What is Business Interruption Insurance?
Business interruption insurance (also known as business income insurance) is a type of insurance that covers the loss of income that a business suffers after a disaster. The income loss covered may be due to disaster-related closing of the business facility or due to the rebuilding process after a disaster.
It differs from property insurance in that a property insurance policy only covers the physical damage to the business, while the additional coverage allotted by the business interruption policy covers the profits that would have been earned. This extra policy provision is applicable to all types of businesses, as it is designed to put a business in the same financial position it would have been in if no loss had occurred.
This type of coverage can be added onto the business’ property insurance policy or comprehensive package policy such as a business owner’s policy (BOP) or as part of a standalone policy in some jurisdictions. Since business interruption is included as part of the business’ primary policy, it only pays out if the cause of the loss is covered by the overarching policy or a defined event in the case of a standalone.
Business Interruption Coverage
The following are typically covered under a business interruption insurance policy:
- Profits. Profits that would have been earned (based on prior months’ financial statements).
Fixed costs. Operating expenses and other costs still being incurred by the property (based on historical costs).
- Temporary location. Some policies cover the extra expenses for moving to, and operating from, a temporary location.
- Commission and training cost. Business Interruption (BI) policy essentially covers the cost of providing training to the operators of the machinery replaced by the insurer following the insured events.
- Extra expenses. Reimbursement for reasonable expenses (beyond the fixed costs) that allow the business to continue operation while the property is being repaired.
- Civil authority ingress / egress. Government-mandated closure of business premises that directly causes loss of revenue. Examples include forced business closures because of government-issued curfews or street closures related to a covered event.
This coverage extends until the end of the business interruption period determined by the insurance policy. Most insurance policies define this period as starting on the date of the covered peril and the damaged property is physically repaired and returned to operations under the same condition that existed prior to the disaster.
In addition, businesses can purchase contingent business interruption coverage, which pays out when a business is unable to operate because of an event (such as a natural disaster) that damages the business premises of one of its suppliers or customers, thus preventing it from engaging in normal trade.
Insurers Failing to Pay Coverage for Covid-19 Claims
Restaurant and other business owners pay insurance company premiums for business interruption (BI) coverage. However, during the ongoing Covid-19 virus shutdowns, many insurance companies are denying business claims and withholding coverage. A business interruption claims attorney will investigate your insurance company policy. If you have a meritorious claim we can pursue, we will work to make your insurance company honor your policy and pay for losses your restaurant or other business suffered during this stressful time. From our main office in Houston, we are handling Covid-19 shutdown-related claims in Texas, as well as all across the nation.
Business Interruption Claim Delayed? Denied? Underpaid?
If your business interruption claim has been delayed, denied, or underpaid, contact a business interruption claims attorney now for a free legal consultation.
Nationwide Legal Help for Business Interruption Claims
Our main offices are in Houston, Texas; but we are working with other lawyers all over the country to handle business interruption claims nationwide. Please see our Frequently Asked Questions regarding Covid-19 related insurance claims for businesses.
Insurers Lying about Coverage
Rather than paying legitimate claims triggered by our country’s civil authority shutdown, the insurance industry has, in some cases, chosen to spread propaganda. Many insurers are claiming that the virus does not cause a dangerous condition to property. Depending on different policies and interpretations, this position can sometimes be shown to be both factually and legally false. Many actors in the insurance industry appear to be spreading this false information to deceive policyholders about their coverage.