Business Interruption Insurance: Some Basics

Many businesses have and purchase business interruption (BI) insurance, and that’s a smart thing. But the mistake that many business owners make is purchasing that insurance, and just assuming that it covers absolutely any reason, or cause, that could affect the downturn of business.

Business interruption insurance is complex, and actually excludes a lot of things that you may think should be included, or covered. While every policy is different, here are some things you should know about BI.

What is Normally Covered?

BI doesn’t cover any physical damage itself, nor pay to repair it. BI is to help you get paid for the revenues or profits that you lose, while your business is unable to operate.

BI can both cover what your losses are, but also what your increased expenses are—for example, extra expenses you may incur, as a result of having to temporarily relocate your office. They may even cover your debts, such as if you have continuing loan or lease payments that you cannot make because of the interruption.

Note that most BI policies do not cover any losses as a result of things that aren’t related to the physical inability to use the property. For example, law changes, or pandemics, are usually not covered-even if they do, effectively, if not literally, shut down your business.

Government Actions

Some BI policies will provide coverage when a government actor shuts the property down, but that may depend on the cause. If the causes are out of your control—for example, your commercial landlord never fixed the roof, and now the city shuts the entire building down—you may be covered.

But if you are the cause of the problem—for example, your restaurant is shut down because you are violating health codes—you may not have coverage.

Usually, when the government is the cause of your shutdown, the cause must be complete—that is, your and the public’s access to the business ‘property must be completely impossible. For example, imagine that there is a gas leak and authorities need to shut down your street for a week because of it. Even though your property isn’t damaged, you still lost access to it, and the BI coverage should kick in.

Problems With Others

Separately, you can purchase coverage for loss of business that is caused by someone else. For example, if your only, sole supplier goes out of business, that can put you out of business as well. What is known as contingent business interruption can help you pay your bills during this time.

Getting Back on Track

Let’s say you are back in business again, after being closed. That doesn’t mean the money your business normally makes will start coming in the next day. It may take time before your revenue streams start up again. An extended policy can pay your bills until your business starts making its regular revenue again.

Problems with your business interruption insurance? Call the West Palm Beach business litigation attorneys at Pike & Lustig today for help.

Sources:

content.naic.org/cipr-topics/business-interruptionbusinessowners-policies-bop

thehartford.com/business-insurance/business-interruption-insurance