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Challenges Facing Policyholders in the Context of Business Interruption Insurance

Thu Oct 31st, 2019 on     Insurance Law,    

Experienced Insurance Law Attorneys in Miami, FL

Business Interruption (BI) insurance pays out for losses due to certain covered events, typically large-scale disasters, such as floods and fires.  BI coverage is absolutely critical for businesses operating in disaster-prone states like Florida — even where the risk of a natural or manmade disaster is low, however, comprehensive BI insurance coverage can protect you in the wake of an event that might otherwise have the cumulative effect of shuttering or relocating the business itself.

As with all insurance coverage, BI providers are quick to look for “outs” in the policy language (or in the circumstances surrounding the disastrous event) so that they can avoid having to payout, or at the very least, so that they can minimize their expected payout.  This is particularly common in the BI insurance context, however, as the losses tend to be more ambiguous in nature — insurers attempt to gain leverage by underestimating their liabilities whenever possible.

Here at Ver Ploeg & Marino, P.A., we have extensive experience handling BI insurance coverage disputes on behalf of policyholders.  We are detail-oriented litigators who invest significant time and attention towards investigating the circumstances central to the coverage dispute, which gives us a significant edge in the BI insurance context (where the determination of a business interruption loss demands a comprehensive assessment of financial records, tax returns, and projected income).  If you’d like to learn more about your case and what the next steps might be, we encourage you to contact us to schedule a consultation with one of our Miami insurance law attorneys.

As you explore your various legal options, you may be wondering what sort of unique challenges you’re likely to face.  Let’s take a brief look at some issues typically encountered in the BI insurance coverage context.

Contingent Business Interruption Issues

If your BI policy includes a contingent interruption provision, then it may provide coverage in the event that a covered event (i.e., fire, flood, hurricane, etc.) impacts your business indirectly via related entities, such as suppliers.

For example, suppose that your business is far enough away from the hurricane strike zone that your properties are unaffected by the disaster.  You could still be affected significantly by the hurricane if one of your suppliers is unable to fulfill an order due to their facilities having been hit by the storm.  Contingent interruption provisions entitle the policyholder to a payout in such circumstances.

Insurers often minimize their liabilities in BI coverage disputes (centering around a contingent supplier) by virtue of the evidentiary difficulties inherent to contingent interruption claims.  As detailed information on the affected third-party is necessary, the insurer may delay, deny, and otherwise undermine your claim on the basis of inadequate evidence.

Broad Categorical Exclusions

Many BI policies are narrowly drafted, with broad coverage exclusions for various disaster categories.  Some may only provide coverage for natural disasters, and not man-made disasters, for example.  This can lead to serious challenges later on — for example, a city-wide fire that starts in a home might be construed as man-made, whereas a fire that starts in the woods due to a lightning strike would be construed as natural.

It’s important to fully understand the exclusions applicable to your BI policy before you purchase, and to routinely assess coverage over time (as you renew the policy).  Of course, it’s not always possible to properly evaluate coverage if the exclusion is written ambiguously, and worse, insurers often write ambiguous exclusions so as to entice prospective customers to sign onto BI policies.

Assessing the Business Value of a Property

When assessing property value in the BI context, it’s important to fully evaluate the real-world value of the property with respect to your business operations.  For example, your small manufacturing facility property may be worth $1M in terms of its land sale value, but if its destruction would prevent you from manufacturing a particular line of products (and your revenues through the sale of that line of products is $5M annually), then the property’s actual value is closer to $5M in the BI claim context.  If the property is functionally damaged such that you have to terminate operations there, at least temporarily, then that associated operational loss must be factored in.

New Market Conditions

Some BI policies include provisions that account for new, changing market conditions in the wake of a disaster.  Insurers may feel comfortable including such provisions because it is quite difficult to “prove” that market conditions have changed in the wake of a disaster.  Typically, market conditions change only on a local basis, and that too after a significant disaster.

Suppose that you run a small retail store that is visited mostly by residents of a few neighborhoods in the city.  Some of those neighborhoods are destroyed by the flood, causing economic havoc in the community and damage to road infrastructure leading from those neighborhoods to your store.  As such, the market for your business has fundamentally changed, and you could ostensibly measure and argue for damages on that basis.

Contact Ver Ploeg & Marino, P.A. for Legal Assistance

Here at Ver Ploeg & Marino, P.A., our team of experienced Miami insurance law attorneys has spent decades representing policyholders in disputes with their insurance providers, including disputes that center around BI coverage.

We are a results-oriented firm, and as such, we engage all necessary resources to effectively advocate on behalf of our client.  We thoroughly prepare for litigation and work closely with clients so as to identify particularities in their case — this enables us to develop and execute a highly tailored litigation strategy.

Ready to speak to an attorney at our firm?  Contact us to request a consultation.

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