Determining Business Interruption Losses

If you are covered by business interruption insurance, then you may find yourself in a particularly vulnerable situation when some event occurs that interrupts the normal flow of business and thus leads to unexpected losses.  A significant enough interruption to business can cause irreparable damage to one’s brand and reputation.  Depending on the nature and extent of the damage, submitting an insurance claim and successfully obtaining benefits may be fundamental to the continuance of the business.

Business Interruption Insurance at a Glance

Business interruption insurance is essentially a form of disaster-related insurance that covers the losses associated with the interruption of business in the event of a disaster.  Business interruption policies are not merely intended to cover actual damages — they are intended to account for the lost profits, too.  As such, they are a more comprehensive form of insurance than, say, property insurance.

Calculating Losses

Every business interruption policy is written differently and may have slightly different exclusions and coverage limitations.  Generally speaking, however, business interruption insurance tends to cover damages associated with:

• Lost profit
• Expenses for repair
• Operating expenses that continue to be borne by the business
• Claim preparation costs
• Rental expenses (such as a property rental to serve as an alternative until repairs are complete)
• New equipment expenses
• Training costs for new equipment
• Forced business closure
• And more

It’s important to note that business interruption insurance claims — just like other insurance claims — should not serve as a financial windfall.  The claimant is expected to claim those losses that will (to the degree possible) put them in a position that accurately reflects their financial position if the interrupting event had never occurred.

In Florida, the courts have occasionally deemed some lost profits calculations as too speculative to warrant a judgment.  There must be a record of sales that can be compared (to the new sales, post-interruption), or at the very least, there must be reliable data that can be used to calculate profits.

For example, if a warehouse is destroyed in a storm, and this prevents the timely packaging and delivery of goods to a particular buyer, then — even without a lengthy sales record — it should be a fairly straightforward matter to calculate the losses, as one could simply calculate the profit that would have been earned had delivery been possible.

Areas of Contention in Business Interruption Claims

Business interruption can lead to significant liabilities on the insurer’s part, and as such, insurers are incentivized to minimize or deny claims.  They may argue, for example, that you have not acted reasonably to mitigate your losses following the business-interrupting disaster, and that as a result, your damages exceeded what they should have been.

Alternatively, the insurer may argue that your business has not merely been “interrupted” by the disastrous event but has completely ended the viability of the business — if this is actually the case, the insurer may avoid paying out the business interruption claim.  Simply put, as the policyholder in a business interruption scenario, you must demonstrate that your business has merely been interrupted, and not damaged irreparably.  This demands that policyholders walk a tightrope where they can successfully claim damages without implicating the end of their business altogether.

Speak With an Experienced Miami Insurance Coverage Lawyer for Further Assistance

Ver Ploeg & Marino, P.A. is a Miami-based insurance litigation firm that has represented numerous policyholders in a range of disputes with their insurers — including those involving business interruption claims — for well over two decades.  With a staff of more than 25 attorneys operating between multiple locations in Florida, our firm is committed to the provision of client-oriented legal representation throughout the engagement process.  We are strong believers in the idea that a successful resolution to insurance litigation requires preparation, and to that end, we conduct a comprehensive coverage analysis to evaluate the extent and nature of your coverage.

Call (305) 577-3996 today to speak with an experienced Miami insurance coverage lawyer here at Ver Ploeg & Marino, P.A. for further guidance.

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