An insured's defective workmanship is an 'occurrence' and covered by a CGL policy in Iowa

Whether defective workmanship is an occurrence in a CGL policy was recently addressed by the Eighth Circuit Court of Appeals in Decker Plastics, Inc. v. West Bend Mutual Insurance Company.1

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Does My Business Have Insurance Coverage for Losses Attributed to the Zika Virus?

As most of you know, there is a spreading concern about the presence of the Zika virus in South Florida. In fact, the Centers for Disease Control and Prevention has issued travel warnings pertaining to the regions where the Zika virus has been confirmed.

The first CDC travel advisory related to South Florida advised pregnant women to avoid the Wynwood, Midtown and Edgewater areas in Miami, Florida—areas known for popular art districts, restaurants, and shopping.

On Aug. 19, 2016, Florida Governor Rick Scott confirmed the Florida health department’s findings that there are five new local cases of Zika and a new “transmission zone” in Miami Beach. Consequently, the CDC has issued an additional travel advisory pertaining to specific areas in Miami Beach.

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Court Holds Damages Consequential to Subcontractors Faulty Workmanship is an "Occurrence" and "Property Damage" Under Plain Language of Standard Form Commercial General Liability Policy

New Jersey has joined a growing number of jurisdictions in ruling that damages from a subcontractor’s faulty workmanship may trigger coverage under a Developer/General Contractor’s Commercial General Liability (“CGL”) policy. On August 4, 2016, the New Jersey Supreme Court rendered a unanimous decision affirming the Appellate Division’s holding that consequential damages stemming from a subcontractor’s faulty work constitute “property damage” caused by an “occurrence” as defined by the policy.1

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9th Circuit to Interpret Meaning of "Direct Supplier" In Context of a Commercial Property Loss Claim

Commercial property insurance policies often include damages sustained by a “direct supplier.” As an example, an insured that sells motorcycles, might rely on a particular motor cycle part supplier to provide parts used in their motorcycles. If the motorcycle part supplier sustains a loss, it could impact the insured’s business.

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Even if Gross Profits Increase after a Loss, Business May Still Have Business Income Loss

When calculating a business income loss, it is important to look at the company as a whole and to look at individual segments of the business. Under a standard loss calculation where the projected “but for” revenues were considered by deducting the revenues from sales of substitute products and applying a profit factor to the loss incremental revenue, the business revenue may not show a numerical decrease. At first blush, one could argue that there was not a loss, because the gross profits were higher pre-loss than post loss. However, a true loss can be masked in instances where a loss impacts one portion of the business but sales or business income in another segment of the business increases.

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Commercial Marine Insurance and Depreciation on Engines

When Hurricanes hit, residential and commercial property are commonly considered when you think of the insurance losses. But in coastal states hurricanes can also have a devastating impact on commercial and recreational marine losses.

As with residential and commercial property, you need to be sure you review and understand your boat’s insurance policy. It is likely that a boat owner or captain has taken special consideration with a Hurricane or Tropical Storm because part of the application requires a written plan for the boat when a Hurricane comes to town.
 

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Business Income Loss Policy's Contrary Provisions Result in Coverage for Payroll

Farm stand fresh vegetables and sweet and savory baked goods can make any day better. Verrill Farms had been in the produce and bakery industry in Concord, Massachusetts, for decades but before you could buy deli sandwiches or take home fresh heirloom tomatoes, Verrill Farms was a daily farm started in 1918.

The farm was passed down for generations and as the years passed the business grew. However, “[o]n September 20, 2008, Verrill Farms suffered a fire loss to its farm store. Within two days of the fire, Verrill Farms reopened its business at alternate locations at reduced capacity. Within another month, the business had resumed nearly full capacity in temporary facilities at nearby locations. After the fire and during the process of restarting the business at the alternate locations, no employees were laid off. All employees who remained on the payroll were involved in operations that allowed Verrill Farms to maintain its business and generate income.”

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Considering Loss Profits and Loss of Business Value on the Commercial Claims

When you have an insurance claim for a business loss, when a covered peril has interrupted business to a point there has been a landslide in business value or the doors are closed completely, you need to carry out a business valuation. Interestingly some of the best court cases discussing proper business valuation are not for property damage cases but other types of losses. Situations for business valuations and the methods used can come up in other types of cases and are helpful in our research.

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Expenses to Reduce Your Loss are Covered Under Your Business Income Coverage

Business Interruption losses can be complicated, confusing, and for some business the damages are the end of the story. Having the right coverage for your business, your buildings, and the business property can make all the difference for your livelihood if a loss occurs. One additional coverage that is also common to purchase is Extra Expense Coverage. Many of our posts have given insight and case evaluations about Extra Expense claims:

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Pair, Set and Match

A public adjuster recently asked me about a hotel that was under a specific brand and the contract to maintain the brand required the rooms and furniture to match. Following a loss, the insurance company has refused to pay for the portions of the physically undamaged property and the policyholder paid millions to match the old undamaged property with the new replacement property. Should an insurance company pay to match hotel property following a loss—especially if the policyholder has legal obligations to match all property which sometimes cannot be done because of age and obsolescence?

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Adjustment Time and Wrongful Denial Considered in Period of Restoration

Merlin Law Group attorney Corey Harris asked me, “do you know of a case that stands for the proposition that when estimating the period of restoration, do you consider the amount of time needed for adjustment of the claim?” My quick response was “with any construction project, financing of the project is a time element needed for consideration. If the insurance is supposed to pay for the financing as most insurance companies promise, then it should be a consideration. I think we wrote about this in our property insurance blog.”

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Business Interruption Coverage Stripped From Car Dealership

Last year when I wrote about Five Towns Nissan v. Universal Underwriters Insurance Company, I mentioned that the case would likely be around in the appellate system, and that has proven true. Recently, a New York appeals court reversed the trial court ruling and held that the policy excludes flood loss and the several million dollar business interruption claim the car dealership presented.1 The trial court opinion last year2 had found coverage for the policyholder’s business interruption claim despite a flood exclusion.

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Commercial Insurance Claim Denied - What Makes a Denied Claim Improper

What makes a denied commercial claim improper?

Riot or Civil Commotion Coverage

After the events that unfolded in Ferguson, Missouri earlier this week, many business owners have been reviewing their commercial property insurance policies because their properties have been damaged or destroyed as a result of rioting, including looting, fire, vandalism, and other associated damage.

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Commercial General Liability Policies - Now Cyber Liability Stands Alone

There are changes occurring to the standard commercial general liability policy that all business owners should know of to make informed decisions when purchasing their insurance policy. The Insurance Services Office, Inc. (ISO) now requires, as of May 1, 2014, a new endorsement that excludes data breach liability. This endorsement , entitled “Exclusion-Access or Disclosure of Confidential or Personal Information and Data-related liability-with limited bodily injury exception,” means that the current standard commercial general liability policy will not cover damages to a company from breach of data that leads to confidential or personal information leaks.

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Delay In Completion Losses Under A Builders Risk Policy

Builders risk policies for large projects can be complex and the scope of loss stemming from them can be difficult to measure. But what if a loss causes damage to property that pushes back the date of completion for the project? There could be coverage under the delay in completion policy form or endorsement.

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New York Federal Court Holds: Without "Direct Physical Damage" There is No Business Interruption Coverage Resulting from a Power Outage

At the end of April, the U.S. District Court for the Southern District of New York (S.D.N.Y.) held that an insured who suffered business interruption losses as a result of a Superstorm Sandy related power outage, were not covered as there was no “direct physical loss.”

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Business Interruption Coverage Found in Superstorm Sandy Case

Those handling Superstorm Sandy claims have likely seen their fair share of business interruption losses. In the last month, there was a ruling from a New York state trial judge in favor of an automotive dealer for business interruption losses sustained due to Superstorm Sandy.1 The interesting holding of the case concerned whether a flood exclusion applied to exclude the business interruption loss.

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New York Courts Recognize the Importance of Business Interruption Coverage to Policyholders Sustaining a Loss

The life of a business can depend on its insurance carrier doing the right thing and promptly paying damages sustained by it quickly and efficiently after a loss. This is the reason many business customers obtain business interruption coverage from their insurance carriers. New York Courts recognize the importance of business interruption coverage to policyholders sustaining a loss.

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How to Recover Business Income Losses Related to Hurricane Sandy Even If Your Business Did Not Have Flood Insurance?

Many businesses in the Northeast have had their business interruption claims denied because they did not have flood insurance. Flood damage is typically excluded from most commercial property policies, but businesses sustained many other types of losses that should be covered under most commercial policies despite the flood damage and lack of flood insurance.

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Business Interruption Claim Denials After Hurricane Sandy Abound in New York City

What’s more disheartening than seeing your business destroyed by an unexpected catastrophe? – Being informed that your insurance company will not pay a dime. Business owners in the City are receiving letters from their insurers denying coverage for the damages caused on October 29, 2012. Denial letters cite policy language to the effect:

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Maximize Your Insurance Recovery for Business Income Losses Related to Hurricane Sandy

Many New York business owners have been denied insurance recovery based on causation issues (i.e., property damages and business income losses were caused by flood which is excluded under most policies). However, many insurance policies provide a measure of coverage and recovery through Civil Authority and Ingress/Egress provisions, which are not triggered by damages at the insured premises. Given the mandatory evacuation orders issued by the governors of New York, Delaware, New Jersey and Connecticut, insurance companies should evaluate potential coverage for business income losses under these additional coverage provisions.

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Securing Proper Recovery for Hurricane Sandy Business Interruption Losses

Many businesses in New York and New Jersey are still recovering from closure or slow down after Hurricane Sandy devastated the region. Insurance companies are issuing payments for business income losses under standardized formulas where recovery may look as follows:1

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Business Income Losses Caused By Hurricane Sandy Are Recoverable Despite Anti-Concurrent Causation Exclusions

I have reviewed denial letters sent to policyholders in New York and New Jersey. Their business income claims have been denied because the “physical loss or damage” was caused, in whole or in part, by an excluded peril – power failure. Hurricane Sandy was a complex windstorm event that caused many perils – power outages, fire, flood, explosion and wind are among the most prevalent. Some of these perils may or may not be covered by an insurance policy, but if an insured property sustained damages caused by at least one covered peril, business income claims should not be denied.

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There is Coverage for Business Income Losses Caused by Power Outages During Hurricane Sandy

On the night of October 29, 2012 the “kings of the hill” in New York knew that they would not be waking up to a City that Never Sleeps. In fact, the lights were out for weeks and the businesses that were at the top of the list - now have to make a brand new start of it.

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Hurricane Sandy Business Interruption Claims Are Broadly Measured in New York

Hundreds of thousands of businesses are still struggling to repair the damages caused by Super Storm Sandy. In New York, claimants will be told that their policies only cover business income losses during the period of time that it would take a “reasonable business” to return to its pre loss operational performance and that repairs shouldn’t take this long. The measuring stick in New York, however, is not as rigid and it considers the actual facts and circumstances that affect the rebuilding or repair efforts.

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Property Damage or Actual Impairment of Access Is Not Necessarily Required To Recover Business Income Losses

The Port of New York and New Jersey is the third largest seaport in North America and the largest maritime cargo center on the East Coast. Many highly interdependent supply chain networks were disrupted during and after Hurricane Sandy. Although Port Authority employees worked extra shifts to resume its transportation and holding operations, many goods were stuck or slowed down at the Port, shipments were rerouted and rescheduled, and businesses from New York to Malaysia suffered losses as the flow of goods over railroads, bridges and roads connecting the Port with the world came to a halt.

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Possible "Triggers" for Business Interruption Coverage For Professional Service Companies In New York and New Jersey Affected by Hurricane Sandy

Catastrophes by definition cannot be felt in the imagination – they are only experienced as embodied in the sensation of the unimaginable. There is no doubt that the destruction caused by Hurricane Sandy was unimaginable. Life along the coast line of New York and New Jersey will never be the same, but as people and businesses adjust to the “new” normal, many are considering how their insurance policies will respond.

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Hurricane Sandy's Supply Chain Disruptions Will Be Significant and Complicated

The 2011 losses Japan and Thailand rippled through the oceans as many realized that our global economy had become highly interdependent and supply chain disruptions were costlier than ever anticipated. A few months ago, global insurers revamped their Contingent Business Income questionnaires and applications in an effort to understand how deeply interrelated and exposed their insureds’ supply chains are.

