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.
I attended both the beginners and advanced business income courses and certainly picked up some gems that will improve my daily practice. Many public adjusters approach me because they think their client may have a business income claim, but they are not really sure. Others will walk away from a business income claim because they do not know where to even begin.
Bruce Smith, CPA, was a panelist in The ABC’s and 123’s if Business Income Losses at the Windstorm Conference. He is a forensic accountant and has vast experience in measuring business income losses. I appreciated the way he was able to point out the nuances between coverage (policy language) and measurement (accounting methodology). A solid understanding of the relationship between coverage and measurement is certainly the recipe for success in complex business income disputes, but where do we start?
Bruce presented a questionnaire that should help all insurance professionals evaluate business income claims, even those who are unsure of what to ask:
- How is revenue generated?
- Who are your customers? How many customers are there? Are they repeat customers?
- How long have you been in operation at the loss location?
- Have there been any changes to the operation within the past year?
- How many employees do you have? Full time, office, salaried v. hourly, etc.
- How many days per week do you operate?
- What are the employees doing now?
- What happened? Review the facts of the loss with the insured. Relate this to income.
- What are the typical monthly sales? What is the normal cost of goods percentage?
- How long do you expect to be closed?
- What is the status of the repairs?
- What is happening now with operations? Partially running or full shut down?
- Do you have other locations that can make up revenue shortfalls?
- Will you be able to make up sales at a later date?
- Discuss the records that are available-make them aware that the BI Loss will need to be documented and supported.