January 12, 2023
No matter where your business is located in The United States, there are always some forms of natural disasters you will have to overcome. Whether that's Hurricanes on the East Coast and the Gulf of Mexico, Tornados in the Central United States, Blizzards in the North, or Earthquakes on the West Coast, natural disasters are just that, natural. You can have all of the preparation in place for the event, but you will never know what the outcome might be.
One thing as a business owner that you can do to prepare for the outcome of a natural disaster is to have business interruption coverage, also known as business income insurance. Business interruption insurance helps small businesses protect against monetary losses due to periods of suspended operations or closures when a covered event, such as a fire, occurs and causes physical property damage.
Q: When does Business Interruption Insurance become active?
A: Business Interruption Insurance becomes active once there is a qualifying event, such as a fire, flooding, or roof damage, that does not allow for the normal operation of a business.
Q: What perils are covered by my business interruption insurance?
A: Typically, business interruption insurance covers expenses when the normal operation of your business is interrupted. The most common perils that cause this are fires, hurricanes, tornados, earthquakes, and global pandemics.
Q: If a disaster impacted my supplier of goods, would this still allow me to file a business interruption claim?
A: On very rare occasions, you can file a business interruption claim if a supplier was shut down after a disaster. This might include a distributor of pipes being destroyed in a hurricane and not being able to deliver pipes to your pipe fitting company, ultimately causing a temporary shutdown until the supplier starts back operation or you find a secondary supplier.
Q: If my business slowed down drastically but did not completely close down, will I still be eligible to file a business interruption claim?
A: As most policies state, you must have completely shut down the operation to file a business interruption claim. There are, however, rare situations where you might be able to file a claim if your business is not completely shut down. For example, there might be a global pandemic that causes millions of tourists not to travel and eat at your beachfront restaurant, causing a fifty percent decrease in your revenue. It is always a great rule of thumb to carefully read through your policy to see if there is such a clause that might allow you to submit a claim even if you are not completely closed.
Business Interruption Insurance is normally purchased for a premium along with your property insurance. The main difference between your property insurance and business interruption insurance is that while your property insurance covers and pays for the actual damage to your property, the business interruption insurance covers any and all net income you would have received while your business is closed.
According to the American Bar Association, there are many steps to consider when you are filing a business interruption claim. Identifying which steps you need to follow is crucial in the success of your claim. We have listed below 5 steps that we suggest a business owner to follow when filing a claim.
The first thing you should do in order to prepare to submit a business interruption claim is to read through your policy. By reviewing your policy, you can determine what perils, such as fire, flooding, or even theft, your business might be covered under. It's also a great practice to review your policy frequently to make sure you are up to date with the latest changes and understand fully what will be covered if a disaster might strike. One of the most important documents to review in your policy is your Commercial Package Policy (CPP). Commercial Package Policies (CCPs) are insurance policies that combine policies, such as liability and property, and are often meant for small to medium businesses.
If your business is eventually affected by one of the qualifying perils, then you must be sure to document extensively. You can document the damages that caused the business interruption by taking photos, checking your inventory, and even taking witness statements from people who might have been present during the incident. There are even instances where you need to collect documentation if your business can not operate because it loses its direct supply of products. For example, if a hurricane hits and destroys a large assembly factory, the factory has to shut down, and your business does not receive essential products for operation. Additionally, suppose you can not safely return to your business to document damages due to the area being heavily damaged or in case of government officials stopping you because of riots, your business interruption insurance still activates.
Once you have documented the damages, you will next need to report the damages in a timely manner. There might be stipulations in your policy that require you to submit documents within a certain amount of time. So be sure you know what time frame you have to submit. The biggest risk factor of not submitting your claim in time is that your claim may be denied.
Once you have notified the insurance company that you plan to submit a claim, you will need to determine your losses and how long it might take for restoration. With certain business interruption insurance policies, you are normally provided benefits during the time of restoration. Most policies have the benefits begin on the first day of the business being closed, but there are occasions where there may be a 24 - 72 hour downtime before benefits are activated. You will also likely become in disputes with your insurance company on the amount of time needed to restore your business, especially when things outside of your control delay the restoration, such as storms causing a delay in construction, essential parts being on backorder, or even delays by the landlord.