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Industry Anticipates Large Business Income Losses From Sandy - Will They Pay?

The morning after Hurricane Sandy made landfall felt like the morning of 9/11. The unthinkable happened. The course of history changed, again.

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Businesses Interruption Coverage and Super Storm Sandy - A Misunderstood Relationship

It’s already happening – business interruption claims are getting denied a mere three weeks after Super Storm Sandy ravaged the Northeast. Running a business is not an easy feat. Business owners paid premiums to protect their hard earned profits and getting a denial letter from an insurance company they’ve probably had for years may be harder to overcome than the hurricane itself. The culprit of all this despair - “your property did not sustain any direct physical loss or damage as a result of a covered peril.”

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Businesses Continue to Struggle as They Recover from Hurricane Sandy

It has been two weeks since the storm forced millions of businesses to shut down in one of the most densely populated areas of the nation. While many businesses have resumed operations, many others are still recovering.

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Civil Authority Coverage Should Help Atlantic City Recover from Sandy - Understanding Business Interruption Claims

The destruction and devastation Hurricane Sandy left behind is disheartening. I have no doubt the greater New York City area will rise again- stronger than ever. Some news outlets have already reported that business interruption coverage may not be triggered for many commercial policyholders if the damage was caused by flood or storm surge.

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Missouri Jury Awards $11 million in Contingent Business Income Case - Understanding Business Interruption Claims

I recently noted the importance of Contingent Business Income (CBI) coverage in Are Your Business Relationships Insured? – Understanding Business Interruption Claims. CBI coverage protects an insured from income losses caused by an interruption or slow-down in the operations of a “dependent business” (i.e., purchasers, suppliers, distributors or service providers). A Missouri jury understood the importance of this coverage, which I affectionately call “relationship insurance,” awarding $11 million in business income losses to a roofing material manufacturer that was affected by the shut down of its asphalt supplier.

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Commercial Property Insurance May Cover "Extra Expenses"

Many businesses buy business interruption coverage to cover a loss of business income in the event of a covered loss. Business income provisions generally provide benefits for an amount of time designated in the policy, typically termed the period of restoration,1 or until the business is able to resume operations.

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Tragedies are Difficult to Measure - Understanding Business Interruption Claims

It is hard to measure property damage and business income losses when human lives have been taken during a loss or occurrence. I have deposed many property and casualty company adjusters and despite their sophistication and experience in this niche industry, they inevitably choke with emotion when they talk about their experience adjusting catastrophic claims like 9/11 and Hurricane Katrina, where many lives were lost – I always say you can take property out of a policy, but you can never take human out of the policy.

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Are Your Business Relationships Insured? - Understanding Business Interruption Claims

When it comes to relationships, businesses are as vulnerable as people. Just like in our personal relationships, businesses depend on the performance and accountability of third parties. When relationships fail, it’s hard to get back out there. Many businesses rely on outside purchasers, suppliers and distributors on a daily basis. These relationships are often stable and reliable, but loyalties are swiftly destroyed if a partner suffers an unexpected loss or calamity and is unable to purchase, supply or distribute inventory. Unlike people, businesses can be less vulnerable by purchasing what I call “relationship insurance,” or Contingent Business Income coverage (CBI), which protects the “recipient business” from income losses caused by an interruption or slow-down in the operations of a “dependent business” (i.e., purchasers, suppliers or distributors).

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Industry Cannot Keep Up With Cyber Perils - Understanding Business Interruption Claims

“In this business it takes time to be really good - and by that time, you are obsolete” - Cher


A recent article in the Insurance Journal magazine, “Industry Faces Cyber Risks in Shift from Tangible to Intangible Property,” highlights the urgent need for new underwriting products and guidelines to keep up with the constantly evolving technology changes.

Technology has moved so rapidly that not only the insurance industry, but also business in general, is now facing a sea change in the way all types of data, including personal and corporate information, is collected and stored. How well re/insurers deal with this new reality could well determine the industry’s future course.

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Space Weather- The Peril of The Future? - Understanding Business Interruption Claims

I am a news junkie - the type who’s interested in everything, but nothing at all. A few weeks ago, I was listening to the white noise of the usual talking heads, but the news station showed an interesting filler story that connected many dots in my overly informed brain. The reporter was proud to present a story about NASA’s latest and greatest technology to photograph solar flares and study the effects of these naturally occurring events, which can cause serious power and satellite disruptions, on the Earth’s electromagnetic field.

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Global Insurance Industry Transfers the Risk - Understanding Business Interruption

In the late 1600’s, at the height of a lucrative slave trade, a group of ship owners and merchants got together at Lloyd’s Coffee House in London to negotiate the first forms of insurance agreement. The merchants promised to use their private funds to pay the ship owners if the ships were attacked by pirates or damaged and sunk by weather. If the ships completed their voyage without any fires or pirate attacks, the merchants kept the fee paid by the ship owners to insure the voyage. The coffee house meetings seemed to make good business sense and a global insurance market was born. The world has changed a lot since the slave trading days, but the coffee house concepts of insurance had not changed much until recently.

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Can a Business Recover for Income Losses After it Restores its Premises and Resumes Operations? Understanding Business Interruption Claims

Most insurers will automatically cut-off business income loss benefits after a business rebuilds or repairs the damaged premises and opens for business. However, this all-too-prevalent claim practice could be inadequate and harmful if the policy has an extended business income endorsement and post resumption conditions are ignored.

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Keeping Them Honest About Reinsurance and Reserves - Understanding Business Interruption Claims

Insurance coverage litigation is a grueling race and winners are usually measured by their stamina and endurance through the discovery process. Courts are reluctant to get involved in discovery disputes, but they are intolerant to parties who try to smokescreen the truth. Reinsurance and underwriting documents are typical battlefields in the fight for information. Insurers closely guard this information, but courts do not protect reinsurance and underwriting information if fraud and misrepresentation defenses are at issue in the coverage litigation.

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Isaac May Trigger Civil Authority Coverage for Businesses in South Florida - Understanding Business Interruption Claims

It is not unusual for government authorities (police, fire, city) to order an evacuation or prohibit access to a certain area due to public safety concerns when a natural disaster, riot or other life threatening event is imminent. When this occurs, businesses are forced to shut down their operations until further notice. If a business has purchased standard business income coverage (CP 00 30), it is likely that the policy also includes Civil Authority coverage for any business income losses caused by a government mandate.

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Insurance Industry Shifts The Blame - Understanding Business Interruption Claims

Last week, I posted Lloyd's Market Association Reviews its Contingent Business Income Products and Claim Exposure. This week, A.M. Best Company – one of the world’s oldest and most authoritative insurance rating and information source- released similar content in a white paper titled “Emerging Opportunities in Business Interruption Coverages for Insurance Agents and Brokers.”

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Lloyd's Market Association Reviews its Contingent Business Income Products and Claim Exposure

Contingent Business Income products are necessary, if not vital, in today’s global market. In Understanding Supply Chain Exposures – Business Interruption Claims, Part 76, I wrote:

Businesses develop and thrive on symbiotic relationships, in which the entities rely on the continued operational viability of each other,(or even exclusively beneficial relationships. Few businesses, however, consider the risk and exposure of losing that relationship due to an unexpected calamity.

[t]oday’s risk management professional cannot merely rely on his or her knowledge and understanding of the organization's varied and unique suppliers and customers. They must understand the bottlenecks and supply chain problems that will likely occur in the midst of catastrophe and have a plan that will keep the chain moving.

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Is Tampa Ready for the RNC - Understanding Business Interruption Claims

Approximately 4,411 delegates and alternate delegates from all 50 states, the District of Columbia and five U.S. territories will attend the Republican National Convention from August 27 – August 30, 2012 in Tampa Bay, Florida. The convention will also host approximately 15,000 credentialed media, a press corps second only in size to this summer's London Olympic Games. In total, the city is expecting over 50,000 visitors- managing this sudden invasion is a feat of its own. Federal and local authorities have already ordered certain road closures in anticipation of the event and many businesses will be affected by traffic re-routing and road closures.

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Pre-Loss Review and Organization Financial Data Can Save Your Business - Understanding Business Interruption Claims

Business interruption coverage is an insurance product intended to financially compensate the insured for the stream of net income it would have received, but for a covered loss or event. Income and Expense flows are rarely fixed in any enterprise. The presentation of a business interruption claim can be a highly taxing and document intensive endeavor that often requires the assistance of several claim professionals like accountants and lawyers. It is a good preventative practice to conduct a yearly pre-loss review of the insurance coverages available to a business as well as a systematic review, organization and categorization of the enterprise’s financial data. If all adequate coverages are in place and historical financial data is easily accessible, the claims process will feel more like a walk in the park than a journey through hell.

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Good Plans Make Good Decisions - Understanding Business Interruption Claims

Aluminum products producer Hulamin in Pietermaritzburg, South Africa, lost recently shut down one of its mills due to a mechanical failure. The repairs took 30 days, and the company lost 23,000 tons of production. As part of its business continuity plan, Hulamin quickly continued production of thicker gauge plate products at a subsidiary facility, using Hulamin’s twin roll casters at the subsidiary facility to continue producing inventory.

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Discredit Makeup, Offsets and Residual Values Claims with a Precise Measurement of Income Loss - Understanding Business Interruption Claims

Business interruption claims are typically evaluated in two phases. Claim professionals will first determine the period of indemnity (a.k.a., period of restoration) and then measure the loss of income by reviewing the business’ income and expense trends and future projection charts.

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The Period of Restoration - Fact or Theory? - Understanding Business Interruption Claims

“Lost time is never found again”- Benjamin Franklin

Business income coverage is supposed to protect a business’ net income and operating expenses while its operations are suspended as a result of loss or damage caused by a covered peril. An unexpected interruption of productivity for a period time can be devastating for a business. And because the period of income recovery after a loss is governed by the concept of time, businesses should always have a contingency plan to maintain continuity in the event of a loss and not rely solely on the expectation of recovery from an insurance claim. Time is an illusion humans created so our simple brains could understand that not everything happens at once. Our brains perceive and value time differently - disagreements will always abound over this concept. If insurance contracts do not set forth clear definitions governing this type of time-element coverage, business income claims could be as mysterious as the concept of time itself.

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In Virginia, an Exception to an Exclusion Does Not Create Coverage - Understanding Business Interruption Claims

In general, business income loss coverage is triggered by the occurrence of a covered peril that causes physical loss or damage and results in a slow down or a total cessation of operations. As such, understanding first party property coverage is the cornerstone of understanding business interruption claims. Coverage analysis varies from state to state and practitioners must constantly follow the subject to remain competent in this field.

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Wildfires Continue to Rage in the Western U.S., with Fast-Moving Flames Forcing Evacuations, Engulfing Structures and Shutting Down Highways in Some States

As of Friday, the National Interagency Fire Center reported that 19 wildfires have burned nearly 500,000 acres in states like Colorado, Nevada, Utah and Wyoming. Five additional large fires were reported in the states of Alaska, Arkansas, Arizona and Idaho.

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The Nuances of Civil Authority Coverage - Understanding Business Interruption Claims

It is not unusual for government authorities (police, fire, city, etc) to order an evacuation or prohibit access to a certain area due to public safety concerns when a natural disaster, riot or other life threatening event is imminent. When this occurs, businesses are forced to shut down their operations until further notice. If a business has purchased standard business income coverage (CP 00 30), it is likely that the policy also includes Civil Authority coverage for any business income losses caused by a government mandate. However, Civil Authority coverage is like playing the lottery, if your numbers don’t match, you lose.

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Are Tenants Covered For Landlord's Repairs to The Property- Understanding Business Interruption Claims

A recently published FC&S Bulletin answered a nuanced coverage question for a situation that is all too common in landlord tenant relationships. In the scenario, the tenant purchased a Business Owner Policy form (BP 00 03). The landlord was required to remove underground tanks from his property and the removal process suspended the tenants’ business operations.

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Loss of Business Income Due to Road Work Not Covered in Louisiana - Understanding Business Income Claims

In Commstop v. Travelers Indem. Co. of Connecticut, 2012 WL 1883461 (W.D. La. May 17, 2012), the court denied business income recovery to the owner of a convenience store (Commstop) after the State of Louisiana began a “road renewal program” in front of the convenience store. The road work continued for more than 9 months. The inconvenience caused drivers to take alternate routes and traffic ultimately diminished “until few vehicles used the road.” Commstop filed a claim with Travelers and alleged that it suffered business income losses and/or extra expenses totaling approximately $75,000.00 as a result of the diminished traffic attributed to the road replacement project (Civil Authority) and as a result of dust generated by the project, which allegedly damaged Commstop's air conditioning compressor (BI/EE).

