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Business Interruption Insurance Claims

What happens when a disaster occurs causing a business to shut its doors? When this happens businesses lose potentially earned profits which may cause them substantial financial hardship for a year or in some cases even longer. All businesses, whether large or small, will suffer without the ability to operate. Even online businesses aren’t immune to disaster. Also, what if that disaster caused damage to the business necessitating the business to make repairs and incur further losses? Business interruption insurance policies offer the solution. Business interruption insurance is provided to supplement businesses with the amount of profit they would have earned had “no interruption” occurred with the stipulation that it cannot put the business in a better place than it would have been.

Business insurance is similar to that of homeowners insurance because it covers damages done to the structure of the home and to the contents inside. However, normal business insurance normally doesn’t encompass lost income. Business interruption insurance is a first-party property insurance coverage only policy and it will not compensate for any and all negative effects from the disaster.

Types of Business Interruption Insurance Coverage

There are three different types of commercial insurance policies for business interruption:

  • Business interruption – This type of policy encompasses the profit loss from the time of damage until it is repaired
  • Extended business interruption – This type of policy encompasses a set period of time from when property is repaired until the business is able to get its profits to pre-loss levels
  • Contingent business interruption insurance – This type of policy encompasses what income was lost due to a supplier or provider’s property being damaged

A business interruption policy may cover interruptions from things like fire, explosion, damage to machinery, civil riots and more. If the policy is just limited to an actual loss, then they insurer will only be held responsible if you can prove that the risk insured against is what directly cost the business interruption.

Calculating a Claim

There is no true formula for how to calculate the amount of damages that have been lost. To be able to get an estimate the basic calculation is:

Net Income + Continuing Expenses + Extra/Additional Expenses = Business Interruption Loss

Normally companies look to historical data and then use that to project future earnings. Things like utilities, payroll taxes and marketing budgets are all things that can be included in this cost. The most practical and acceptable way for calculating potential earnings should be used in this instance. If the amount of net loss that would have been incurred by the business without interruption does not exceed the amount of normal operating expenses incurred, then no insurance coverage will be available. The key words most policies use for coverage are, “Gross Earnings,” “Business Income,” and “Actual Loss.”

Major Issues With Getting a Claim Paid

Getting the money from an insurance companies without a fight is next to impossible. Insurance companies calculate claims at less than they should be, or they try to find a reason why you should not receive any payout at all. Insurance companies will delay as much as they can before they have to pay out which can hinder businesses from being able to move forward after a disastrous situation. It is unfair when insurance companies put business owners through added emotional and financial suffering. Often the insurance company is going to offer a settlement that does not provide the actual amount of profits the business lost, or they are going to question the loss to the point that they will find some loophole to get out of it. Therefore, it is important to remember that the burden of the insured to prove its case so all proof that a business has lost income should be thoroughly documented.

There is no reason why any hurt business owner should be denied the coverage they are legally entitled to.

Accepting an unreasonably unfair low offer from the insurance company is not necessary. You have a choice. If you have been denied coverage, have been delayed in your coverage due to your insurance company not doing the due diligence necessary or have been offered an unreasonably unfair low offer, contact Andrew J. Pascale, Esq. today. He is a skilled insurance law attorney in Miami who represents clients throughout Miami-Dade, Broward and Palm Beach County, including nearby areas in Coral Gables, Miami Beach and Kendall.

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I contacted Andrew for assistance with the selling of my business. He was very knowledgeable and explained the process to me during the selling of my shop. The documentation was produced very quickly and accurately which made both parties very comfortable with the process. I would highly recommend containing Andrew for any of your legal needs. K.A.
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