When you are calculating the number of losses sustained by a disaster, be sure to reference your policy. Most, if not all, policies clearly state how to calculate your losses. Additionally, be sure to be careful and thorough when you are calculating how much you lost in sales, earnings, and projected sales; the slightest deviation can result in harsh penalties. Because it may be difficult to predict your projected income, an insurer may look at your past income over the recent years and base the projected income loss based on these numbers. To do so, you, as the owner, will be required to submit proof of your income over the recent years. Keep in mind if your business operated at a loss over the recent years, you will not be excluded from help; however, the insurer will generally compensate you for fixed expenses, such as payroll.
Everyone's circumstance is different, which might result in different plans of action for submitting a business interruption claim. Business interruption insurance is designed to get the insured back on their feet and operational as soon as possible. To be able to ensure this is the case, you might need to seek outside help from a business interruption attorney. A business interruption attorney will guide you along whatever plan of action you set into motion and ensure you are granted the compensation you deserve.
Business interruption insurance is a vital coverage you should have on your business, no matter if you are a small mom-and-pop or a part of a fortune 500 franchise. Business interruption insurance can cover you in many different ways after a natural disaster or a global pandemic, as we have experienced in the most recent years. We have highlighted below some of the items that business interruption insurance covers.
Profits - Business interruption insurance will cover lost profits that you would have received if you could have remained open. Keep in mind that the amount of assistance you will receive will be based on the number of sales and expenses that you have a record of. Keeping an accurate and honest record of your profits and expenses is vital to gaining the amount you deserve.
Rent - Even if your business is destroyed, you are still responsible for paying your rent to your landlord. This can be extremely difficult to accomplish if you are not gaining any income from your business that was on that property. Paying rent after a disaster is where business interruption insurance comes in handy; business interruption insurance will cover all of your payments while you are working to reopen your business.
Payroll - Hard workers and dedicated staff are hard to come by. That is why in most cases, you want to retain the workers you do have. Whether that is because they are a long-time employee who has been with you from the start or a new hard-working employee that is looking to help take your business to new levels. The workforce behind your company is your biggest asset, and being able to pay them while you are working on reopening the business is vital to retaining those key assets.
Relocation fees - There are instances after disasters like hurricanes or tornadoes when you will likely have to relocate your business. Relocating a business can be very difficult, time-consuming, and expensive. If you have your business interruption insurance, these costs will be alleviated. Business interruption insurance will cover the cost of movers, equipment, hiring and training new staff, and even leasing for the new location.
These are just a few of the items that business interruption insurance covers. Be sure to read your policy thoroughly to know what expenses are covered.
Throughout the country, beginning in the Spring of 2020, we were faced with government shutdowns and safer-at-home orders, something that many, if not all, Americans had never faced before. It was a huge learning curve for everyone during this time, including businesses and insurance companies.
Even though the insurance companies updated most of their policies following the 2003 SARs (Severe Acute Respiratory Syndrome) outbreak that caused many organizations to file business interruption claims, for example, the Mandarin Oriental, a hotel chain in Asia, which received a $16 million dollar business interruption settlement, nothing prepared them for the COVID-19 pandemic.
Early on during the COVID-19 pandemic, experts estimated that business interruption losses were to exceed $300 billion per month for small businesses alone. Due to the COVID-19 pandemic, several business owners sought business interruption and extra expense coverage for lost revenue incurred as a result of forced business closures. One of the main questions that many business owners were asking was will the claims be honored, being that the business did not have any physical losses.
Many would soon find out the answer in the unfortunate case of Neuro-Communication Servs., Inc. v. Cincinnati Ins. Co., where an Ohio judge ruled that there was no physical loss to the company due to the impacts of COVID-19. Furthermore, the court stated on page 11, paragraph 24 of the court records that, while COVID-19 is harmful, the damage here is different since Neuro's properties were not uninhabitable but were just unsafe due to the possibility of COVID-19 transmission.
Since 2020, the COVID-19 pandemic has delivered a significant blow to many business owners throughout The United States and the world. In August 2020, 10 states, including New York, Louisiana, Rhode Island, California, and Michigan, drafted legislation that required insurers to retroactively pay for business interruption losses caused by coronavirus shutdowns. To know if your business is covered by business interruption insurance from pandemics, you will need to review your policy thoroughly and check with your insurance agency.