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Business Income Loss Must be Caused by Covered Peril - Understanding Business Interruption Claims

First party property insurance litigation is sometimes an all or nothing affair. In Scottsdale Ins. Co. v. Sally Group, LLC, 2012 WL 1144577 (S.D. Tex. April 3, 2012), a cigar bar operator discovered mold in its humidor and reported a claim to its insurer. The bar, humidor and inventory were eventually demolished to remediate the mold conditions.

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How To Consider the Market Conditions After A Loss? - Understanding Business Interruption claims

As noted before in To Consider the Economy, or Not To? 'That is the Question' -- Understanding Business Interruption Claims, Part 9 and What's Good for the Goose is Good for the Gander - Post-Loss Market Conduct Ignored in Louisiana - Understanding Business Interruption Claims, Part 36, there are two diverging views on whether post-loss market conduct should be considered to determine the value of a business interruption loss.

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Carrier's Reliance on CPA's Report to Support Business Income Loss Calculation is Not Sufficient to Defeat Bad-Faith Allegation - Understanding Business Interruption Claims

A federal court in California recently denied AMCO’s request to enter judgment in its favor and dismiss a policyholder’s allegations of bad-faith in the handling of a business income loss claim. In A-1 Transmission Automotive Technology, Inc. v. AMCO Insurance Company, No. 10-8496, 2012 WL 1534466 (C.D.Cal., April 27, 2012), the Plaintiff’s auto garage location sustained a substantial. AMCO commenced a claim investigation a $25,000 advance to compensate for business personal property. The garage owners commenced emergency shoring and repairs required by authorities to allow entry to the red-tagged building and to provide temporary power.

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Red River Waterway's 15-day Closure Caused Millions of Dollars in Losses - Understanding Business Interruption Claims

Traversing over 225 miles, the Red River Waterway has become a strategic cargo and customs hub for the South. It is linked to the Mississippi River and Gulf Intracoastal Waterway and it also sits amidst a Louisiana Highway system, major interstate highways and Louisiana’s railway system, which can deliver cargo to any city in the United States within 7 days. Along the River, there are a series of 5 lock and dam structures that perform a stair step effect on the river, creating controllable pools and passageways for river traffic. There is also a network of public and private ports and surrounding industrial complexes that heavily rely on barge transport of oversized cargo that would be impossible to move by land or air.

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Thailand Flood Claims Are Expected to Be Higher Than Initially Estimated

A recent online publication of Insurance Journal highlighted A.M. Best Co.’s quarterly estimates of insurers’ losses from the Thailand floods. The current estimate is $15 billion, a 50% increase since Best’s last briefing of Nov. 23, 2011. According to the briefing, the loss is now in a tie for the fifth (5th) costliest insured loss event in the past 31 years. It has been reported that the floods have damaged or destroyed more than 4 million homes, businesses, and manufacturing facilities and that the amount of structural damage is actually four times greater than the damage resulting from Japan’s earthquake and tsunami in March 2011.

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Commercial Insurers Ranked Poorly in New Zealand

On February 22, 2011 a 6.3 magnitude earthquake destroyed thousands of homes and businesses in Canterbury, New Zealand. To make matters worse, the catastrophe area experienced a series of earthquake aftershocks as late as December of 2011, which inevitably delayed rebuilding projects and insurance payments.

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Why Offset The Net Loss? - Understanding Business Interruption Claims

About a year ago, a California Court of Appeals published an opinion that invigorated the debate over the proper methodology or calculation of a business income loss. In Amerigraphics v. Mercury Casualty Company, 182 Cal. App. 4th 1538 (March 23, 2010), the court held that under the traditional Business Income Form (CP 00 30),

Business Income” has two distinct components: (i) net income, and (ii) continuing normal expenses. Given its placement in the policy and the plain language of the provision, it would be objectively reasonable for an insured purchasing the policy to construe it as protecting both its lost income stream and as defraying the costs of ongoing expenses until operations were restored. 

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How Many Deductibles? Proper Application Of Deductible Under A Blanket Policy On Commercial Properties

A blanket property insurance policy covers different types of property at one or more locations and does not specify the valuation of the items protected under the blanket, but instead allocates an overall limit to the policy, upon which premiums are based.

The expression “blanket policy” is a term of art in the field of insurance. It appears to be most frequently used in connection with fire insurance policies and has acquired a rather precise connotation. A blanket policy is said to be one which contemplates the risk of shifting, fluctuating or varying, and is applied to a class of property rather than to any particular risk or thing.... A compound or blanket policy invariably covers and attaches to every item of property described in the policy and insures the property collectively, without providing in the event of loss for a distribution of the insurance to each item.

Nat'l Bank v. Fidelity and Casualty Co., 125 F.2d 920, 924 (4th Cir. 1942).

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Ordinary Payroll Coverage Can Be Extraordinarily Tricky- Understanding Business Interruption Claims

When measuring a business income loss, a company can treat all payroll and benefits (if directly related to payroll, i.e., FICA, worker’s compensation, etc.) as “continuing expenses” in its accounting worksheet as defined in CP 00 30 10 (Business Income and Extra Expense Coverage Form). If the policy has an Ordinary Payroll Exclusion or Limitation, the company can maintain all non-hourly payroll as a continuing expense in the worksheet and submit the payroll for the hourly employees under an additional coverage endorsement, which is purchased for a specific number of days (e.g., 30, 60, 90, and up to 365) to be recovered within the Period of Restoration.

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Crop Insurance: A Necessity for Farmers

There are all kinds of insurance products out there and there are new products in the pipeline. An example: crop insurance. A Fremont Tribune article, Insurance a bigger factor in planting picture, discusses the importance of farmers maintaining both crop and revenue assurance policies, so that they can deal with any catastrophes –natural or economic – that happen to come their way.

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A Heavy Loss Is Limited - Understanding Business Interruption Claims

The Fifth Circuit Court of Appeals limited a policyholder’s recovery in its most recent opinion, National Union Fire Insurance Company v. Gulf Island Fabrication (No. 11-30375, March 9, 2012).

On April 29, 2008, four cranes were being used to lift a piece of machinery at Gulf Island Facility’s heavy steel fabrication facility. One of the cranes side-loaded and collapsed, crushing one of the cranes and killing the crane operator inside. The other three cranes were substantially damaged. Shortly thereafter, Gulf Island rented substitute cranes to continue the building operation, ultimately incurring rental expenses in the approximate amount of $11,117,838. One of the cranes was deemed a total loss with a replacement cost value (RCV) of $3,459,807.

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Will Your Business Be Covered When It Needs it The Most? - Understanding Business Interruption Claims

Last month, in Service One Cable T.V., Inc. v. Scottsdale Ins. Co., 2011-1469 (La. App. 1st Cir. February 10, 2012), the Louisiana First Circuit Court of Appeals decided that a cable service company did not have coverage under its commercial property damage or business income provision after a hurricane damaged the company’s cable distribution system.

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A Florida Niche Manufacturing Plant Loses Power - Understanding Business Interruption Claims

Buckeye Technologies Inc., is a leading manufacturer and marketer of specialty fibers and nonwoven materials. Its goods are sold worldwide to makers of consumer and industrial goods. The publicly traded company is headquartered in Memphis, Tennessee, and operates several manufacturing facilities throughout the United States, Germany, and Canada. On Friday, February 17, 2012, Buckeye was forced to shut down its Foley Plant in Perry, Florida, following a malfunction in a high voltage electrical line and subsequent transformer failure in its power house.

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Measuring a Business Income Loss Is Not Weird Science - Understanding Business Interruption Claims

“If the facts don’t fit the theory, change the facts” – Albert Einstein

Unlike physicists and philosophers, lawyers, adjusters and accountants don’t have the luxury of changing hard facts when measuring, evaluating and adjusting business income claims. Einstein’s universal approach, however, does not mean that facts (or data in this context) should be destroyed or created to fit a particular accounting theory, it rather means that the source of data should be curiously evaluated to come up with simple solutions to the most complex problems.

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I think I have a Business Interruption Claim, Now What? - Understanding Business Interruption Claims

I attended the 13th Annual Windstorm Insurance Conference® in Orlando last week. Windstorm is one of those rare meetings that bring all types of industry professionals together (regardless of affiliation) to engage in professional debates about the trends and issues recurring in the first party property and casualty industry.

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New Zealand's Quake Approaches its One Year Anniversary - Understanding Business Interruption Claims

February 22, 2012, will mark the one-year anniversary of the 6.3 magnitude earthquake that destroyed thousands of homes and businesses in Canterbury, New Zealand. The one-year anniversary mark is important because most business interruption policies have a 12-month period of coverage. New Zealand’s trade with Asia and Australia is three times larger (thus healthier) than its trade with Europe and the U.S. However, the country’s private lending and monetary fiscal policies are dependent on international markets, and according to the New Zealand Herald, the country will likely experience a spillover recession as Asian markets slow down in 2012 in reaction to last year’s European and U.S. political spectacles.

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Federal Court in Texas: No Business Interruption Coverage for Insured's Reduced Operations After Ike

In H&H Hospitality L.L.C. v. Discover Specialty Ins. Co., No. 10-1886 (S.D. Tex. Dec. 20, 2011), the U.S. District Court for the Southern District of Texas granted summary judgment in favor of a commercial property insurer in an action brought by an insured motel owner for wrongful denial of a business interruption claim arising from property damage caused by Hurricane Ike. The Court held that the policy did not provide coverage for the reduced business operations experienced by the policyholder.

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Unit Owner's Loss of Rent Not Covered Under Association's Policy in Washington State - Understanding Business Interruption Claims

In Elkins v. QBE Insurance Corporation, No. C11-5150, US District Court (W.D. Washington), Mr. and Mrs. Elkins filed suit against their condominium association’s insurance carriers for loss of rental income after a fire damaged common areas and individual units. The Elkins alleged that their individual loss of rent was part of the “community income” as defined in the property and casualty policy in question.

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The Proof Is Not Always In the Numbers - Understanding Business Interruption Claims

Many insurance company adjusters deny, disclaim or reduce the amount of a business interruption claim, stating that amount of the loss is speculative or has not been “adequately” supported. A conjured or baseless claim should never be covered, and policyholders should always provide competent proof of an actual loss of income as a result of a slow down or suspension of operations. However, sometimes losses are based on real circumstances which were not necessarily documented for bookkeeping purposes and the proof cannot always be found in a spreadsheet. Rather than impulsively denying a claim for lack of "adequate" support, insurance companies should explore the nature of the circumstances and give the benefit of the doubt to the policyholder when warranted.

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Is Your Reputation Covered? - Understanding Business Interruption Claims

It takes many good deeds to build a good reputation, and only one bad one to lose it
-Benjamin Franklin

A good reputation is more valuable than money. A broken reputation may possibly be repaired, but the world will always keep their eyes on the spot where the crack was. One scandal can destroy an empire and short of inventing a time travel machine, there’s not much that can be done to change the public’s perception. Take for example, the recent Penn State child sexual abuse allegations. The entire nation spent weeks, judging the institution’s incident reporting practices and procedures. The damage? A decrease in student recruitment, alumni donations and, perhaps, federal funding.

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Is a Key Location Worth the Risk Loss? - A Case Study

Last week’s blog entry, Fact: 40 % of Businesses Shut Down After a Disaster. Will Yours Survive?, profiled a New York Times case study on a business that provides holistic services to women undergoing medical fertility. The yoga studio is conveniently located a few doors down from one of the country’s largest fertility clinics, and 60% of their clientele stream down the hall to their studio after their medical treatments.

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Forty Percent of Businesses Shut Down After a Disaster. Will Yours Survive? - Understanding Business Interruption Claims, Part 100

The US Department of Labor estimates that forty percent (40%) of businesses never reopen after experiencing a disaster. Twenty five percent (25%) of surviving businesses will lose their market and shut down within two (2) years of a calamity. Savvy entrepreneurs understand that insurance policies are not meant to hedge these serious odds. Do you?

