Submitting Business Interruption Claims Due to a Public Health Crisis

For the majority of business property insurance policies, business interruption is a standard component, designed to shield the business and its shareholders in case of disasters and emergencies. Though business interruption is most commonly discussed in terms of natural disasters (e.g., hurricanes, earthquakes, tornadoes), diseases are also included. With the global slowdown of businesses due to COVID-19, many business interruption claims are likely in the coming months. The following types of damages and expenses are typically covered under business interruption insurance policies:

• Profits – Lost profits that would have been earned over the normal course of business, based on historical financial statements.
• Fixed Costs – Operating expenses and other costs still being incurred by the business, based on historical costs.
• Temporary Location – An optional policy clause covering the expenses for moving to and operating from a new and temporary location.
• Commission and Training Costs – Policies typically cover the training costs to replace workers and technology post-event.
• Civil Authority Ingress/Egress – Government-mandated closures, causing a halt of business.

With the full impact of coronavirus still unknown, it is vital to keep track of all these expenses in order to properly file claims in a timely manner.

In addition to proper record keeping, it is also critical to understand when the business interruption coverage begins and ends. For health disasters, the damage is described as the time of infection of a company or when the first employee is diagnosed with the disease, until the company is back to normal operating capacities under the same conditions that existed pre-infection. In planning to file insurance claims for your business, consider the following:

• Know exactly what is covered under your business interruption policy.
• Understand and comply with any and all claim filing deadlines.
• Identify other policies issued to other businesses in your supply chain that may also name or reference your business as an additional insured entity.
• Create an outline of your potential claim(s).
• Know the intricacies of coverage exclusions (e.g., percentage of workforce impacted and other clauses).

Again, you will need to keep clear and consistent records in order to submit a well-presented claim. While the amount of documentation required to build and support a business interruption claim varies, it is generally recommended that it include the following:

• Detailed description of business operations, including products and/or services provided.
• Detailed business plans prepared prior to infection.
• Detailed budgets/forecasts for future periods created both prior to and after the infection, highlighting the anticipated differences due to the business interruption.
• Historical tax returns, generally three to five years.
• Audited, reviewed or compiled financial statements—generally three to five years.
• Payroll records for the last two years.
• Monthly profit/loss statements, generally three to five years.
• Customer-specific detailed sales data, generally three to five years.
• General ledgers and/or accounting software data files.
• Detailed listing and support for extra expenses allowed by your business interruption policy.
• Any industry/geographic trade data to support claims.
• Any civil authority ingresses and/or egresses concerning your business or businesses in your supply chain.
• Any other information/data deemed necessary.

Undertaking a business interruption claim can be a time-consuming project, requiring expertise and strong attention to detail. In fact, many claimants choose to enlist the services of an experienced business advisory firm to oversee the project, as claims generally require great attention to detail in the submission of financial statements. Ensure that the lines of communications between you and your insurance broker, insurance carrier, legal counsel, accountant and any other professionals that you may need are open as early as possible. Regardless of the size of your claim and who is assisting you, make sure that you do not mistakenly release your insurance carrier from any owed coverage.