Businesses Could Have Interruption Claims Due to Hurricanes Harvey and Irma
Many businesses in Missouri and elsewhere will see increased costs and lower profits because of the damage caused by Hurricane Harvey in Texas and surrounding states and the impact of Irma on other states.
Insurance policies may provide businesses with loss of profits coverage, or business interruption, even if their properties are not damaged by the storm.
Do you have grounds for a business interruption insurance claim?
A business can experience contingent business interruption even without a physical location in Texas, Louisiana or other states affected by the hurricanes. Reasons for contingent business interruption include not being able to travel to the impacted area, not being able to ship goods from the area, not being able to receive materials from the area to make goods, as well as many others that cause lost profits.
If a business has a physical location in the damaged area but no physical damage to the property, it could still have a contingent business interruption claim if profits are lower because of the widespread damages in Texas, Louisiana and other states.
If a business does experience actual physical harm to a property, the business will probably also experience business interruption and loss of profits aside from the actual damage. For example, a company experienced damage to one-quarter of its building from a natural disaster in the Midwest but did not file a business interruption claim because the company was able to get right back into business.
The staff worked overtime and extra people were scheduled, but the sales did not meet expectations for a month after the disaster. An independent insurance consultant pointed out that this was a business interruption loss and suggested filing a claim. By going through the claim presentation, the company collected $175,000.
In another instance, a business suffered significant damage to its building that forced it to shut down for several months. It filed a business interruption insurance claim for $250,000, which the insurance company was stalling to pay out. Through working with an attorney and a valuation specialist, the company discovered additional lost profits the company’s executives had not initially calculated. This included how the business would have continued to grow “but for” the damage to its building.
By taking into account the “but for” scenario, the calculated loss increased significantly. The business realized a $2.5 million claim in the end.
Does your insurance policy cover floods and physical property damage?
Businesses in the hurricanes’ paths that experience physical damage to their property might have a property policy that covers floods, but not all polices are created equal. Additionally, organizing the necessary information needed to value an insurance claim is time-consuming — during an already stressful time.
Most insurance policies have a provision that the insurance company will pay for some or all of the fees for an independent firm to help organize and value a physical damage claim.