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Zurich Survey Reveals Sharp Increase in Supply Chain Disruptions - Understanding Business Interruption Claims, Part 99

Zurich Financial Services Group and the Business Continuity Institute conducted a survey among 559 organizations in more than 62 countries, covering 14 different industries, to look at the impact of this year’s natural and manmade occurrences that have caused supply chain disruptions worldwide. Overall, 85% of the companies reported at least one supply chain disruption. Twenty percent of the occurrences were attributed to the earthquakes or tsunamis in Japan and New Zealand; fifty-one percent were attributed to adverse weather; and forty-one percent were attributed to IT or telecommunications outages.

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The Generally Accepted Accounting Principles ("GAAP") Sometimes Don't Fit the Glove - Understanding Business Interruption Claims, Part 98

“If the gloves don’t fit, you must acquit” – Johnny Cochran

Many forensic accountants have noted that the Generally Accepted Accounting Principles (“GAPP”) focus on business valuation formulas that are more suited for commercial transactions than for determining the amount of business income loss. Businesses also have different styles of bookkeeping, which can create challenges in finding the necessary data to support a claim.

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Nevada Wildfires: Business Interruption Losses Caused By Order of Civil Authority

The recent wild fires in Reno, Nevada, caused tragic losses of many homes and extensive loss to business property and business income. Commercial property policies with business interruption coverage vary widely with regard to coverage of business income loss due to order of civil authorities.

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The Importance of Having a Plan B - Understanding Business Interruption Coverage, Part 97

Buying adequate insurance coverage is a fundamental step in ensuring the success of a business enterprise. Today’s entrepreneur must understand that the purchase of insurance is never a substitute for a risk management plan that will help the business maintain its daily operations after a catastrophic event.

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Texas Insurance Law: Period of Restoration

After Hurricane Ike, many businesses had to cease their operations for until their damaged property was repaired. Fortunately, many had the appropriate insurance to cover their business losses. But even though many carried the appropriate amount of insurance, several struggled to obtain the full amount of the benefits they were owed. Insurers sometimes shortchange their customers by interpreting little-known policy language against the customer. Every now and then though, a policyholder challenges an insurer’s interpretation in court, and a judge determines which interpretation is correct.

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Service Interruption Coverage May Help Connecticut Businesses Get Ready for the Holiday Season - Understanding Business Interruption Coverage, Part 96

More than three million customers across the Northeast lost power last weekend as wind and heavy snow uprooted some trees and sheared branches off others, snapping power lines as they fell. Connecticut Light and Power is still struggling to get service restored to hundreds of thousands of residents and business owners.

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Too Much is Never Enough - Understanding Business Interruption Claims, Part 95

Business income claims are not very emotional or passionate. Jurors will not get to weigh the credibility of wild and intriguing witnesses or examine the conclusions of a forensic medical examiner who will explain how a person died. These cases are dry and forensic accountants can only be so entertaining. Notwithstanding the dull topic, the role of a forensic accountant in a business income claim is very similar to the role of the medical examiner in a murder case: a business is dead or seriously injured and the jury needs to know the cause. It is always important to rely on experienced forensic accountants to assist the insured in this dry process.

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Hotels May Find Courts' Interpretation of Business Interruption Coverage Inhospitable, Part 2

Last week’s post included analysis of many courts’ interpretations of business interruption coverage and the conflict created by policy provisions requiring a suspension of hotel operations and mitigation of property loss. This week’s post provides tips to help hotel owners and risk managers avoid business interruption coverage gaps.

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Incurred Expenses May Be Recovered Outside of the Period of Restoration - Understanding Business Interruption Claims, Part 94

Insureds have a contractual obligation to mitigate damages after a loss occurs. Most businesses take drastic measures to resume operations swiftly and will spare no expense in minimizing the down time. In a market where delays are not tolerated and consumers are ever more demanding, the efforts to resume operations are more akin to survival strategies than contractual indulgences. These desperate efforts to keep doors open and machines running can eliminate business income losses in their entirety, a feat much appreciated by insurance companies. Even though these mitigation efforts usually save insurers business income benefits they would otherwise owe, some insurers refuse to reimburse these expenses because, although incurred within the period of indemnity, the payment obligations fall outside the period of restoration.

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Hotels May Find Courts' Interpretation of Business Interruption Coverage Inhospitable

In the hospitality business, property loss can be financially difficult. Property loss combined with complete or even partial shutdown of hotel operations can be devastating. For these reasons, most standard hotel property polices include business interruption coverage. Business interruption coverage is intended to provide money to sustain a business while its operations are suspended or partially suspended due to damage to the insured property by a covered cause of loss (e.g., fire, tornado, hurricane). Business interruption coverage benefits are usually estimated by calculating a business’ pre-tax net profit that would have been earned had the loss not occurred, plus the normal operating expenses and payroll that continue during the period of restoration to the damaged property.

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Business Interruption Essentials

In the claims-handling business, everyone has his/her own style of “working a claim.” There are, however, a few healthy techniques that practitioners should uniformly follow to effectively present a business interruption claim:

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Hiring the Wrong Expert is a Costly Mistake - Understanding Business Interruption Claims, Part 92

Hiring qualified experts to assist policyholders in the presentation of a business interruption claim is a sine qua non condition for success. An expert’s inexperience or poor work product could cause irreversible damage and destroy any viability of what would have been an otherwise valid claim.

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The Flip Side of the Coin Sometimes Pays Off, Understanding Business Interruption Claims, Part 91

Many commercial lessors have unexpected losses at the insured premises when the premises are vacant or when leases are about to expire. Unless there is verifiable proof of anticipated rental income (i.e., future leases or agreements), the business income calculation will likely yield a zero recovery, making the series of unfortunate events financially unbearable. As with many other things in life, perspective can make a difference and it can actually pay off.

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Contingent Business Coverage and Extra Expense Coverage May Help Those that Were Not Directly Affected by Hurricane Irene and Lee, Understanding Business Interruption Claims, Part 90

Millions of businesses have been affected directly or indirectly this hurricane season. Hurricane Irene and Tropical Storm Lee caused significant structural and infrastructure damages, expansive floods and lengthy power outages. Many so-called coverages will play important roles in the adjustment and recovery process. Proper training and in depth understanding of all available coverages and remedies will ensure quick and proper resolution of the slew of claims related to these storms. The flip side will cause delays and headaches.

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Industry Minimizes Extent of Irene's Commercial Losses - Understanding Business Interruption Claims, Part 89

This past week, Bloomberg News reported that U.S. utility companies are struggling to restore power in the areas affected by Hurricane Irene. Over 1.7 million homes and businesses will remain without power for days to come. Entire towns are still underwater and the phrase “business as usual” will not be heard for months in those areas.

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Ingress/Egress Coverage Will Play An Important Role in the Aftermath of Hurricane Irene - Understanding Business Interruption Claims, Part 88

Hurricane Irene caused significant infrastructure damage. Here is a picture of the damage caused to a road in Puerto Rico. There are still many roads that are unserviceable as thousands of people and businesses grow increasingly anxious to resume normal business activities.

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Hurricane Irene Steals Our Power - Understanding Business Interruption Claims, Part 87

Hurricane Irene has caused a considerable amount of structural and infrastructure damage as it pummeled the Caribbean and the Eastern seaboard of the United States. Sadly, Hurricane Irene also took some lives along its way and has left millions of people under water and without power.

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Can an Insured Recover for Business Income Losses for Damages Caused to its Vehicles? - Understanding Business Interruption Claims, Part 86

The standard Commercial Property Form (CP 00 10) typically excludes coverage for damages to business owned vehicles. The form states, in pertinent part:

Vehicles, Aircraft, and Watercraft—We do not cover vehicles or self-propelled machines (including aircraft or watercraft and their motors, equipment, and accessories) that are:

a. required to be licensed for use on public roads; or
b. operated principally away from the described premises.

We do cover vehicles or self-propelled machines you manufacture, process, warehouse, or hold for sale. However, this does not include autos you hold for sale. We also cover rowboats or canoes out of water at the described premises.

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Ownership of Interdependent Business Does Not Necessarily Foreclose Coverage - Understanding Business Interruption Claims, Part 84

Contingent business coverage is a type of business interruption coverage intended to protect the “dependent business” from an external business income exposure. There are four (4) types of dependent business ISO endorsements:

  1. Contributing Premises, such as the businesses that deliver materials to the insured;
  2. Recipient Premises, such as the businesses that receive the insured’s products;
  3. Manufacturing Premises (businesses that make products for delivery to the insured), and
  4. Leader Premises, such as businesses that bring the customers to the insured.
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I Want to Expand My Business - Understanding Business Interruption Claims, Part 83

Research conducted by the Gartner Group found that approximately 40% of companies that experience a disaster will be out of business within five years. With these dire predictions, business should spare no expense in having a business continuity plan and risk planning strategies to soften the blow of a catastrophic loss, pending the outcome of any insurance claims. Businesses planning to expand their operations or venture into new oppoutunities should be even more aggressive with their risk planning.

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Is Industrial Espionage Covered? - Understanding Business Interruption Claims, Part 82

In Coupled Products, LLC v. Harleysville Ins. Co., No. 1:09-CV-349, 2011 WL 3101357 (N.D. Ind. July 25, 2011), the court said, “unfortunately, no.”

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Total Cessation is Not Required to Trigger Extra Expense Coverage -- Understanding Business Interruption Claims, Part 81

The issue of whether a total cessation or a mere slowdown in productivity is required to trigger Business Income coverage is one of those questions that will most likely be defined in the policy. If not defined, courts will decide if the requisite elements are met for business income coverage. In my earlier post, The Shortcomings of a Total Cessation Requirements—Understanding Business Interruption Claims, Part 55, I highlighted how many courts follow the “total cessation” approach, but that many others will allow recovery under a “slow down” theory and discussed the limitations and implications of following a “total cessation approach.”

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Unreported Property at Unscheduled Locations Costs Advertiser $16M for Hurricane Damage to Billboards

When Lamar Advertising Company suffered damage from Hurricanes Ike and Gustav, it did what any business would do and filed a claim with its insurance company, Liberty Mutual. A significant part of Lamar’s claimed damages were to outdoor advertising signs, or billboards, that were scattered throughout the country. While Liberty Mutual admitted that losses from Hurricanes Ike and Gustav were covered under the policy, Liberty Mutual denied Lamar’s claim for billboard damage on the basis that the billboards were located at “unscheduled locations” that had not been properly reported to the insurance company. Just this month a federal court in Louisiana agreed with Liberty Mutual in Lamar Adver. Co. v. Liberty Mut. Fire Ins. Co., No. 10-620, 2011 WL 2648483 (M.D. La. July 6, 2011).

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Does a Lessor Have an Insurable Interest Over Lessee's Business Personal Property? - Understanding Business Interruption Claims, Part 80

Ownership of business personal property is required to trigger coverage and payment after a loss under most business income loss provisions. Notwithstanding this general rule, an insured may recover for a loss without necessarily having title to business personal property, so long as the insured can establish that it had an insurable interest in the non-owned property. The “insurable interest” doctrine, however, has its limits and it is usually a fact specific issue.

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The Japan Tsunami and Contingent Business Interruption Coverage

Contingent Business Interruption coverage is usually an extension of the business interruption coverage available in most commercial property policies. It provides the insured with benefits to cover lost profits and extra expenses resulting from damage to a third party’s property.  In today's integrated business world, most businesses are highly dependant upon others for product, sales, and even customers.  As businesses globalize, they become vulnerable to disasters across the globe.  Even now, many businesses are waiting to realize the extent of the contingent business loss that will result from the tsunami and nuclear disasters in Japan.

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The Fine Line Between Business Interruption and Contingent Business Insurance Coverage - Understanding Business Interruption Claims, Part 79

Business Income policies have multiple coverages, all of which may be all triggered after a single occurrence or event. In these cases, insurers often argue that the coverages run concurrently. Depending on the language of the provisions at issue, however, a policyholder may be entitled to “stack” coverages and recover the full amount owed under each, capped at the amount of the loss.

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It Is All In the Presentation - Understanding Business Interruption Claims, Part 78

In the book Business Interruption: Coverage, Claims and Recovery, the authors devote a section to discuss relevant issues surrounding the presentation of reports and data in support of a business income claim. We live in a world where information is being stored in “clouds;” knowing exactly how to gather, collect and present business data after a loss or catastrophe is likely the best practice to avoid unnecessary delays and obstacles during the claims process.

