Damage to a business—whether because of a major storm, bad fire, or other natural disaster—can cause serious problems. Not only is rebuilding often costly, but the company may be required to temporarily suspend or at least dramatically cut back operations. As a consequence, the business can sustain additional losses. Business interruption insurance is a type of coverage that companies can use to address this risk. At Insurance Claim HQ, we have deep experience helping clients navigate business interruption claims. Here, our New Orleans business interruption attorney provides an overview of the best practices for a successful business interruption claim.
What are Business Interruption Insurance Claims?
The National Association of Insurance Commissioners (NAIC) explains that business interruption insurance is a type of coverage that covers operating expenses and lost income for a company that has to scale back or suspend operations due to a covered event. Common causes include natural disasters, fires, or government-mandated closures. To file a claim, businesses must demonstrate the cause of interruption, the financial impact, and compliance with the specific policy terms. Here are some hypothetical examples of business interruption claims:
- Hurricane Damage to a Restaurant: Imagine that a popular Creole restaurant in the French Quarter suffers severe damage after a hurricane floods the building. The business is then forced to close for repairs. It suffers serious lost revenue. The restaurant may file a business interruption claim to cover lost income and ongoing overhead expenses like rent.
- Fire Damage to a Boutique Hotel: Another example of a business interruption claim would be a boutique hotel near the Garden District of New Orleans experiencing a fire in its kitchen. It could be forced to shut down for extensive repairs. The hotel owner may file a business interruption claim to recover lost bookings and other costs.
- Government-Mandated Closure of a Jazz Club: Finally, imagine that a well-known jazz club on Bourbon Street is forced to close due to a citywide emergency order following a public security threat. If the shutdown is required by a government order, it may be covered under a business interruption policy. It should be noted that some business interruption policies do not provide coverage for government-mandated closures.
Documenting Your Losses is a Must (How to Do It)
Here is the most important thing that business owners should know about business interruption claims: Proper documentation is essential. Unfortunately, insurance companies can be challenging to work with in these cases. Without clear, comprehensive records, insurers may undervalue or even outright deny your claim. As a business owner, you should start by gathering financial records that show your typical revenue and expenses before the disruption. Some common examples of relevant business records include:
- Tax returns
- Profit and loss (P&L) statements
- Sales records
- Payroll documents
- Other overhead expenses
Beyond commercial records related to costs/losses, businesses should also keep detailed records of the event that caused the disruption. If a hurricane, fire, or government order forces your business to close, it is imperative that you get as much relevant information as possible about that covered peril. You should obtain reports, photos, repair estimates, and any official notices. Once a covered peril happens, business owners should track all extra expenses incurred due to the interruption.
Best Practices for a Business Insurance Interruption Case
1. Make Sure You Understand the Scope of Your Business Interruption Coverage
As a starting point, it is imperative that businesses understand the business interruption coverage that is actually offered by their policy. You do not want to be surprised about any limitations in your coverage. Before filing a business interruption claim, a business owner should carefully review their insurance policy to understand what is covered and any exclusions that may apply. Remember, these policies vary fairly widely in the application. Some key terms to look for include:
- The covered loss period
- Limits on reimbursement
- Whether extra expenses—such as temporary relocation costs—are included
- Pay close attention to any policy exclusions.
2. Notify Your Insurance Company that Operations are Disrupted
A proactive approach is key for business interruption claims. You do not want to fall behind in the insurance claim process. As soon as your business is interrupted, you should notify your insurance provider in writing. Most policies require prompt reporting—and that is a big responsibility that all business owners should be aware of at the outset of the claims process. Any delays in reporting could potentially impact your claim. Business owners should be ready to provide a clear and detailed account of what happened, including:
- When the disruption began
- What was the cause
- What is the expected impact on operations?
Business Interruption Insurance Tip: If your policy requires a specific timeframe for filing a claim, ensure compliance.
3. Take Pictures of All Physical Damage to Your Business
If your business has suffered physical damage, taking comprehensive photographs and videos is crucial for your insurance claim. Capture wide-angle images of the affected areas, as well as close-ups that highlight specific damage, such as broken equipment, structural issues, or water intrusion. Photograph both interior and exterior damage, including signage, inventory, and office spaces. If your business was impacted by a natural disaster, document debris, flooding, or smoke damage. While the business interruption claim itself is not about the actual physical damage, you will need to prove the existence and cause of the physical damage to get coverage.
Business Interruption Insurance Tip: You should be prepared for an insurance company to carefully evaluate your claim to see if the damage was caused by a covered peril. Make sure you have as much documentation as possible related to the cause of the physical damage.
4. Carefully Document Losses Related to Disrupted/Suspended Operations
Finally, business owners should carefully and comprehensively document all losses that are related to the disrupted or outright suspended operations. You should gather tax records, profit and loss statements, payroll documents, and sales reports to demonstrate lost income. If customers cancel orders or reservations, you should retain documentation of those cancellations.
Beyond that, business owners should track additional expenses, such as renting temporary workspace, outsourcing services, or other costs. Use spreadsheets or accounting software to categorize losses. The more evidence you have of the losses, the better positioned you will be to maximize your financial benefits.
Business Interruption Insurance Tip: You should keep receipts for every expense. If your insurer disputes the extent of your losses, detailed records will be essential for establishing your claim.
We Help Clients Build a Strong Business Interruption Claim
Business interruption claims are notoriously complex. If you are preparing to file for business interruption coverage or if you have already filed and had your claim denied, professional guidance and support can make the difference. At Insurance Claim HQ, we have deep experience working with businesses and organizations. With a proven record of case results in high-stakes claims, our attorneys know how to hold insurance companies accountable. You can set up a free, no-obligation consultation with our top New Orleans business interruption claims attorney today.
Contact Our New Orleans Business Interruption Attorneys Today
At Insurance Claim HQ, our New Orleans business interruption lawyers are standing by, ready to help you get benefits. If you have any questions or concerns about a business interruption claim, please do not hesitate to contact us today for a free, no-strings-attached case review. We handle business interruption claims in New Orleans and throughout the entire Gulf Coast region.
