What Small Business Owners Must Know about Business Interruption Insurance
The closure of many businesses across the country has placed severe pressure on the livelihood of small business owners. Businesses that were deemed “non-essential” such as real estate brokerages, certain retail stores, child day-care centers, and many more continue to feel the impact of the shutdown. The lost revenue has caused business owners to review their insurance policies for any coverage that might apply.
Business interruption insurance is often included as part of a property owner or renter’s insurance policy. BI insurance typically covers lost revenue when a business is interrupted due to damage to a property. For example, coverage may be available where a tree falls on the building preventing business operations during the period of repair.
Whether coverage will apply depends on the language of the particular policy and the circumstances around how revenue was lost. Here is an example of a typical policy: We will pay for the actual loss of Business Income you sustain due to the necessary suspension of your “operations” during the “period of restoration”. The suspension must be caused by direct physical loss of or damage to property at the described premises.
Language such as the above example may exclude claims due to COVID because the business suspension results from public health orders and a virus, not direct physical loss to the property. The other major hurdle to recovery is a possible exclusion for viruses such as the following: “We will not pay for loss or damage caused directly or indirectly by… any virus or other microorganism that induces or is capable of inducing physical distress, illness or disease.”
It is important to review policies carefully because the language of individual policies varies from policy to policy. A business could recover for COVID losses if an endorsement for viruses was added to the policy, or if the language did not require direct physical damage to the property.
The COVID situation increased awareness that BI coverage may apply in many property damage situations. Business owners who lost revenue due to an interruption caused by property damage should protect their interests.
Timing is important, and failure to act quickly can cause severe delays. I recommend anyone interested in exploring a BI claim take the following steps:
1. Document the circumstances that caused the interruption.
A claim could be expedited by obtaining clear photographs, witness statements, estimates of repair, and more. If the item could be helpful in showing how damage occurred and what is necessary to correct the damage, document it.
2. Gather evidence of your losses.
Many business owners do not realize that the amount of loss is where the greatest likelihood of delay will come. If a policy applies, the insurance carrier is likely to scrutinize the amount of the demanded payment and continuously request further evidence of loss. Gathering documentation will put a business owner on track for an earlier settlement.
3. Review the insurance policies.
If you are unsure of whether coverage applies due to COVID or any other loss, please call us for a free assessment.
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