- On April 21, 2020
Get answers to the most common business interruption claim questions.
As forced closure due to COVID-19 continues, businesses across the U.S. are feeling the pressure. To get some financial relief, many are seeking help from business interruption insurance to offset the devasting drop in revenue. Some experts estimate that there could be as many as 39 million business interruption claims per month going forward. But will claims be covered? Right now, it is all dependent on how carriers are interpreting policy coverage – leading to more questions than answers. Below are the top three and what you need to know.
1. Should you file a claim even if you have a virus exclusion?
Yes. Not all virus exclusions are the same and additional areas in your policy may provide coverage. An example is civil authority interruptions. This coverage should cover loss of income if the government requires you to shut down – which is the case for many non-essential businesses right now.
2. What do you need to file a business interruption claim?
Business interruption policies are used to provide income for a business after a loss so you will need to provide documents to show there is a loss. Documents like monthly profit and loss statements, monthly and daily production reports, monthly inventory, monthly cost accounting reports, and invoices and purchase orders are a good place to start. Some additional documents that may originally be overlooked are utility costs, payroll, taxes, and additional advertising.
The basic business interruption claim formula is this: net income + continuing expenses + extra/additional expenses = business interruption loss.
3. What do I need to look at in my policy to see if I have coverage?
There are three main areas within your policy that you will want to review ASAP for possible coverage due to COVID-19 closures or loss in income.
Is there a virus or bacteria exclusion?
Most insurance policies started limiting virus and bacteria coverage after the SARS outbreak in 2003. If you do NOT have a virus or bacteria exclusion it could mean you have coverage. In some instances, insurances are claiming a virus is not a “direct damage to the building” so it is not covered as a loss.
Is there is civil authority coverage
Civil authority coverage is for instances where state or local governments prevent a business from being open. Businesses that have been deemed “non-essential” during COVID-19 could have coverage.
Review declaration page for your policy
An insurance declarations page is a concise overview of your policy and is usually the very first page. Review the amount of potential coverage, any deductible that must be met before the policy can be activated, and the term of the policy.
Insurances carriers and policyholders are interpreting coverages differently and without expert help it can be difficult to know what you are fully covered for. We can help. Request a comprehensive policy review today.