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Understanding Business Interruption Claims

Many Florida companies carry business interruption insurance in addition to their general property insurance coverage. While traditional property insurance will typically only cover damage that is caused to the premises of a business, a business interruption policy will protect a business from business losses sustained as a result of that property damage. After all, sustaining significant property damage may result in a business losing the ability to operate at full capacity for quite some time. Major financial losses can be sustained during this period. Because business interruption claims are notoriously complex, it is important that policyholders understand how to file an effective claim and how to protect their legal rights.

The Three Types of Business Interruption Coverage

In general, a company’s business interruption policy will cover one, or all, of the following three types of business losses:

  • Direct interruption: This type of coverage will cover losses that stem directly from the property damage. For example, if you own a restaurant in Fort Lauderdale, and property damage forced you to shut down operation for three weeks, any direct lost income sustained during that three week period will be covered under this policy.
  • Extended interruption: Extended coverage provides an added level of protection. This is because in many cases a business suffers losses even after the damage is repaired and operation is resumed. An extended interruption policy will cover income lost during the period after the business re-opens, but before income returns to pre-damage levels.
  • Contingent interruption: Finally, some Florida businesses may also desire coverage for losses caused by damage to suppliers or consumers. Damage to either could potentially result in substantial lost income for a business.

How are Business Interruption Losses Calculated?

Business interruption claims frequently lead to disputes over the precise value of the damages. This is because it can be difficult to accurately calculate a company’s interruption related losses. Under Florida law, insurance companies have a duty to act in good faith. Unfortunately, insurance companies sometimes take advantage of the murkiness of lost income calculations and offer impacted businesses unfair settlements. On the surface, the calculation of business interruption losses is rather simple. The value of the damages should equal the amount of income that was lost due to interruption caused by property damage. This can be determined by looking at the time the business was closed and the amount of sales that would have otherwise occurred during that period. However, this clearly requires using projected future income forecasts. Disputes can arise over what constitutes a fair projection of lost business income. Affected businesses must begin assembling evidence that supports their projections as soon as possible after property damage is sustained. You can be sure that the insurance company will take a very critical look at any projected income estimates.

Contact Our Office Today

Your business deserves recovery for the full extent of your covered property damage, this include fair recovery for any business interruption damages. If you are unsatisfied with your current offer from the insurance company, or if your claim has been denied, the experienced attorneys at Geyer Fuxa Tyler can help. Please contact our Sunrise, Florida office today to schedule a free review of your business interruption claim.

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