming specific “contingent properties” which are covered or it may be a blanket policy that covers multiple entities that may impact your business’ profitability.
Understanding CBI insurance is complex. Attorney J. Blake Ledbetter of Conoscienti & Ledbetter has years of experience in all aspects of insurance law and can help navigate this difficult area for you. Let us put this experience to work in your favor. Contact us today.
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