What You Need To Know About Business Interruption Claims
A business interruption clause or endorsement is designed to protect the insured for losses of business income it sustains as a result of direct physical loss, damage, or destruction to insured property by a covered peril. Business interruption insurance covers the financial – not material – costs of a temporary shutdown. Property damage is covered by commercial property insurance, which is included in a business owner’s policy.
If your business can’t serve customers, sell products, or work with clients because of property damage, business interruption insurance will help compensate your business for lost revenue. This policy ensures that a temporary shutdown doesn’t become a permanent closure if you don’t have the means to keep your business open.
When Should You File Business Interruption Claims?
- When a devastating event forces your business to close temporarily, you might still have to pay rent or make payments on equipment that you don’t own. Business interruption insurance covers the cost of rental and lease payments while your business isn’t making money.
- If your business is forced to relocate due to a devastating event, business interruption insurance can help cover your moving costs. It can also pay for rent in the new location.
- To retain employees while your business is closed, you’ll have to keep paying them. Business interruption insurance covers the cost of payroll while your business isn’t making revenue. Most business interruption policies cover the cost of up to one year of pay for each employee.
- Even if finances are tight during a temporary shutdown, you’ll still have to meet your quarterly or annual tax obligations. Business interruption insurance ensures that you have the funds to pay the taxes you owe, even if your business is no longer bringing in revenue.
- If your business has loans, you’ll still need to meet your loan obligations when your business isn’t making revenue.
What Are the Limits of Business Interruption Claims?
- Business interruption insurance covers normal expenses during a temporary shutdown. Extra expense coverage pays for expenses above and beyond a business’s normal operating costs. This rider funds “extras” – i.e., non-ordinary operating costs like leasing equipment, paying employees overtime or hiring temporary workers.
- Business interruption insurance only covers losses caused directly by your business’s closure. But your business can suffer indirectly when a company that you depend on shuts down temporarily or permanently.
- Contingent business interruption insurance provides financial assistance when the loss of a primary supplier, partner, or customer affects your ability to do business. As with business interruption insurance, it must be tied to a commercial property claim.
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Florida property insurance claims: the deadlines and the fee cap
- Notice of a claim
- Under Fla. Stat. §627.70132, a property insurance claim or reopened claim is barred unless notice was given to the insurer within 1 year after the date of loss. A supplemental claim is barred unless notice was given within 18 months after the date of loss. — Fla. Stat. §627.70132(2)
- Time to bring a court action
- An action for breach of a property insurance contract must be brought within 5 years, running from the date of loss. This is a separate clock from the notice deadline, and §627.70132(5) states that the notice statute does not affect it. — Fla. Stat. §95.11(2)(e)
- What a public adjuster may charge
- A public adjuster’s compensation is capped at 20 percent of the amount of insurance claim payments or settlements, exclusive of attorney fees and costs, paid to the insured by the insurer. For claims based on events that are the subject of a declaration of a state of emergency by the Governor the cap is 10 percent, and that limit applies to claims made during the year after the declaration of emergency. — Fla. Stat. §626.854(11)(b)
- Which deadline applies to you
- Which of these applies to your claim depends on your policy and your date of loss.
Public Loss Adjusters, LLC — Robert Mack, Florida public adjuster, Lic. #A161638. The review is free and carries no obligation. Call 352-353-4556.
For business losses, see our commercial business interruption claims help.