The Length of the Road Back from Disaster: Four Rules for Measuring the Business Interruption Period

Business Interruption (BI)

The Length of the Road Back From Disaster: Four Rules For Measuring the Business Interruption Period

By Gary Thompson

EDITOR’S NOTE

While working through a business interruption insurance claim, the policyholder and the insurer need to reach an agreement on a number of variables — none more worthy of discussion than the question of “How long does a business suffer the consequences after a disaster strikes?”

In this issue of Adjusting Today, author Gary Thompson brings into focus the elements that will help determine which route to take toward recovery of business interruption losses.

Drawing on nearly a century of case law, Mr. Thompson compiles for policyholders the rules of the road when establishing their period of interruption, moving from “theory” to reality.

Our goal for this issue is to provide a better understanding as to what course to take when the business interruption period is developed.

 

 

 

Sheila E. Salvatore
Editor

Commercial property insurance policies commonly cover business interruption (“BI”) losses during the period of time that a business is interrupted by a covered peril such as a hurricane or earthquake. The typical BI coverage within that period is for the “actual loss sustained” by the policyholder, usually further defined as the net profits that would have been earned plus any continuing expenses such as rent (or alternatively, gross revenues minus discontinued expenses). Apart from calculating the BI loss itself (the province of forensic accountants), adjusting the length of the “BI period” (or “period of recovery”) is a common point of disagreement between insurer and policyholder. How longshould the insurer pay such a BI loss?