If you or someone you know has been impacted by a disaster and had a business interruption claim denied, please contact us at The Cochran Firm today for your no-obligation, free consultation. We take great pride in using our expertise for you and look forward to hearing from you. To schedule a free, no-obligation consultation with one of our attorneys, please contact us today. We maintain offices throughout the United States, better enabling us to fight tirelessly for the rights of injury victims in all areas of the country.
Living on the Gulf of Mexico and The Atlantic Coast can be a beautiful and relaxing time with miles and miles of beaches, resorts, and family vacation areas. These areas are also where people call home when tourists and vacationers leave after the tourist season. Having a business in heavily trekked tourist areas comes with its perks, but there also is a downside. Every year from June through November, these areas prep for what might be the next largest hurricane season. These storms start out as sand storms over the Sahara Desert and make their way into the Atlantic Ocean, beginning their more than six thousand-mile journey to North America. As we know, most storms dissipate or might even curve back into the ocean; however, there are a few that make their way all the way to the mainland of The United States.
This was the case in September. 28, 2022, as hurricane Ian made landfall off the west coast of Florida. Hurricane Ian caused widespread damage totaling over 50 billion dollars. The Florida Office of Insurance Regulation, as of this past December, estimated nearly 670,000 claims, with more than 29,000 being commercial property claims. Hurricanes and many other natural disasters are known for completely shutting down operations in the areas they directly impact. Business interruption won't cover the cost of your losses as far as property damage, but it can help mitigate the cost associated with lost income and profits, taxes, relocation expenses, and loan payments. There are occasions where business interruption insurance comes into effect if the government shuts down the areas around the wake of a disaster, such as barrier islands not being able to be reached because bridges and roads are not stable for travel. Even if buildings were still standing, the inability of workers and customers to get to and from those areas would be sufficient to trigger business interruption insurance.
When you have paid thousands of dollars for insurance you want to make sure that you have it ready when you need it the most. Insurance companies can be sneaky and they look to make a profit anywhere they see they can. In the majority of cases of business interruption claims, the insurance carrier will honor the contract and pay the amount of the claim. There are however occasions when the insurance provider will deny the claim or accept the claim but underpay the amount owed.
According to a document from 2020 by the National Associations of Insurance Commissioners (NAIC), the insurance industry estimates that only 30 – 40% of small businesses purchase any business interruption coverage at all. The Federal Emergency Management Agency (FEMA) put out a separate statement that stated that roughly 25% of businesses fail to reopen after a natural disaster. This is mainly due to insurance companies underpaying claims or outright denying claims all together.
No matter the type of claim you may have, if it is denied, The Cochran Firm is here to help. Contact us today at 1-800-The-Firm for more information on how our experienced insurance claim attorneys can help you. Even though your claim may be denied by the insured, it does not mean all is lost. Our lawyers at The Cochran Firm have extensive experience in challenging claim denials, setting up policies to handle any potential claims that may happen in the future, and making sure the rights of the client are continually protected. Insurance disputes and claims can be complex and time-consuming, so it is important to work with a trusted and experienced lawyer who can provide the correct resources and expertise appropriate for your case.
Founded over 50 years ago, The Cochran Firm is one of the nation's premier personal injury, truck accident, and medical malpractice law firms. The Cochran Firm is a national firm with regional offices throughout the United States. The Firm is a diverse group of highly skilled and experienced lawyers dedicated to bringing quality representation to injured people and their families.
The Cochran Firm has offices nationwide, with dozens of experienced business interruption claim attorneys ready to help society's innocent victims; we're equipped to handle most of your legal needs. With 11 unprecedented verdicts in excess of $100 million each and 35 in excess of $10 million, the partners practicing in The Cochran Firm have secured over $35 billion in verdicts, settlements, and judgments for our clients. While we cannot guarantee that your claim will result in millions of dollars, we can guarantee that we will fight tooth and nail, taking your case as far as necessary to ensure you are awarded every penny you are due. We are proud of our service to our clients. We are also proud to know that much of our work, both in and out of the courtroom, has been integral in changing corporate and government policy for the better. We set precedents when we can but always set out to obtain justice. We are prepared to do whatever it takes to see that justice is served for you and your family. To schedule a free, no-obligation consultation with one of our attorneys, please contact us today. We maintain offices throughout the United States, better enabling us to fight tirelessly for the rights of injury victims in all areas of the country.
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