Today, high-speed computer networks and Internet access are considered to be as essential as indoor plumbing. We have access to what seems like limitless data and information. Company computer systems house terabytes of financial information that is sliced into countless management and financial reports that executives use to efficiently run and guide their business

Easy access to all of this information can be good or bad for business interruption claims as it can 1) assist in speeding the insurance claims process to an agreeable settlement, or 2) mire the process in unnecessary data that slows progress, contributes to countless questions and requests from insurer representatives, and increases scrutiny regarding the amounts being claimed.

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Time Limitations for Civil Authority Coverage - Understanding Business Coverage, Part 77

Civil Authority provisions normally provide coverage for business income losses when access to an insured premises is prohibited by a governmental action. This coverage, however, is not easily triggered, and it will also be subject to time restrictions.

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Understanding Supply Chain Exposures - Understanding Business Interruption Claims, Part 76

Businesses develop and thrive on symbiotic relationships, in which the entities rely on the continued operational viability of each other,(or even exclusively beneficial relationships. Few businesses, however, consider the risk and exposure of losing that relationship due to an unexpected calamity.

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Newly Built Businesses Also Need Extra Expense Coverage- Understanding Business Interruption Claims, Part 75

Learn from the mistakes of others. You can’t live long enough to make them all yourself.
-- Eleanor Roosevelt

One of the main reasons I research and write about business income claims every week is to share real life situations that should help all of us learn to avoid making the same mistakes.

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How a Grand Forks Business Owner Bought More Time -- Understanding Business Interruption, Part 74

Time is often the most important and controversial element in evaluating a business income claim. Determining an adequate Period of Restoration is sometimes as counterintuitive as solving a quantum mechanics formula. In the book, Business Interruption – Coverage, Claims and Recovery, 2nd Ed. (2011), the authors illustrated a real world challenge in determining an adequate Period of Restoration and a savvy business owner that made the most of his time.

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One Provision with Many Readings - Understanding Business Interruption Claims, Part 73

The standard Business Income (And Extra Expense) Coverage Form CP 00 30 04 02 says, "We will pay for the actual loss of Business Income you sustain due to the necessary 'suspension' of your 'operations' during the 'period of restoration.'" Business Income is defined as:

  1. Net Income (Net Profit or Loss before income taxes) that would have been earned or incurred; and
  2. Continuing normal operating expenses incurred, including payroll.
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Don't Forget to Submit Your Accountant's Bill - Understanding Business Interruption Claims, Part 72

Insurance carriers are quick to deny payment for services rendered by accountants or consultants in connection with the presentation of a business income claim. The number one reason given not to pay is that there is no specific language in the policy obligating an insurer to pay for such expenses. In a previous post, Passing the Accounting Bill - Understanding Business Interruption Claims, Part 19, I explained that a careful reading of the applicable coverage forms may support payment for these expenses.

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A Few Practice Pointers - Understanding Business Interruption Claims, Part 71

Fulcrum Inquiry, an accounting firm in Los Angeles, California, prepared a very helpful list of practice pointers that is worth sharing in order to make the business income claims process more effective and less frustrating for all. I frequently employ most of these methods with great success and strongly advocate for a transparent and thoughtful claims process that helps all interested parties achieve their claim goals.

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Lawyers Never Stop Working - Understanding Business Interruption Claims, Part 70

It is often said that the law is like a jealous mistress; it requires a long and constant courtship. In Evans v. LaFayette Ins.Co., No. 06-6783, 2007 WL 4545883 (E.D. La. Dec. 18, 2007), an insurance company refused to extend business income coverage to lawyers that knew not to disappoint their jealous legal practice. A law office in Louisiana sustained property damages during Hurricane Katrina, causing the office to completely shut down for several weeks. The insured law firm also had offices in Colorado, Texas, and North Carolina, which were also listed as insured premises of the policy in question.

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An Important Business Interruption Book Gets Revamped- Understanding Business Interruption Claims, Part 69

The 2nd edition of Business Interruption: Coverage, Claims and Recovery, by Daniel T. Torpey, Daniel G. Lentz & Allen Melton, will be released by the end of this month and I have already pre-ordered my copy. Dan Torpey’s recent interview with Claims Magazine gives us a sneak peek of the topics explored in the book which will help risk managers, claims professionals and attorneys address today’s uncharted issues in business interruption claims.

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The Speculative Card - Understanding Business Interruption Claims, Part 68

Many insurance company adjusters like to pull the “speculative” card under the consequential (or remote) loss exclusion to deny, disclaim or reduce the amount of a business interruption claim when they do not feel that a claim has been “adequately” supported. The adjuster’s judgment call can, however, be called into question, depending on the facts or circumstances of the claim.

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Aunt Sally's Sweet Finale - Understanding Business Interruption Claims, Part 67

Aunt Sally’s Praline Shop, Inc. (Aunt Sally’s) is in the business of manufacturing and selling pralines made of sugar, cream, butter and pecans. The company had several facilities in New Orleans which suffered extensive damage when Hurricane Katrina devastated the region. Aunt Sally’s facilities were insured with United Fire & Casualty Company. United Fire initially denied all the claims, but Aunt Sally’s was able to negotiate payment for some of its claims. Aunt Sally’s filed a lawsuit to recover the underpaid insurance benefits. After two (2) favorable jury verdicts and one (1) appeal, Aunt Sally’s will finally collect its hard fought insurance benefits.

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Japan's aftershocks are yet to be felt - Understanding Business Interruption Claims, Part 66

Look around you. Unless you live on a deserted island, you should find at least one item manufactured in Japan. If you are planning on purchasing a car or an electronic item within the next 12 months, you may find that some of these items are perhaps more expensive due to a shortage in the supply line.

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Louisiana Law Requires Causal Link Between Prior Property Damage and Civil Authority Action - Understanding Business Interruption Claims, Part 65

Civil Authority provisions normally provide coverage for business income losses when action to an insured premise is prohibited by a governmental action. This coverage is not easily triggered, as many elements must be met to obtain the oft elusive benefits.

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Reasonable Expectation of Coverage Question Certified to the Ohio Supreme Court - Understanding Business Interruption Claims, Part 64

I have been following a honey ham-business-income saga in the Ohio federal court system. In HoneyBaked Foods Inc., v. Affiliated FM Ins. Co., No. 08-1686, 2011 WL 834067 (N.D. Ohio March 4, 2011), the district court faced a tough coverage question. Rather than ruling one way or the other, the district court certified the issue to the Ohio Supreme Court to determine whether Ohio law recognizes the doctrine of reasonable expectation of coverage.

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A Broker's Wit Can Save You Millions -- Understanding Business Interruption Claims, Part 63

As discussed in my post, Insured’s Control or Operation of Leader Property Does Not Trigger Contingent Business Coverage – Understanding Business Interruption Claims – Part 50, it is generally understood that ownership or insurable interest (i.e., leaseholds) over the dependent property, or supplier, destroys contingent business income coverage. However, in Park Electrochemical Corp. v. Continental Cas. Co., No. 04-4916, 2011 WL 703945 (E.D.N.Y. Feb. 18, 2011) the court declined to follow this maxim of business income loss, proving once again that a diligent broker can save you millions.

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Proof Required to Prove Continuing Expenses in Louisiana - Understanding Business Interruption Claims, Part 62

Supporting and documenting business income claims is never an easy feat.

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A Power Outage Saga Comes to an End - Understanding Business Interruption Claims, Part 61

This week’s Insurance Law and Litigation Week highlighted the conclusion of a controversial business income that arose in the aftermath of the 2003 blackout. On August 14, 2003, problems with the interconnected North American power system resulted in a four-day electrical blackout over much of the northeastern United States and eastern Canada. Millions of people and businesses were affected by this outage, including Wakefern, a conglomerate group of supermarkets that owns the ShopRite chain. ShopRite suffered losses due to food spoilage during the blackout, in addition to incurring loss of business. Having paid a $5.5 million premium for insurance, covering (among other things) damage due to the loss of electric power, Wakefern turned to their insurer, Liberty Mutual, to pay for their losses.

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A Lawyer's Loss -- Understanding Business Interruption Claims, Part 60

It is always interesting to read cases where attorneys are parties to a lawsuit. I always expect and anticipate creative arguments and I am rarely disappointed for we are wordsmiths by trade and wizards of logic. I recently came across a business income case where the insured party was a law firm. In Eidelman, et al. v. State Farm Fire and Casualty, No. 10-2578, 2011 BL 14407 (E.D. Pa. Jan. 19, 2011), the insured law office was destroyed in a fire. Seven (7) weeks after the loss, the firm rented a temporary space to resume operations. During the claims process, the parties disagreed on the method of calculating the business income claim.

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Avoiding the Anti-concurrent Causation Trap -- Understanding Business Interruption Claims, Part 59

Relying on anti-concurrent causation clauses, several insurers have adopted a method of claims adjusting where business income claims are denied in whole if the property suffered damage attributed in part to an excluded cause of loss. In most states, this type of business practice is wrong and contrary to public policy. For an in depth analysis on the legal framework of anti-concurrent clauses, I encourage you to read Chip’s post, Anticoncurrent Causation Clause Explained in Relation to Hurricane Losses.

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Considerations for the Hospitality Industry - Understanding Business Interruption Claims, Part 58

Maximizing recovery after a catastrophic loss requires expertise in preparing hospitality business interruption claims, combined with a thorough understanding of the hotel's unique market and operation.

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The "Physical Damage" Requirement - An Archaic Concept in Today's World - Understanding Business Interruption Claims, Part 57

Coverage that excludes electronic data serves very little purpose in today’s business world. Many businesses have abandoned physical storefronts and the familiarity of face-to-face transactions and operate exclusively in the cyber world. Even businesses that operate out of physical buildings or structures no longer store information in filing cabinets, but in servers and electronic files that contain crucial and often irreplaceable information. I can’t imagine anything more frustrating than having to tell an impatient customer that you cannot fulfill their needs because your computers are down. With respect to the products offered, the insurance industry has done little to keep with the times. Smaller businesses are often forced to choose generic first-party ISO forms that exclude coverage for damage to electronic data (caused by e-perils) because such coverage is simply unaffordable.

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An Insured May Not Profit From its Loss, But it May Profit From His Work - Understanding Business Income Claims, Part 56

Insurers are often quick to call foul while handling business income claims. I found an interesting article in the FC&S Bulletin that illustrates the riddles a business income claim may present and how an insurer can avoid unnecessary disputes with a more thoughtful approach in its claims handling practices.

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The Shortcomings of a "Total Cessation" Requirement - Understanding Business Income Claims, Part 55

The issue of whether a total cessation or a mere slowdown in productivity is required to trigger business interruption coverage is one of those questions that will most likely be defined in the policy. If not, courts will be given an opportunity to answer the question, which could lead to undesired results for either party. While many carriers require a “total cessation” in order to trigger coverage under a business income provision (not extra expense), some courts have disagreed with this “all or nothing” approach, depending on the language of the policy in question.

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A Business Income Deductible is a Concept of Time - Understanding Business Interruption Claims, Part 54

Many clients and claim professionals often have questions about their deductible responsibility toward their business income claim. Typically, if the property has sustained physical loss or damage, the insured will be required satisfy the applicable peril-deductible to receive benefits to repair or replace the damaged property and trigger the business income coverage. However, insureds should keep in mind that while there may not be an additional monetary deductible to trigger business income coverage, their business income claim will probably be subject to a waiting period of 24-72-hours, which often is the most crucial period of time after the loss. This waiting period is supposed to encourage the insured to take prompt and adequate repair measures to mitigate the business losses. However, any lost profits during this waiting period are not recoverable, and many consider this waiting period a “time deductible.”

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One Method Insurance Companies Use to Reduce Business Interruption Claims in Texas

As mentioned in some of my prior posts, Business Interruption coverage protects an insured against a loss of business income that the insured suffers as a result of a covered peril. However, although an insured may suffer an interruption of business, it does not necessarily follow that the insured actually incurred a recoverable loss.

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Are your tenants covered? - Understanding Business Interruption Claims, Part 53

Finding out that your insurance policy does not provide coverage for your losses is probably one of the hardest pills to swallow. For that reason, commercial property owners should pay careful attention to the landlord-tenant insurance responsibilities before entering into leasehold agreements.

