Posted: 14 / 05 / 2020
What is Business Interruption?
It is a temporary suspension in business operations on either a partial or complete basis due to the result of a specific and sometimes catastrophic event.
What does Business Interruption Insurance cover?
Business interruption claims are rarely straight forward and often require careful analysis of the insurance policy wording and the factual circumstances surrounding the loss. Standard interruption insurance may not extend to Coronavirus and if you are unsure check with your broker or your insurer. The scope of the loss is commonly disputed for example whether it should include the post-loss economic conditions of the impacted area of the business.
The performance of the business prior to Coronavirus can be an accurate reflection of how the business would have performed had the interruption of production or suspension of operations caused by the virus not occurred. However, the calculation of the loss relies on the unique facts of each particular claim including the state of the economy prior to the loss arising from Coronavirus and its impact on the economy.
The policy wording should, therefore, be scrutinised to identify what consideration is to be given to in calculating the loss, which may only be for a specified period, in particular the calculation of Business Income.
Typically the loss will be loss of profit, fewer savings, plus extra costs and additional costs of working. Once insurance cover has been established and the Insurer notified, businesses should be capturing and recording losses throughout their operations to enable them to document and substantiate their claims effectively at the same time as taking action to mitigate their potential loss.
This can be even more challenging for small businesses which keep minimal or even poor accounting and financial documentation. This can quickly become complex for businesses with multiple locations and the ability to offset lost production in one facility that may involve higher costs and lower profit.
This issue will be with us for many months and on top of that claims will take time to pay so it is vital for the survival of many businesses that valid claims are made as soon as possible.