Just the Basics: What Is Business Interruption Insurance?


Business interruption insurance coverage is designed to assist with replacing the income you lose and other expenses you incur when your business is affected by a covered disaster. This can be a confusing coverage for some business owners, especially small business owners who may not even realize they have this coverage on a policy.

If you aren’t completely clear on what business interruption insurance is and how the subsequent claims process works, you need to know.

Business Interruption Insurance Is Not a Separate Policy

If you are a business owner and you looked through your various policies and can’t find one for business interruption insurance, don’t give up yet. Instead, you should contact an experienced business interruption insurance lawyer for assistance. You may have coverage without even realizing it if you have a commercial business owners’ policy or commercial property policy.

What Does Business Interruption Insurance Cover?

While other sections of your policy might cover physical damages to your business, business interruption coverage is to compensate you for the revenue you are losing due to a disruptive disaster. It can also pay you for your expenses.

Examples of disasters include damage due to a fire or flood. After a fire, you may need to be closed for months while you rebuild. You will lose out on income, plus you will still have all the other expenses that you need to pay.

Under your business interruption policy, you might be able to make a claim for any of the following losses:

  • Employee wages,
  • Business income,
  • Temporary relocation,
  • Fixed costs,
  • Taxes,
  • Training costs, and
  • Loan payments.

In addition, if your business is closed down due to a government mandate, it may cover your expenses under the provision of “civil authority.” This is one of the provisions being used to present business interruption claims for COVID-19 shutdowns.

Does Business Interruption Insurance Cover COVID-19 Closures?

The COVID-19 pandemic continues to affect every industry, which means many businesses are still unable to operate. With some government lockdowns still in effect, it’s no surprise that many business owners are looking for assistance under their business interruption policies. However, insurers are pushing back and denying most claims.

Some insurers are relying on policy language that excludes coverage for viruses and infectious diseases, while other companies are denying claims based on no physical damage. Experienced business interruption insurance attorneys are helping business owners all over the country pursue coverage in litigation.

There is still much to be determined on whether coverage will be written into federal or local state law. However, your best chance as a business owner to stay on top of all the updates is to have an attorney representing you who specializes in these types of cases.

Documentation Needed to Prove Your Business Interruption Claim

Are you presenting a claim under your business interruption coverage? If so, you’ll want to work on collecting all the documentation to support the financial assistance you’re asking for. Some of these documents include:

  • Your business plans;
  • A detailed description of your operations;
  • What services and/or products you offer;
  • Sales data for at least a three-to-five-year period;
  • Tax returns for the last three to five years;
  • Payroll records for several years;
  • Your budget;
  • Forecasts for future business periods;
  • Your monthly profit and loss statements, including year-to-date and several previous years;
  • Three to five years’ worth of audited financial statements;
  • A detailed list of extra costs, which should consist of supporting receipts; and
  • Any other industry data or information that will support your claim.

Depending on your business type, you may need additional documentation to support your claim. Your attorney will tell you what records and documentation will be necessary for your business interruption claim.

Do Business Owners Really Need Business Interruption Insurance?

Nearly all business owners need to consider business interruption insurance. Do you have the money to rebuild and pay all your staff and expenses in the event of a disaster? Most business owners don’t.

Imagine your business is destroyed due to a fire, and it will take four months to rebuild. That’s four months you will be without any income, and you still have to pay all your regular monthly business expenditures, including employee salaries and benefits.

What Are My Obligations as a Business Owner in the Event of a Claim?

You have a duty to report the claim to your insurer promptly. You should also take the appropriate steps to protect your property from sustaining further damages. This is known as “mitigating damages.” If you fail to report the claim timely and the business remains open to the elements, it could sustain further damages. Your insurer is not going to cover the additional damage caused by your delay in reporting and not getting protection from the elements.

Business owners also have to be diligent in getting their business open as soon as possible once they are approved for coverage. There is usually a 48-hour to 72-hour waiting period before benefits start and a cut off on when benefits will end. This is known as the restoration period, which is how long the insurer believes it will reasonably take you to get your business restarted again.

 If the restoration period is six months, that doesn’t mean you should make repairs slowly so you can benefit from six months of assistance. Your insurer will be watching the progress. If they determine that you could’ve had repairs done in three months and reopened, you may not get the full benefits.

Do I Need an Attorney for My Business Interruption Claim?

Because business interruption claims are complex, you should consider retaining an experienced attorney. Insurance adjusters are watching what you say during your initial call, which could impact whether your claim is approved. Claims related to COVID-19 losses definitely can benefit from the assistance of counsel, since many claims are being denied.

Don’t leave your claim to chance; let an experienced business interruption insurance attorney help guide you through the legal process and help you fight for the compensation you deserve.


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Founded in 1994 by the late Pamela Hulse Andrews, Cascade Business News (CBN) became Central Oregon’s premier business publication. CascadeBusNews.com • CBN@CascadeBusNews.com

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