The Inner Workings of Business Interruption Coverages

August 19, 2020
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Business Interruption Losses Can Cripple Your Operations After a Loss

We understand that business interruption and financial time element losses can be catastrophic to an insured and their operations after a loss. The coverages are varied and inconsistent amongst the various insurers. Some are narrowly tailored for specific industries while others are more generic. 

When evaluating a claim for business interruption or extra expenses, a loss consultant must contemplate the loss exposures to the particular client, whether it is a manufacturing facility, agricultural business, a small business owner, or professional services. Without due consideration and proper strategy, one can suffer tremendous financial losses that could shut a business down long after the coverage has been exhausted. 

Generally, business interruption coverage is written either with no dollar limit for losses, i.e., the actual loss sustained, but for a specific time limit.  Alternatively, the coverage can be provided with a specific dollar limit but placing a time limit that an insured utilize due diligence and dispatch to resume operations as soon as reasonably possible. It is critical for an insured to not only understand what coverage they need but also how those coverages can work in their favor and ensure the business survives a devastating loss. 

Generally, the business interruption provisions provide coverage for net loss or gain plus any continuing expenses less any saved expenses. Each relevant term has meaning and must be carefully analyzed to work for the insured and their particular operations.

The premise of such a time element or business interruption coverage is to restore the insured after a loss to the same or similar financial condition has a loss not affected or shut down their operations. The indemnity for loss of earnings general entails reimbursement for net income (or loss) plus continuing normal operating expenses that a business would have earned if no direct physical loss or damage has occurred. Saved expenses or those expenses that would not be incurred by the business due to the loss are often taken as a credit by an insurer. 

A large wildfire bursting behind a city

SunPoint Comprehends the Nature of Your Business and Customize Your Business Interruption Recovery

A mercantile operation focuses on operating expenses and profit that are derived from resale at a markup of goods purchased and will have different issues or concerns than a manufacturing operation that develops its income from the increase in the value of materials that it converts from raw materials to work-in-progress, and ultimately finished goods for sale to the public. 

Similarly, a business that primarily provides a service has a different focus as they do not sell any merchandise or manufacture a product; rather, they derive revenue and profits utilizing consumable goods to provide professional services without the need of cost of goods or raw materials to operate profitably. Our forensic accountants are experts at analyzing profit and loss statements, tax records, payroll documentation, business plans, the period of restoration to make the coverage be customized for the insured to help restore their earnings loss. 

Moreover, even if a business is new and is not operating at a profit can have a major financial loss by a covered event to cover payroll or continuing expenses if a loss suspends their operations. Many carriers will try to reduce the amount collectible by arguing that claim payouts should be reduced by the extent of financial losses notwithstanding that expenses were incurred prior to the covered loss. Our team of forensic experts places a keen and astute to the policy language to ensure the language actually provides such coverage without any credit towards losses. 

SunPoint Will Establish Coverage for Payroll to be Compensable for Business Interruptions

Coverages for payroll also vary amongst the insurance products available in the market. Some policies provide coverage for payroll but limit it to 90 days for “ordinary employees.” Who determines what an ordinary employee? A hostess or waiter at a high-end Michelin Star restaurant may be looked at as an ordinary employee by an insurer but the insured could not operate without that particular hostess as being the first face of the insured that hostess may be the reason patrons return to the restaurant.  Training and loyalty are placed at a higher standard by an insured than by carriers. 

Other policies provide coverage for key employees subject to certain conditions. Yet, different policies have no such payroll limitations.  Key forensic analysis and advocacy of the right and favorable position for an insured is what a public adjuster like SunPoint specializes in.

SunPoint Knows What Considerations Must be Given to Ramp Up Your Recovery After a Financial and Business Interruption Loss

While endless other considerations and coverages can be discussed, another key component of business interruption coverage is what happens once the insured’s business or property is rebuilt or replaced and operations somewhat resume. Who and how does the insured get indemnified during the ramp-up period during that critical time when the property or operations are back on the market albeit under reduced revenue streams. Of course, extra expense coverage, which is discussed in the next edition, is of critical concern but many policies provide an extended period of indemnity (“EPI”) coverage. EPI comes into play for the ramp period where the mercantile, manufacturing, or service business suffers losses after re-opening doors or operations. Capturing these financials properly for the benefit of the insured is a critical function of a true policyholder’s advocate.

SunPoint Advocates Only for the Insured’s Benefit

SunPoint is the “Gold Standard” of the Public Adjusting industry.  We comprehensively review and evaluate your policy, immediately deploy a team of experts to assess and quantify your damages. We customize a strategy around your personal recovery to promptly and properly maximize the resolution of your claim. 

Our in-house and other veteran experts are experienced in quantifying and negotiating business interruption, financial, and time element losses along with building, personal property, stock, inventory, or other additional coverages.  We work solely on your behalf to favorably resolve your claim. Our experts ensure your insurance company does not delay, diminish, or deny benefits that are rightfully owed to you. Industry experts agree that having a public adjuster like SunPoint on your side early in the process expedites and maximizes your recovery.  

Our team of experts has been advocating on behalf of policyholders for decades. We have handled, managed, and successfully navigated claims ranging from corporate losses in the hundreds of millions of dollars, disaster losses involving government entities and municipalities, agricultural and recall losses, mercantile, professional services, manufacturing, and virtually any type of large commercial losses that implicates business interruption claims. 

Our team of Public Adjusters, forensic accountants, building experts, inventory specialists, equipment consultants, and many other experts make up a group unmatched in our industry.  It takes dedication every day to be the best – we have that dedication. Our goal is aligned with yours. To obtain a free assessment of your specific circumstances and recovery please contact us to strategize your best means of recovery according to your policy.


Masood Khan, ESQ

Masood is one of the principals of SunPoint Public Adjusters Inc., which is one of the premier public insurance adjusting, valuation, and loss consulting organizations in the United States. His experience as an insurance adjuster, attorney, and Vice President for various companies provides him the tremendous insight to advocate on behalf of commercial professionals and homeowners who have suffered catastrophic losses and need a professional and dedicated expert on their side to level the playing field. Since 1992, Masood has helped numerous individuals and businesses recover from disasters such as firestorms, hurricanes, tsunamis, tornadoes, earthquakes, and other catastrophes throughout the United States, Asia, and the Caribbean. For a consult, please call him at 415.271.2612 or by email at