When a business’s property is damaged to the point it needs to shut down for a period of time, it can put operations and thus revenue at a standstill. One way to work around this frustration is by having a business interruption insurance policy in place to cover overhead expenses until the property and business are up and running again. While this sounds like a simple safety net, these policies are actually quite complex and have several nuances that can easily be overlooked. Knowing how to properly file a business interruption claim can help business owners increase the likelihood of a successful claims payment.
Filing a Business Interruption Claim
Business interruption insurance offers businesses potential coverage for unexpected interruptions to their income stream due to a loss event that results in physical damage. This coverage is often bundled into a business owner’s policy (BOP). These policies combine property, liability, and business interruption coverage.
Businesses that rely on having physical locations like warehouses and restaurants, to name a few, are the main claimants of business interruption. However, many of these types of businesses found at the beginning of the COVID-19 pandemic that not every loss event is covered by business interruption policies. Most require physical damage caused by a natural disaster, fire, vandalism, or another covered event in order for coverage to be triggered.
Once it has been established that a covered event did cause physical damage to the premises, property owners can then begin the claims filing process; however, because business interruption claims can be complex, certain steps need to be followed when filing, including:
Fully Understanding the Policy
The first step commercial property owners should take when filing a business interruption claim is to fully understand the parameters of the policy. Often, business owners will keep a simplified version of their policy on hand, but it is more beneficial to look at the policy in full. This way, policyholders will know if any exclusions to coverage apply and whether or not the location of the business and the context of the damage will affect the claim.
Compile a Business Loss Claim
Once the scope of coverage has been assessed, policyholders will then want to review and quantify the loss. These losses are often defined as physical injury to tangible property, including all resulting loss of use at that property. Detailed, date-marked notes should be taken regarding the damage and how it has impacted the business as soon as possible and should be kept every day during which operations are affected. Additionally, policyholders should gather all documentation required for filing a business interruption claim, including photos and videos of the damage.
Provide Notice and Understand the Period of Restoration
Just like filing any other type of insurance claim, timing is incredibly important when it comes to business interruption policies. Insurers should be notified as soon as possible. Once notice has been received, the insurer will then request all documentation related to the covered event in order to facilitate an investigation of the claim.
Even if coverage is granted, it’s important that commercial property owners understand business interruption coverage only applies within the period of restoration. When that period begins can vary, but typically the period of restoration starts 72 hours after the loss has occurred. A waiting period like this is common to most interruption policies and makes it clear that coverage will not begin until that timeframe has passed. Typically, this period ends on the date the property should be repaired, rebuilt, or replaced with reasonable diligence and similar quality or when the business resumes operations at a new permanent location.
Calculate Income Losses
When filing a business interruption claim, policyholders must be able to show income the business was generating both before and after the loss. Detailed records should be maintained of business activity and the extra expenses incurred in order to keep the business operational in a temporary location during the interruption period. If a company is forced to close down entirely, any expenses that continue during the time the business is closed should be noted, such as advertising and utilities.
Houston Business Interruption Recovery Attorneys
Filing an insurance claim can be a difficult process to navigate, especially while under the stress of having a temporarily inoperable business. While in many instances coverage should be granted for covered losses, insurance providers can attempt to delay, underpay, and deny valid claims. At Raizner Law, our team of insurance attorneys is well versed in these and other bad faith tactics insurers use to avoid paying out claims to turn a profit for themselves. Contact our office today to see how we can help you recover the payments you are due under the terms of your insurance policy.