There are so many moving parts in a successful business organization that it is frankly impossible for even the most competent and experienced professional to appropriately address them all. Many entrepreneurs and executives invest in multiple kinds of outside help, including insurance coverage to limit a company’s liability and protect it from the unforeseen.
Business interruption insurance is one of the most valuable forms of coverage when it becomes necessary. Although most business owners and executives never need to make a claim against such coverage, those who become unable to operate their business and qualifying circumstances could benefit from investing in the right policy before things go wrong.
Business interruption insurance usually only applies under very limited circumstances. What is the typical standard for claims against business interruption coverage?
There must be damage to the premises or near the nearby area
Businesses may temporarily close for all kinds of reasons. The owner falling ill might force them to shut down the company if there is no one to take over their role. A lack of available employees or a supply chain disruption could also potentially force a company to cease operating temporarily. Of course, when a company shuts down due to unpredictable operational challenges, it will still continue to accrue expenses. From salary obligations to rent for physical locations, there will be costs that the company still has to cover even when it cannot open its doors to the public. Business interruption insurance can help cover everything from lost profits to employee-related obligations, but typically only if there is an issue with the business’s facilities.
The average policy requires that the business suffer some kind of physical damage, such as the destruction of part of the premises due to a fire or criminal activity. Policies can also provide coverage if there was damage to another business or building nearby that inspires local authorities to close down a commercial district or a street pending the completion of repairs. In most cases, unless there are issues with the physical premises itself or access to the space, business interruption insurance will not cover a company’s operating expenses. Even when the circumstances meet the criteria for a valid claim, business owners and executives may find themselves fighting an uphill battle with the insurance company.
Making sense of policy documents and basic coverage rules can help people determine whether or not an insurance company may have acted in bad faith and if there is a possibility of appealing a denied claim.