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

But not all businesses are alike. Adjusters and claim professionals should spend a considerable amount of time in getting to know the intimate details of the affected enterprise. Are there special trends, characteristics or events that had an impact on the representative period of data chosen to measure the business income loss? Is the business seasonal or does it provide a highly specialized product? Would it be accurate to measure the loss with income or expense data during a period where an insured’s key customer or supplier went bankrupt? Similarly, would it be accurate to consider the surge in sales after a one-time promotion? These questions will not always have the same answer, and company-specific or industry-specific factors should be given special consideration when measuring a business income loss.

Business income claims should always be accompanied by historical profit and loss data, but in New York courts will also accept business owner testimony to calculate lost profit damages that directly stem from a breach of contract.2  This means that a business owner will be allowed to testify and quantify the measure of business income loss had the insurance company properly measured the loss after the hurricane.

Businesses should contact business income loss professionals to make sure that they are receiving adequate payment from their insurance companies.

1 Graph prepared by accounting firm Cohn Reznick.
2 Securitron Magnilock v. Schnalbook, 65 F.3d 256 (2nd Cir. 1995).

  • Devin

    Well said. Many people also forget to consider loss of income for renters when their tenants can no longer live in the rental dwelling. Obviously a covered peril must occur before loss of income (or coverage C) can be considered. If the tenants leave on their own terms, then this coverage will not apply.