Extra Expense Coverage

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“Extra” is the E that largely stands for the concept of expediting costs which are incurred to reduce the ultimate loss. “These are out-of-the-ordinary expenses.”1 They are differentiated from the normal expenses to repair and replace damaged property covered under the property insurance policy. These expediting costs usually fall into three categories:

  1. Those that speed up the return to normal operations;
  2. Those that continue operations during the period of interruption but at a higher than normal cost;
  3. Those incurred, after operations are resumed, to refill inventory.

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Continue Reading What Is the “Extra” E and Why It May Be The Most Important “E” of “The Six E’s” of Business Interruption Insurance?

Our client owns a large food market. Last summer, it burned down. The client submitted a claim under his business insurance policy from Farmers. The insurance policy included several different types of coverage, such as Business Property, Business Income, Extra Expense, and more. The insured had insufficient insurance limits under his Business Property to replace everything needed to reopen the market. Thus, he sought coverage for those items under Extra Expense coverage. By the plain and clear terms of the policy, these items were also covered under Extra Expense. But Farmers found an excuse to wrongfully deny the claim in a textbook example of how not to interpret and apply insurance policies in California.…
Continue Reading Can Business Losses Be Covered Under Multiple Parts of Your Policy?

On Saturday October 12, 2019, several decks of upper floors of the Hard Rock Hotel & Casino under construction just off Canal Street in New Orleans suddenly collapsed. As emergency personnel were engaged in the immediate efforts to rescue and aid the crews working at the hotel site, the City of New Orleans was busy implementing its emergency response teams. …
Continue Reading New Orleans Hard Rock Hotel & Casino Construction Collapse Triggers Time Element Coverages

In addition to covering property damage, most first-party commercial insurance policies offer business interruption coverage. Business interruption coverage typically has two different built in coverages: business income and extra expense. Both are intended to assist businesses in the event a covered peril damages business property and impacts business operations.…
Continue Reading Business Income and Extra Expense – Understanding the Differences

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

A law firm in New York was without power prior to Superstorm Sandy making landfall. The reason for the power outage was because the utility company preemptively shut down power for several days prior to the storm as it anticipated there would be significant pre-storm flooding. The insured premises sustained no flooding or physical damage during the storm. However, the law firm made a claim under its commercial insurance policy for loss of business income and extra expense as the office building was without power from October 29, 2012 through November 3, 2012. During that time period, there was no electricity or elevator service in the building.

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Continue Reading Law Firm Cannot Recover Business Income Losses Resulting from Intentional Pre-Superstorm Sandy Power Outage

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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Continue Reading Commercial Property Insurance May Cover “Extra Expenses”

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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Continue Reading Can a Business Recover for Income Losses After it Restores its Premises and Resumes Operations? 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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Continue Reading A Heavy Loss Is Limited – Understanding Business Interruption Claims

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