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Are Property Manager's Fees Recoverable? - Understanding Business Interruption Claims - Part 52

Property manager’s fees are normally considered “continuing expenses” in business income claims. The standard Business Income (And Extra Expense) Coverage Form CP 00 30 04 02 says, "We will pay for the actual loss of Business Income you sustain due to the necessary 'suspension' of your 'operations' during the 'period of restoration.'" Business Income is defined as:

  1. Net Income (Net Profit or Loss before income taxes) that would have been earned or incurred; and
  2. Continuing normal operating expenses incurred, including payroll.
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Civil Authority and its Impact on Business Interruption Coverage in Texas

From time-to-time, governmental authorities prohibit access to certain areas after a catastrophic event, even though not all the buildings in the area were damaged. For example, after Hurricane Ike passed through the Houston area, Houston officials closed downtown Houston for several days to assess the damage. Another example is the evacuation of New Orleans after Hurricane Katrina. “Civil Authority” coverage protects against losses arising out of orders such as these.

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Location, Location, Location - Understanding Business Interruption Claims, Part 51

Despite the emergence of global markets and internet economies, physical location is probably the most important factor for the success of many businesses today. Therefore, when a catastrophic loss occurs, many business owners are faced with the tough decision of rebuilding or replacing the property at the same location or relocating the business elsewhere.

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The "Causal Connection" Requirement in Texas Business Interruption Coverage Law

Last week I wrote about business interruption insurance and how it can help your business during tough times. Today, I would like to expand on that further and discuss what you, as the policyholder, need to show in order to obtain coverage for your business interruption losses. A policyholder may suffer a loss of income from an event, such as a hurricane, but the loss of income may not be tied to property damage. For that reason, business interruption provisions often require a “causal connection” between the business’s loss of income and covered physical loss or damage.

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Insured's Control or Operation of "Leader Property" Does Not Trigger Contingent Business Coverage - Understanding Business Interruption claims, Part 50

Contingent insurance covers the loss that the insured will suffer if the operation of a key supplier, customer, or leader property on which the insured's operations are dependent is shut down by an insured peril. It is important to note that ISO form CP 15 08 06 07 is used to provide coverage subject to the same limit of insurance, coinsurance percentage, and coverage options as is found on the business income (and extra expense) coverage form, whereas CP 15 09 06 07 is used when direct business income coverage at the insured’s own premises is not provided or when the limits of insurance selected by the insured for the dependent properties differ from the direct business income limit of insurance or differ among the various dependent properties themselves.

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Business Interruption Insurance in Texas

We all know that property insurance protects against physical property losses resulting from a covered peril, but what about non-physical damage, such as loss of business income? Is that covered under your policy? For those of you without “Business Interruption” coverage the answer is “no,” and for those of you that do have “Business Interruption” coverage, the answer is “maybe.”

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Not All Businesses Are Alike - Understanding Business Interruption Claims, Part 49

In today’s world, business models are limited only by our imagination. Transforming an idea into a business reality is probably one of the most rewarding achievements in our society. However, not all businesses are alike and, as such, not all business interruption claims should be put through the same rigors. While most business income policies contain standardized language, insurers should take into account the atypical nature of a business when necessary so as to never deprive a policyholder of its right to receive the capital needed during the period of restoration to sustain the business while its operations are suspended as a result of damage caused by a covered peril.

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Should My Business Losses Be "Stacked"? - Understanding Business Interruption Claims, Part 48

Business Income policies have multiple coverages that may be all triggered after a single occurrence or event. In these cases, insurers will oft argue that the coverage run concurrently, but depending on the language of the provisions at issue a policyholder should be entitled to “stack” such coverages and recover the full amount owed under each, capped at the amount of the loss.

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Off Premises Power Outage Coverage is Important

Hundreds of Ft. Myers, Florida, businesses dependent on natural gas were recently shut down after a construction worker sliced through a natural gas pipe. The importance of proper power outage coverage is usually realized only after these types of events occur.

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When is Business Income Owed? - Understanding Business Interruption Claims, Part 47

As a matter of principle, business interruption coverage is supposed to provide the capital needed to sustain a business while its operations are suspended as a result of damage caused by a covered peril. Since business income coverage was designed to keep the money flowing when the operation is out of action, the timing of the payment is, of course, of the essence. Chip’s recent post, AON Warns Agents That Insurance Companies Are Getting Tough on Commercial Claims, is alarming, and I advise everyone to pay attention to any signs of systematic claim delay tactics in the handling of business income claims. These practices should not be allowed.

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AON Warns Agents that Insurance Companies are Getting Tough on Commercial Claims

An insurance industry article yesterday, Aon Voices Concerns Over Business Interruption Coverage, confirms that businesses cannot trust insurance companies to timely pay claims.

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An Insurable Interest Requirement in Contingent Business Interruption Claims - Understanding Business Interruption Claims, Part 46

Every day, businesses develop and thrive on symbiotic relationships, where the entities rely on the continued operational viability of each other (or even exclusively beneficial relationships). Few businesses, however, consider the risk and exposure of losing that relationship due to an unexpected calamity. Businesses that are dependent on a non-related entity’s operations should talk to their agents about attaching “dependent business interruption” endorsements to avoid costly surprises.

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"My Phones are Down" - A Coverage Disagreement - Understanding Business Interruption Claims, Part 45

I ran across an article in the National Underwriter publication, FC&S Bulletin, regarding a situation where the insured experienced a “slow down” in its debt collection operations after a lightning strike. The problem was discussed as follows:

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Recovery despite the "net loss" - Understanding Business Interruption Claims, Part 44

The standard Business Income (And Extra Expense) Coverage Form CP 00 30 04 02 says, "We will pay for the actual loss of Business Income you sustain due to the necessary 'suspension' of your 'operations' during the 'period of restoration.'" Business Income is defined as:

  1. Net Income (Net Profit or Loss before income taxes) that would have been earned or incurred; and
  2. Continuing normal operating expenses incurred, including payroll
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Considerations Regarding Ordinary Payroll - Understanding Business Interruption Claims, Part 43

A recent IRMI article titled “Limiting the Interruption in Business Interruption” discussed the importance of considering payroll during the risk assessment phase of obtaining business insurance coverage. The forms regarding business income and ordinary payroll are hyperlinked for ease of use and understanding.

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Keep Your Customers Tanned - Understanding Business Interruption Claims, Part 42

Summer is officially over, but many folks around the country will glow year round with the help of some indoor rays and good Extra Expense Coverage.

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Never give up - A Jeweler's Story - Understanding Business Interruption Claims, Part 41

Many of our clients come to our doors with perplexed looks on their faces and denial letters in their hands. Dizzied after a long battle with their carriers, which our clients seemed to have lost to purported words in their policies that they are presumed to have bargained for, they come to us for understanding and hoping that the policy they purchased is not a pamphlet full of meaningless words.

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How to Properly Protect a Landlord's Property Interests in Texas through a Tenant's Insurance Policy

Most commercial landlords require new tenants to purchase a property insurance policy that will provide coverage during the tenants’ lease period. By requiring the tenant to purchase property insurance, the landlord does not bear the responsibility of purchasing a broad, all-encompassing insurance policy – an “all risk” policy – that would cover every possible activity that could take place on the landlord’s property. All risk policies tend to be expensive, and instead of passing that cost to the tenant, the tenant can purchase a less expensive insurance policy tailored to his business. However, as the landlord in the case below discovered, just because a tenant purchases an insurance policy does not mean all the landlord’s property interests are properly covered.

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Can an insured recover business income losses if a rental property is unoccupied at the time of the loss? - Understanding Business Interruption Claims - Part 40

Business interruption recovery is typically denied if a policyholder is not able to show an actual loss of income as a result of a covered peril. Accordingly, most courts will deny recovery under a business income provision if an insured building serves as a rental property and is fully unoccupied at the time of the loss. See, e.g., Farm Bureau General Ins. v. Dynamic Land, LLC, 2009 WL 454961 (Mich. 2009)(where the court rejected the insured’s argument that it was entitled to “fair rental value” during the period of restoration because the building was unoccupied and undergoing renovations at the time of the loss and it was not able to show an “actual loss of income”).

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Total Cessation v. Partial Cessation - Understanding Business Interruption Claims, Part 37

Before I proceed, I must caution the reader with a caveat-the actual policy language in any given claim is of critical importance, therefore, a careful reading of the applicable provisions should be the first step in any claims practitioner’s book.

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What's Good for the Goose is Good for the Gander - Post-Loss Market Conduct Ignored in Louisiana - Understanding Business Interruption Claims, Part 36

For those keeping score of the hottest debate in business interruption claims, a patient reading of Consolidated Companies, Inc. v. Lexington Insurance Company, No. 09-30178, ___ F. 3d ___ (5th Cir. August 17, 2010) is of rigor. For those who need to catch up to speed, I suggest reading my blog posts titled, To Consider the Economy or Not to? ‘That is the Question’ as well as Post Loss Market Earnings Ignored in Mississippi.

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Court Reduces Continuing Charges and Expenses From Net Profits When a Business Resumed Partial Operations After a Loss - Understanding Business Interruption Claims, Part 35

The Fifth Circuit Court of Appeals recently issued a 21-page opinion in the case of Consolidated Companies, Inc. v. Lexington Insurance Company, No. 09-30178, ___ F. 3d ___ (5th Cir. August 17, 2010). The opinion is dense, to say the least, but it resolves an issue that sometimes can make or break a settlement in business interruption claims.

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Mitigation Efforts Are Recoverable as Extra Expenses Outside the Period of Interruption - Understanding Business Interruption Claims, Part 34

In a business interruption claim the insured has an obligation to mitigate its losses by reasonable means, but, as illustrated in Insured’s Duty to Mitigate – Understanding Business Interruption Claims Part 30, insureds should not be required to go out on a limb to protect the insurer and then get a hand slap in response.

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The Value of Ingress/Egress Coverage - Understanding Business Interruption Claims, Part 33

Catastrophic losses impact unimaginable aspects of a business operation that go beyond the loss of net profits. For example, access to an insured property may sometimes be impaired after a loss, and the resulting loss can be covered under Ingress/Egress coverage.

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Michelle Claverol's Business Interruption E-Book

Every Sunday for the past thirty two weeks, Michelle Claverol has written on topics involving business income, extra expense and interruption claims. These are not the easiest or sexiest of insurance coverage matters, but, for many businesses, winning these issues and having claims paid promptly can determine economic survival.

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The Importance of "Service Interruption" Coverage: A Chicken Story - Understanding Business Interruption Claims, Part 32

Catastrophic losses are life altering. Hurricanes and earthquakes often shut down power and utility services for weeks, and, all of the sudden, ice becomes the most valued commodity in town. People are resilient. Businesses, however, need more than a little ice to survive.

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The "Loss" or "Damage" Coverage Requirements - A Business Interruption Afterword - Understanding Business Interruption Claims, Part 31

Earlier this week, Chip Merlin posted Does an Insurance Policy Cover only “Loss” or “Damage” to Property? regarding the different interpretations of the proverbial “loss” or “damage” provision in property insurance policies, specifically as applied in anticoncurrent causation analyses.

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The Insured's Duty to Mitigate - Understanding Business Interruption Claims, Part 30

The insured’s duty to mitigate its damages after a loss is a well-recognized principle in property insurance law. In business interruption claims insureds are required to take affirmative steps to reduce their loss of earnings after a loss. While an actual business loss occurs only where the insured is unable to reduce or eliminate lost profits, insureds are not necessarily required to engage in super-heroic-acts to mitigate their business interruption loss.

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How to Prepare for the Hurricane Season and Avoid Being Underinsured for Business Interruption Coverage

*(Note: Bob Glasser is a managing director at BDO Consulting, a division of BDO and Seidman, LLP, in the New York office. Mr. Glasser is a certified public accountant, a certified fraud examiner and a certified insolvency reorganization accountant, with more than thirty years of diverse financial management and accounting experience at public and private companies. Mr. Glasser leads the firm’s New York Insurance Claim Services practice).

Most CFOs and risk managers have an understanding of their property and liability insurance needs and dollar limits and are comfortable purchasing coverage that protects their companies from a loss due to an insured peril. However, it has been my experience that their comfort level drops dramatically when it comes to business interruption coverage and limits. The uncertainty surrounding business interruption coverage, extensions of coverage and respective limits of that coverage consistently results in many middle-market organizations finding themselves underinsured and short of cash when faced with a major loss. Even the fortunate CFOs and risk managers who have not experienced a major loss may eventually discover that they have been significantly overinsured for business interruption losses and paying unnecessarily higher premiums for their coverage. Of course, the more devastating situation is finding out after a shutdown of operations from a loss that company management has not mitigated the company’s risk of lost profits and now has insufficient coverage to protect profits and cash flow during a potentially long period of restoration.

