After the coronavirus outbreak, the future of businesses is being questioned while they are accessing their income losses. Normally, through business interruption (BI) insurance, companies can save their business owners from income loss during tough times, such as natural calamities or man-made disasters. Businesses have to suspend their operations immediately, forming a huge gap in revenue generation. But generally, a BI insurance is applied when there is a damage caused to business property, and, therefore, doesn’t cover pandemics or infectious diseases like COVID-19.
A Business Interruption / Income Loss Property Claim Lawyer can definitely guide you during tough times and help you protect your finances. However, you need to know the things that a Business Interruption insurance policy does and doesn't cover. In this article, we will be discussing that, along with the scenario during the coronavirus outbreak.
What is Business Interruption Insurance?
Business Interruption Insurance or BI Insurance refers to the insurance coverage that fills any income loss caused to a company due to a natural or man-made disaster, such as a fire. It is to be noted that BI insurance is not sold as a stand-alone individual policy, but is rather added to a casualty or property policy. Also, if you have a comprehensive package policy, you can acquire a BI insurance coverage as an add-on or rider.
A Business Interruption insurance policy generally covers all the operating expenses, along with payroll, loan payments, and taxes. Further, it can also cover the expenses required while moving to a temporary business location. In extreme or rare cases, a BI insurance policy can also be applied to the business loss occurred when a civil authority shuts down that particular company when some physical damage is caused to a nearby business.
What Does It Cover?
A Business Interruption insurance plan can reimburse the policyholders during the following events/cases -
- Profits: An insurer will provide reimbursement to the policyholder for the profits that it would have earned had the disaster not occurred. The reimbursement amount will be decided upon accessing the performance of the company in the previous months.
- Fixed Costs: These include all the standard operating costs and other expenses incurred while running a business. You can discuss with your Business Interruption / Income Loss Property Claim Lawyer about the list of fixed expenses covered under a BI Insurance policy.
- Commission and Training Costs: In an event of business interruption, a company might often need to replace the old, damaged machinery. This would require retraining personnel to operate this new machinery. A BI insurance policy would cover these retraining expenses incurred.
- Temporary Location: In case a business moves to and operates from a temporary location, the costs involved are covered by a Business Interruption policy.
- Employee Wages: During a business shut down, the owners don’t normally want to lose their employees. A BI insurance, therefore, covers all employee wages or payroll costs during a crisis when the business cannot operate.
- Extra Expenses: Beyond the fixed costs, there are overhead expenses incurred to a business during a crisis. A BI insurance plan may include all reasonable extra expenses that help a business to keep operating until it sets a firm foot again.
- Taxes: A business still requires to pay all taxes, even during a crisis. A tax coverage scheme can be included in a BI policy to ensure that a business can pay taxes on time and avoid receiving legal notices.
- Loan Payments: Like taxes, business loans need to be paid even when it is not generating any revenue due to a disaster. In such cases, a Business Interruption insurance policy can help you pay off all your monthly loan dues.
- Civil Authority Ingress/Egress: Often during a government-mandated closure of a business, mostly when it causes financial loss directly, might hamper its regular functioning. A BI insurance policy covers the loss incurred during this time. Again, a professional Lawyer can help you in case you face difficulties in getting a reimbursement during civil authority ingress or egress.
Apart from these, a BI insurance policy does normally cover damage or loss caused due to civil unrest, vandalism, or malicious mischief, such as theft, unless otherwise excluded. In this case, you must consult a Vandalism Lawyer to learn about the policies that cover such events.
What It Doesn’t Cover?
The things that a BI insurance policy doesn’t include its coverage scheme are -
- Damages caused due to floods or earthquakes, as these are covered under a separate policy.
- Broken items caused due to a covered event or loss (for example, glass).
- Utilities
- Undocumented sources of income that are not listed on the financial records of your business.
- Pandemics, communicable diseases, or viruses (such as COVID-19).
To learn more about intricate or hidden policies and schemes, it is always better to talk to a professional lawyer, who will help you to arrive at the best decision. Also, it must be noted that an insurer is only subject to pay when there are actual losses incurred on the policyholder’s business, after a thorough investigation of the claims made. The reimbursement amount will not, under any circumstance, exceed the proclaimed limit stated in the policy.
Business Interruption Insurance During COVID-19 Crisis
As mentioned previously, a standard Business Interruption Insurance policy doesn’t normally cover pandemics like COVID-19. This has raised questions among many businesses who have been a severe victim of the crisis and have lost a good market share. Also, some of the all-risk insurance plans, too, have special exclusions for losses caused as a result of pandemic outbreaks of viruses or bacteria.
Further viruses don’t really break or cause physical harm to any business property. According to Michael Menapace, the virus “leaves no visible imprint”, as compared to natural or man-made disasters like fire or wind. He further states that a pandemic cannot survive for long and after it is gone, the business property is “as good as before”.
Recently, some states in the US, including Massachusetts, Louisiana, New York, Michigan, New Jersey, Ohio, Washington, D.C., and others, have come forward to introduce bills for covering business losses that occurred due to the coronavirus crisis.
As per the reports of FAIR (Future of American Insurance and Reinsurance), only the federal government has the financial power to cover losses and risks caused due to pandemics. To help businesses cope with this, insurers and several state governments have united to form a COVID-19 Business and Employee Continuity and Recovery Fund.
Final Words
In conclusion, make sure that your insurer lures by its promises and do thorough research about them. Also, make sure to read all terms and conditions carefully before signing for any policy. Most insurance policies do cover theft or vandalism, so talk to your Theft/Vandalism Damage Property Claim Lawyer regarding such plans. As for the coronavirus pandemic, states are awaiting confirmation from the government to include in the BI insurance policy all the business losses resulting from the COVID-19 lockdown. More information about here https://louislawgroup.com/miramar-fl/property-claim-lawyer/