Do You Know The Terms Of Your Business Interruption Insurance?
If you’re running a business, you probably have insurance. And if you can’t absorb the income loss if your business has to shut down for an unknown period of time due to physical damage then business interruption insurance (BI) may be part of your business insurance coverage.
BI is underwritten to replace the revenue that is lost when a business is unable to operate. But the insurance does not cover just any type of interruption to a business. It is important to know exactly what your policy covers and what is not covered so you don’t get blindsided when you attempt to make a claim only to have it denied by your insurance company.
Insurance claims adjusters interpret the terms of their policies very narrowly in order to limit the reach of the coverage. At Dawson & Rosenthal, our bad faith insurance lawyers force insurance companies to honor their contracts and make good on their promises to pay our clients.
What is a Business Interruption?
A business interruption is the inability of a covered business to generate income due to direct physical damage or loss to business property caused by a covered peril.
What Can Cause a Business Interruption?
Business interruptions can only be caused by certain types of force or actions that are specified in the coverage terms. Typical BI policies list the following as covered causes of loss:
- falling objects
- access to business restricted by civil authority due to physical damage to a nearby property
What is Direct Physical Damage?
BI coverage is intended to compensate for the business interruption caused by destruction to covered business property making it unusable.
Arguments have and are being made trying to establish Covid-19 as a covered peril that causes direct physical damage to trigger BI coverage for the mandatory business shutdowns that occurred. The majority of those arguments have so far not convinced insurers or judges.
What is Not Covered by Business Interruption Insurance
Certain damage, costs and loss are specifically not covered by BI. BI coverage will usually exclude:
- glass broken by a covered cause of loss
- damage caused by earthquake or flood
- lost income claims that cannot be documented by business records
- utility costs
- business interruptions due to viral or bacterial infections or other communicable diseases
What Will BI Pay For?
What BI will pay for depends on the specific needs of your business and the coverage you purchased. Typical business interruption coverage pays many of the normal operating expenses that a business incurs on a monthly basis.
- lost income
- employee payroll
- rent/mortgage payments
- other monthly expenses
- tax payments
- expenses associated with temporarily relocating the business
How Long Will BI Pay?
Business Interruption coverage specifies a ‘period of restoration’ during which time benefits will be payable. Coverage usually starts on the first day a business is shut down and has a maximum duration subject to the earlier of one of two things.
- when the property should – with reasonable efforts – be restored to operating condition, or
- when the business has resumed permanent operations at a different location
What if the Insurance Company Denies My Business Interruption Claim?
Although policy language tends to be very similar among different carriers underwriting the same coverage, the language of your specific policy is what you must rely on to determine your right to coverage.
You should be familiar with what your policy covers, what is not covered and whether there are any conditions that affect your right to receive coverage. If you believe you have a covered claim and your insurance company denies it you can challenge that denial and have it decided by a court.
The business interruption insurance claim attorneys at Dawson & Rosenthal know that policy language and the interpretation of that language can make all the difference when it comes to granting or denying coverage. We have over 70 years of combined legal experience persuading insurance companies and judges in California and Arizona that our clients have valid claims and are entitled to payment.