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Bracing for the Worst - Understanding Business Interruption Claims, Part 29

Yesterday, Rocco Calaci posted a blog entry announcing that La Niña conditions are already being observed. While I dare not attempt to explain the mechanics of these conditions, it is generally understood that La Niña is a climate phenomenon that is marked by an unusual cooling of the sea surface in the Pacific Ocean, which in turn affects wind and weather patterns globally. It is also generally said that these conditions foster more frequent and stronger storms in the Atlantic Ocean and the Gulf of Mexico. As a result, NOAA has forecasted 14 to 23 named storms, of which 8 to 14 are expected to be hurricanes and 3 to 7 major hurricanes during this season.

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The Fifth Circuit Court of Appeals Restricts the Definition of Property in a Business Interruption Claim - Understanding Business Interruption Claims, Part 28

The Fifth Circuit Court of Appeals recently issued an opinion in the case of WMS Industries v. Federal Insurance Co., affirming the U.S District Court for the Southern District of Mississippi’s ruling in favor of the carrier in a business interruption/extra expense coverage dispute that arose in the aftermath of Hurricane Katrina, which struck the Mississippi Gulf Coast on August 29, 2005.

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Can a Commercial Lessor's Actions be Considered in Determining a Period of Restoration? -- Understanding Business Interruption Claims, Part 27

A standard business interruption form reads:

We will pay for the actual loss of Business Income you sustain due to the necessary suspension of your “operations” during the “period of restoration”. The suspension must be caused by direct physical loss of or physical damage to property at the “scheduled premises”…caused by or resulting from a Covered Cause of Loss.

 

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Can "Real World Circumstances" Be Considered To Establish a Theoretical Period of Restoration? - Understanding Business Interruption Claims, Part 26

The “Period of Restoration” in a business interruption claim is a concept of time. The period, as defined in most ISO forms, begins at the time of “direct physical loss or damage” and ends on the earlier of “the date when the property should be repaired, rebuilt, or replaced with reasonable speed and similar quality.” […] or “the date when the business is resumed at a new permanent location.”

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Oil Spill Accounting and Damages: The Team Approach to Determine Business Interruption Claims

The proper determination of more significant oil spill commercial lost profit and earning capacity claims must be approached very similarly to business interruption catastrophe claims. The best approach for larger or more complex claims is through a team of specialists. A business client can only be properly represented and fully indemnified through a collegial debate and analysis developing the proper assessment of the business, the circumstances resulting from the catastrophe, the amount of the loss, and legal considerations of what the law will allow and require as proof, if challenged.

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What Does "Incur" Mean in an Extra Expense Provision? - Understanding Business Interruption Claims, Part 25

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims). 

The Standard ISO Extra Expense provision reads as follows:

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A Catch-22 in Extra Expense Coverage - Understanding Business Interruption, Part 24

Evaluating a business interruption claim is not as simple as it sounds. After reading Chip's blog, How to Value an Oil Spill Claim--Not an Easy Task, I sincerely hope that everyone involved in this oil mess is properly trained in business valuation losses. Sometimes, as a result of inadequate or improper training, insurance companies can put their policyholders in an untenable position.

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Can a Business Expect Recovery For Its Normal Operating Expenses, Even If It Was Operating at a Net Loss, Prior To a Suspension? - Understanding Business Interruption Claims, Part 23

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims). 

Keith Turner, a fellow attorney from California, forwarded me a novel and interesting court opinion from his home state that may change the typical business interruption rhetoric.

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Extra Expense and the Period of Restoration - Understanding Business Interruption Claims, Part 22

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims).

Most extra expense provisions state that coverage will be extended for necessary expenses that the insured incurs during the “period of restoration.”

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Can an Insured Assign its Business Interruption Claim After a Loss? - Understanding Business Interruption Claims, Part 21

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims).

Many business owners consider “pulling the plug” after a loss. Whether emotionally based or a strict numbers decision, business owners want to know if they can sell their business and assign their business loss claim as part of the package.

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Accountants and Business Interruption Experts Will Play an Important Role Recovering BP Oil Spill Income Loss Claims

The tragedy of loss of human life and damage to the environment when discussing the BP Oil Spill cannot be overstated. The important role that accountants and business interruption experts will play helping prove financial loss cannot be overstated either. Experienced professionals like Bob Glasser, noted in yesterday’s Are Lawyers Pandering for BP Oil Spill Clients Going to Get Sued for Malpractice in Follow-up Class Actions? A Guest Blog Regarding Business Claims By Bob Glasser Explains and Guest Blogger Bruce Smith, who wrote The Forensic Accountant's Role In Business Interruption And Business Income Claims, should be in high demand from businesses and entities that lose revenue and income as a result of this oil spill. Attorneys presenting these lost income claims should consider hiring such individuals as consultants and financial expert witnesses.

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What if Code Upgrades Delay the Time to Complete Repairs? - Understanding Business Interruption Claims, Part 20

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims).

Complying with code upgrades often extends the period of time it takes to repair or replace the property after a loss. Depending on the type and nature of the code requirements, repairs could be extended for several months and depending on the type of policy this time delay may not be covered. Depending on the size of the business, this could translate into significant unrecoverable losses.

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Passing the Accounting Bill - Understanding Business Interruption Claims, Part 19

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims).

Many policyholders are not familiar with the documents or income accounting records required to present a business interruption claim. To comply with the requests from an insurance carrier, policyholders are often forced to retain accountants to accumulate the data and provide a report to the company, but such services are rarely free.

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Possible Coverage to Obtain Recovery from Volcanic Activity - Understanding Business Interruption Claims, Part 18

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims). 

Yesterday, I wrote about how swiftly the insurance industry has decided to shut down the possibility of recovery on business interruption claims resulting from the recent volcano eruption in Iceland. As reported, it is estimated that having to close Europe’s busiest airports may cost the airline industry in excess of $2 billion. While the insurance companies’ message of non-recovery was heard loud and clear, coverage fights will likely ensue, depending on the language of each individual policy.

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The Duane Reade Saga -- Understanding Business Interruption Claims, Part 16

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims). 

New York-based drugstore chain, Duane Reade, must feel like it is Ground Hog Day every time their attorneys call to give status on their case against St. Paul Fire and Marine Insurance Company. Duane Reade, recently acquired by Walgreens, owns and operates 200 drugstores in and around New York City, including 124 in Manhattan. Duane Reade has been battling its carrier for almost 8 years in a protracted insurance coverage dispute arising from the September 11, 2001, destruction of its single most profitable store, formerly located on the main concourse of the World Trade Center. After a bench trial, four Federal District Court opinions, an appraisal and two appeals, the business interruption saga finally came to an end.

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Learning from Other's Mistakes -- Understanding Business Interruption Claims, Part 15

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims). 

“Experience is the name everyone gives to their mistakes” – Oscar Wilde

I picked up a couple of pointers worth sharing in an article published by the University Risk Management and Insurance Association titled, "Case Study-Business Interruption: An Exposure by Many Names," by William Austin, et al., (2005). The article examined a case study similar to what some academic institutions near the Gulf Coast experienced in the aftermath of Hurricane Katrina. The business interruption case study, however, was analyzed in a scenario where a catastrophic fire damaged a state of the art research facility at a higher education institution that thrived on revenue from its prestigious research and development programs.

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Post-Loss Market Earnings Ignored in Mississippi - Understanding Business Interruption Claims, Part 14

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims).  

Several weeks ago, in a blog titled To Consider the Economy, or Not to? ‘That is the Question’, I examined two diverging legal views regarding the use of post-loss market conduct in business interruption claims. In that blog, I borrowed information from an article published in the July/August 2009 issue of Coverage titled “Measuring Business Interruption Loss in Wide-Impact Catastrophes: Insurance Against Catastrophes or Only Against Insured Damage from Catastrophes?” by Richard Chattman and Gregory Miller and I explained that:

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Consequential Loss Exclusions - Understanding Business Interruption Claims, Part 13

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims).  

In general, business interruption insurance is intended to return to the insured's business the amount of profit it would have earned, had there been no interruption of the business or suspension of its operations. However, business interruption coverage ought not be used to put the insured in a better position than it would have occupied without the interruption. Most policies will therefore typically exclude coverage for any consequential (or remote) losses, delay, loss of use or loss of market, which do not directly flow from a covered loss.

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Strategies for Claim Resolution -- Understanding Business Interruption Coverage, Part 12

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims).  

In this business, everyone has their own style of “working a claim.” There are, however, healthy techniques of claim presentation that practitioners should follow to effectively present a business interruption claim.

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In Tough Economic Times, Extra Expense Coverage Should Survive Budget Cuts - Understanding Business Interruption Claims, Part 11

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims). 

In these tough economic times, many businesses are looking to cut expenses and trim their budgets. While it is tempting to reduce insurance coverage to minimize operating costs, business owners should not skimp on insurance protection to trim budgets, particularly when it comes to additional coverages like Extra Expense Coverage.

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Can a Carrier's Delay Toll the Period of Restoration? -- Understanding Business Interruption Claims, Part 10

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims).

Last weekend, I took a little break from blogging to spend time with my parents and siblings to reconnect and reinforce bonds that sometimes get loosened in the life of a dedicated young attorney, who perhaps wants to accomplish too much, too soon in life. While I learned that family bonds are unbreakable and that I can accomplish anything I want in life, Chip, who I am convinced has a clone, blogged about an interesting topic in business interruption claims that generated some debate.

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The Period of Restoration Does Not End When the Business Is Sold or Operations Cease

Michelle Claverol has been writing a weekly post every Sunday regarding business interruption and extra expense issues. I can tell that weekend posts are not read as often as those published during the workweek. I encourage those involved with commercial claims to go back and review her discussions of this important commercial coverage. She went home to visit with her family this weekend, and her leave provides me an opportunity to address a business income question that is asked of me on a fairly frequent basis:

What happens in the valuation of a business income claim when the business closes or is sold after the loss?

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The Overhead Fight -- Understanding Business Interruption Claims, Part 8

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the part of a series she is writing on business interruption claims).

Accountants usually define “overhead” as operation costs that are incidental to the production process. Generally, there are three categories of “overhead:”

(1) those directly associated with plant operations such as power, lease costs and insurance;

(2) general selling and administrative costs attendant to the production, sales and delivery of a product; and

(3) costs incurred for the benefit of multiple operating units, including debt service executive management compensation, investor relations costs and corporate advertising (usually larger corporations with individual units or operating entities). 

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The Hospitality Industry Has Significant Insurance Coverage Issues: Lessons Taught at the 2010 Hospitality Law Conference

I represented a Houston based hotel management company last spring regarding Hurricane Ike insurance claim disputes with eleven hotels they owned or managed in Texas. Some cases simply go right, and this one settled after two months. My client’s owners went out of their way to call to my attention that managers in the hospitality and real estate management business needed to be taught about the insurance claim game. The next thing I knew, they were putting a phone to my ear and I was talking to Stephen Barth of HospitalityLawyer.com.

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Understanding Business Interruption Claims, Part 6: Competent Proof

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the sixth part in a series she is writing on business interruption claims).

A very insightful reader posted this comment to my blog last week, Understanding Business Interruption Claims, Part 5:

I'd guess that many small businesses, such as mom and pop stores, independent contractors, sales agents etc might not be able to benefit from this ruling if they don't project forward. Many small business owners are not trained in business management, and might not be aware of techniques they can use to plan their business success. 

Could the small business owner therefore have difficulty making a claim for projected earnings and expenses if they don't have a business plan?

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The Concept of Mutual Dependency in a Business Interruption Claim. Understanding Business Interruption Claims, Part 4

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the fourth part in a series she is writing on business interruption claims).

Assume you own a hotel at a fabulous location on South Beach. The hotel has two suite-towers and a swanky three-star Michelin restaurant in the hotel lobby. One day, the fine restaurant was consumed in flames and the hotel sustained a significant decrease in room occupancy after the fire. Can the hotel claim business interruption benefits as a result of the fire in the restaurant? Maybe.

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Understanding Business Interruption Claims, Part 3

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the third part in a series she is writing on business interruption claims).

In simple terms, business interruption insurance is intended to return to the insured's business the amount of profit it would have earned, had there been no interruption of the business or suspension of its operations as a result of a covered loss. However, as with all property insurance claims, causation is a crucial element of the claim and all coverage issues should be addressed at the outset.

