Business Interruption Insurance Expert Witness


All industries are exposed to Business Interruption – Business Income – (“BI”) losses. In simple terms Business Interruption can be viewed as “disability” coverage when physical damage (fire, windstorm, flood) to its facilities results in interruption of normal business operations. BI coverage provides funds to replace “Net Income, and Continuing normal operating expenses, including payroll” (e.g. – profits, payroll, loan payments) during the business interruption. Extra Expense (“EE”) coverage is intended to pay for “[extra] expense during the “period of restoration”” The basic idea is to “minimize the suspension of operations” (e.g. – relocation, expedited freight, overtime, additional loan interest). BI/EE is sometimes referred to as Time Element coverage because it covers losses for the period of time required to resume normal operations.
BI/EE insurance policy forms and/or endorsements can be structured to insure claims resulting from:
- Loss of Rents
- Off-premises utilities
- Dependent properties
- Extended Period of Indemnity
- Equipment breakdown / Food Contamination
- Builders Risk soft costs
Customized policy forms may be required for BI/EE loss exposures such as Electronic media (Computers), International operations, Food Borne Illness, Dependent properties, and Seasonal variation.
BI/EE coverage is based on “forward looking” financial assumptions, projections and estimates at policy inception. Partly because of this claims can be among the most difficult to settle. What would the Profit and Loss statement show had the loss not occurred? What is a reasonable “period of restoration”? How did a given “extra expense” item serve to minimize the business interruption?
Call (817) 980-4897 to discuss your case.
Since Property Insurance policies typically exclude Business Interruption and Extra Expense, coverage is added by endorsement or written separately. Policyholders might consider:
- How do we calculate adequate limits of insurance for BI/EE?
- Have we completed a Business Income Worksheet?
- Where does the money come from to pay ongoing bills after a fire shuts down the business?
- How long can we survive a Business Interruption before we are out of business?
- Do we need an Extended Period of Indemnity?
- How long can we survive on reduced income of 25%? 50%? How long with NO income?
- What 'Extra Expenses' will we have? How will we pay those 'Extra Expenses'?
A relatively small $20,000 fire loss can result in a catastrophic $500,000 BI/EE claim. Without adequate “BI/EE” insurance, the majority of businesses fail to survive an extended period of Business Interruption.
Successful resolution of BI/EE claims depends on:
- Properly structured BI/EE coverage forms and adequate limits of insurance.
- Carriers are obligated to investigate and attempt settlement of the claim in reasonable fashion.
- Policyholders are obligated to make efforts to resume operations as soon as soon as practical.
Various tools and methods are available to document the claim, calculate amount of loss and expedite claim settlement:
- Business Income Worksheets
- Rent rolls pre-loss
- Segregated accounting for pre-loss and post-loss expenses.
- Specialized BI/EE accountants familiar with the nuances of BI/EE may be engaged by policyholder and/or carrier.
- Hard-to-value items may be negotiated in good faith between the policyholder and carrier.
Mr. Daniel has dealt with BI/EE insurance from initial coverage design through final claim settlement. As an agent his experience includes advising clients with BI/EE coverage structure and claims. As an insurance expert witness he has been engaged on various BI/EE issues and negotiated BI/EE claims with carriers.
Mr. Daniel offers decades of experience with Business Income and Extra Expense coverage structure; representative client industries included:
- Manufacturers
- Retailers / Wholesalers
- Contractors
- Property owners
- Importers / Exporters.
He is frequently engaged as an insurance expert witness (see “Cases”) to provide analysis and opinions on various BI/EE coverage and claims issues related to:
- Business Income Worksheets
- Loss of Rents
- Agreed Value
- Off-Premises Utilities
- Extended Period of Indemnity
- Dependent Properties
- Ordinance or Law
- Computers / Electronic Equipment / Media
- Builder's Risk “soft costs”
- Inland Marine / Ocean Marine
- Boiler & Machinery / Equipment Breakdown
- Coinsurance / Agreed Value
- Business Owners policies