At the 2018 RIMS annual conference, Christopher Loebler from the firm McCarter & English discussed business interruption claims.
Business interruption usually falls within your property policy. The coverage is triggered by a property loss from a covered peril under the policy that shuts down your business for a time. One in five U.S. companies sustain a loss in this area with an average claim of more than $2 million.
Oftentimes, losses are less obvious, more complicated and larger than the property claim. Unfortunately, the focus on the front end tends to be on the property loss when any incident occurs.
Five Pitfalls on Business Interruption Claims:
- Failure to include an insurance coverage lawyer on your crisis response claim. Policies tend to be long and complex, so you need someone who has read the policy in advance of the incident to now how to best respond.
- Issuing a press release can directly undercut the insurance claim. After an incident, the typical reaction of a company is to issue a press release letting people know that the business can still operate. Later, when you try to file a business interruption claim, the carrier pulls out that press release and questions coverage.
- Failure to understand what is privileged communication. Questions should be asked through your lawyer under privilege, not through you broker. Communication with your broker is not protected by privilege.
- Failure to communicate. You have an obligation to communicate with the carrier, including putting iut on prompt notice. However, you need to make sure you are not giving it information that can be used against you without going through your attorney.
- Failure to retain a forensic accountant. A forensic accountant is an expert in both the policy and making claims. The accountant knows exactly what information is needed to maximize recovery.
NOTE: Claim preparation expenses are usually covered under the policy. This includes the forensic accountant but not attorneys.
Also, you can add contingent business interruption coverage to your policy. This coverage would apply if one of your key suppliers suffered a loss that would be covered under the policy and that particular loss disrupted your business.