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Is the Loss Adjustment Process Factored in a Period of Restoration? Understanding Business Interruption Claims, Part 2

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the second part in a series she is writing on business interruption claims).

If you are reading this entry, you are probably familiar with the loss adjustment process of a claim. It is the period of time an insurance carrier has to investigate a claim, make a coverage determination, set its reserves and value the claim that was presented by its policyholder. The loss adjustment process is a necessary evil. The world would certainly be a happier place if insurance companies wrote checks for the full amount claimed immediately after a loss. However, I would not be writing this entry today, and insurance companies would not be executing their fiduciary and statutory duty of investigating claims to prevent wasteful spending of their premiums.

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How does the Period of Restoration Affect the Valuation of a Business Interruption Claim? Florida Valuation Issues, Part 10

(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the tenth and final part in a series she is writing on valued policy laws).

In general, business interruption coverage is supposed to provide the capital needed to sustain a business while its operations are suspended as a result of damage caused by a covered peril.

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Business Interruption and Extra Expense Insurance are the Most Important Commercial Coverages--and Often the Most Overlooked at Point of Sale and Adjustment

Insurance agents need to do a better job convincing commercial policyholders to purchase business interruption and extra expense coverage. Insurance claims executives need to do a far better job paying those benefits much quicker than they typically do. These two activities would help many more commercial establishments remain in business following a catastrophe.

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Insurance Agents and Policyholders Need to Communicate and Share Information to Get Coverage Right

A recent Louisiana decision, Isidore Newman School v. J. Everett Eaves Inc., No. 2008-1368, 2009 La. App LEXIS 1469 (La. App. 4 Cir., Aug 5, 2009), underscores the need for insurance agents and policyholders to fully discuss insurance needs when selecting types and amounts of coverage. Insurance agents generally have a duty to exercise reasonable care and competence in obtaining and communicating information to policyholders. Interestingly, this case also demonstrates that business policyholders have a similar duty as well.

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Event Cancellation Insurance and the Michael Jackson Tour

Following up on yesterday’s post, What does a Property Insurance Coverage Policyholder Lawyer Think About the Day After a Def Leppard Concert?, there has been some debate in the insurance press regarding the 2009 Michael Jackson Tour. Phil Gusman has three articles in the National Underwriter Property & Casualty on the topic: Will Insurers Pay For Jackson’s Concerts?; Michael Jackson’s Death Raises Event Cancellation Issues; and Insurers Could Question Jackson Pre-Concert Physical Results. Based on the articles, Jackson would have had a physical examination as a requirement of the insurance.

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What does a Property Insurance Coverage Policyholder Lawyer Think About the Day After a Def Leppard Concert?

How about, “Where’s the Advil?” My wife commented Friday night that all my “edgy” friends must also enjoy this genre of rock because the concert was sold out. Just as she made that remark, a thunderstorm struck. Being the nerdy insurance coverage lawyer that I am, and even though my thoughts were straying just a little at the time with the rather bizarre visuals that accompany a Def Leppard concert, I thought, “if the power cut off and the concert cancelled, would there somehow be coverage afforded under an insurance policy?”

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Texas Coastal Areas are Still Reeling From Hurricanes Ike and Gustav: Insurance Claim Denials and Delays are Prevalent

I just finished a two day settlement conference of a commercial insurance claim dispute held on the 51st floor of Fulbright & Jaworski in Houston. The view from the conference room was beautiful and in juxtaposition to the manner my client felt the insurance claim was handled. As is becoming customary for many of my cases, the terms of the settlement are confidential. The resolution ended very amicably, although the process was somewhat frustrating. The significant aspect to others is this was a matter whose facts are similar to, and seem repeated in, thousands of other Texas losses, no matter if the loss is small or a complex middle eight figure claim. Insurance claim denials and delays seem commonplace in Texas.

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First Party Property Insurance Claims Conference Set

We will be participating in a brand new Property Insurance Claims Conference this fall. The inaugural First Party Claims Conference (FPCC) takes place October 26-27, 2009, at the Crowne Plaza Hotel in Warwick (Providence), Rhode Island. A series of presentations, panel discussions, and interactive seminars will address significant issues regarding first party claims.

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When Calculating Insurance Payments, Take the Deductible From the Repair Value and Not the Policy Limits

One wrongful adjustment method that occurs from time to time is the practice of taking the deductible from the policy limit. For insurers, this is a way to never pay the policy limit. When this occurs, the underwriter essentially charges unearned premium for the amount of the deductible, and the policyholder never has a chance to fully recover under the policy. Sometimes the practice occurs out of ignorance. Some just take advantage of the unknowing policyholder.

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Texas Supreme Court Rules On When Late Notice Can Be Used To Deny Coverage In Claims-Made Policies

The Texas Supreme Court issued two opinions March 27th, clarifying when a delay by the insured in submitting a notice of loss in a claims-made policy can bar recovery.

In the first case, Financial Industries Corp. v. XL Specialty Ins., ___ S.W. 3d ___, 2009 Tex. LEXIS 109 (March 27, 2009), the Texas Supreme Court was faced with the issue of whether, under a claims-made policy which required, as a condition precedent to recovery, written notice to the insurer of any claim "as soon as practicable after it is first made," an insurer could deny coverage because the insured waited seven months after the suit was filed to give notice, although notice was given within the policy period.

The Court distinguished between the prompt-notice language, ("as soon as practicable"), and the requirement that a claim be made during the policy period.

The insurer (XL) and insured (FIC) stipulated that FIC violated the policy's prompt notice provision and that XL was not prejudiced. Noting that claims-made policies benefit an insurer by allowing it to "close the book" on a policy at its expiration, giving the insurer a certainty unattainable with other types of policies, the Texas Supreme Court sided with the insured. FIC gave notice within the policy period, so that XL could "close the book" on the policy at the end of the policy period. Because XL was not denied the benefit of the claims-made policy, it could not deny coverage based on FIC's immaterial breach of the prompt notice provision, as they could not prove prejudice from the delay in notice.

In Prodigy Communications Corp. v. Agricultural Excess & Surplus Ins. Co., ___ S.W. 3d ___, 2009 Tex. LEXIS 111 (March 27, 2009), the policy required the insured give written notice of any claim "as soon as practicable," "but in no event later than ninety (90) days after the expiration of the Policy Period or the Discovery Period." Prodigy gave notice almost one year after it was named in a lawsuit, but within 90 days of the end of the discovery period. The insurer denied coverage, alleging the notice was not "as soon as practicable," but admitted it was not prejudiced by the late notice.

After a lengthy discussion regarding claims-made policies, the Texas Supreme Court distinguished between the two notice requirements, stating:

"[The requirement that the claim be made during the policy period...is not simply part of the insured's duty to cooperate, but defines the limits of the insurer's obligation, and if there is no timely notice, there is no coverage.... [A] notice provision requiring that a claim be reported to the insurer during the policy period or within a specific number of days thereafter 'define[s] the scope of coverage by providing a certain date after which and insurer knows it is no longer liable under the policy'"

While the prompt notice provision of the policy could benefit an insurer by giving it more time to investigate and participate in negotiations, the Court held that the provision was not a material part of the bargained for exchange in the policy contract so long as notice was given within the policy period. Because the insurer was not prejudiced by the delay in notice, it could not use the immaterial prompt notice provision to deny coverage.

The Importance of Understanding Your Business Interruption Insurance Coverage

(*Note:  This Guest Blog is by Ed Acle, an attorney in the Coral Gables office of Merlin Law Group).

Merlin Law Group often assists commercial policyholders with claims for business interruption insurance. Many policyholders, electing to save as much as they can on their premiums, often forego this type of coverage on their policies. Those that obtain business interruption (or “BI”) insurance often neglect to take full advantage of the full protections afforded by this coverage. This could have grave implications, as the accurate application of BI coverage on a claim can often make the difference between a business’s continued operation or the shuttering of its windows forever.

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Protecting the Blown-Away Hurricane Dolly and Ike Policyholders: Discussions of Texas Hurricane Insurance Claims Practices

If you want to find a bunch of irate policyholders with plenty of stories to tell, hang out with Tina Nicholson and Javier Delgado in our Houston office. Commercial and residential policyholders have had enough frustration trying to do it themselves and are seeking legal counsel to fight the delays and denials from their insurance carriers. Anger at the insurance company and the adjusters working their claim is the prevalent emotion. Over the next several weeks, I plan to write much more on Texas property insurance law and protection it provides because Texas is the hottest new venue in the insurance litigation war. We are in the middle of it.

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The Forensic Accountant's Role In Business Interruption And Business Income Claims

(*Chip Merlin’s Note--Bruce D. Smith is a certified public accountant and certified fraud examiner, whose firm’s focus since its founding in 1992, has been forensic and investigative accounting for the insurance industry. He has been involved in claims in both catastrophic and non-catastrophic environments and has been engaged by both insurers and policyholder and their respective representatives. I invited Bruce to write a guest blog on this aspect of business income loss.)

What is a Forensic Accounting?

The Association of Certified Fraud Examiners (ACFE) explains that, “Forensic accounting is the use of professional accounting skills in matters involving potential or actual civil litigation. The word “forensic” is defined by Black’s Law Dictionary as “used in or suitable to courts of law or public debate.” More simply put forensic accounting is litigation support involving accounting.

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Vandalism, Theft And Arson Insurance Claims Rise

The deteriorating economy appears to be having an impact on our business. We are being referred more insurance disputes involving losses that are directly the result of the souring economy.

For the first time in a decade, we have been referred several fire claims that are allegedly of an incendiary (intentionally set) cause.

There are a number of reasons why fires are intentionally set. Statistically, the most common cause is adolescent males simply setting fires to property. Arson for profit is fairly rare, but insurers understandably hire specialized fraud attorneys, such as Barry Zalma, to take Examinations Under Oath and conduct investigation.

More and more buildings are unoccupied or vacant. When a building does not have somebody in it, the structure becomes an easier target for arsonists, vandals, and thieves. Accordingly, there appears to be more of these losses. Since policies often restrict coverage of and have exclusions that apply only to vacant or unoccupied buildings, more insurance coverage disputes occur.

For example, Tina Nicholson, of our Houston office, recently settled a case for a client where numerous break-ins, thefts, and vandalism had resulted in damage to the building. The policy at issue had specific clauses regarding exclusions and exceptions to exclusions pertaining to vandalism, theft and damage caused by burglars breaking in or exiting the building.

The Motion for Partial Summary Judgment and Memorandum of Law filed by Tina analyzes this very complex insurance coverage issue. These pleadings should be read by two types of people--those wanting to understand highly technical differences in the wording of commercial insurance coverage disputes and those that need help going to sleep. For such a commonplace loss scenario in this economic climate, the resolution depends upon which state law applies and the exact language of the policy in question.

If the economy worsens, I expect we will see more of this type of loss. Risk managers and property managers should carefully review their policies to make certain this type of loss is covered. I am fairly certain that adjusters in the industry have been made aware of the limitations in some of the policies.

The Value Of Valuation Clauses--Gold Exists In The Small Print Of Your Property Insurance Policy

Kelly Kubiak burst into my office jubilant in her recent victory over Great American Insurance Company. She received an Order granting her Motion for Summary Judgment in a case where the central dispute involved the interpretation of the valuation clause of an insurance policy. We so often talk about the problems of causation that we fail to spend enough time talking about how many benefits insurance policies are supposed to provide. It has been our experience that many policyholders think they have obtained a fantastic settlement from their insurance company until we explain how much money was left on the table through lack of knowledge and experience.

The insurance company adjuster is ethically required to help the policyholder maximize benefits. A properly trained and motivated adjuster teaches the policyholder how the policy can be used to soften the financial blow caused by insured peril. One can imagine how much money is innocently not claimed or recovered when an adjuster does not understand the policy.

In Kelly’s case, the small business she represented had an adjuster fight with the owner over  “new” merchandise versus “used” merchandise. I wonder how many other insureds have been cheated as a result of Great American's obviously wrong interpretation of the valuation clause. Many policyholders do not realize the issue or simply fail to fight the issue by retaining an attorney. Unfortunately, this scenario is repeated far too often as many insurance company adjusters do not help the policyholder find ways to encourage payment of full policy benefits.

Have you ever heard of an insurance adjuster saying, “I think the policy can help you and pay you more if you would just….?”