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Alternatives to Business Income Coinsurance
Non-BOP business income coverage is written on a coinsurance basis; however, some agents are afraid of coinsurance for a couple reason: 1) they don’t know how to develop the proper coinsurance percentage; and 2) they don’t want to explain the CP 15 15 Business Income Report and Worksheet. Well, there are three alternatives to coinsurance agents can use. One doesn’t save the agent from having to explain the worksheet, and two may not indemnify the insured – but agents do have alternatives. All three are touched on in this article.
Business Income – Coverage for Employee Payroll
Is employee payroll covered by the business income policy? One part of the contract seems to state that only the payroll of employees necessary to resume operations is covered. Is this the correct application of this wording?
Business Income and Specialty Vehicles
An insured veterinarian generates 50-60% of her income from two specially-equipped mobile vet labs she uses on visits to area farms or clients who have acreage and horses. She has a need (as do her clients) for business income coverage if these vehicles are damaged away from the premises. Can this be done within the ISO commercial auto or commercial property programs?
Business Income and Undeclared Buildings
The ISO CP 00 10 has a coverage gap for property in undeclared buildings that does not exist in their BOP. In this article, VU faculty member Mike Edwards explores whether the same CP gap exists for business income coverage.
Business Income Coverage and Hourly Employees
Is the payroll of hourly works compensable under the ISO CP 00 30 business income form? This situation is another variation on a previous VU article about whether a continuing expense is 'necessary,' as required by the ISO CP 00 30. Our consensus continues to be that the INSURED, not the adjuster, is in the best position to determine what expenses are necessary for his or her business continuity.
Business Income Coverage for Auto Damage
For businesses with operations that rely extensively on auto fleets, damage to vehicles can result in significant business income losses. Commercial property forms exclude damage to autos, but do they exclude any resulting business income loss? Read on...
Business Income Policy Has Two “Loss Periods”
Business Income is the most important property coverage. The problem is, some agents only do half the job when protecting the insured’s income loss exposure. There are two loss periods the business income policy needs to cover.
Business Income vs. Manufacturer's Selling Price
An agent asks, 'I'm quoting a tank fabrication operation. They manufacture large metal tanks at their facility, transport the tanks to the customer’s location, and install them. The current agent includes business income coverage, but I think there is still a gap if these very expensive completed tanks are destroyed while still at the insured’s location awaiting transport and installation. Am I right and is there a solution?'
Extended Business Income
A Louisiana agent asks, “I am stumped on a couple of business income issues, and would appreciate your help. First, I’m trying to figure out the difference between Extended Business Income, Extended Period of Indemnity, and Maximum Period of Indemnity. Second, how do all these differ from ‘regular’ Business Income? I realize these are probably pretty basic questions, so my apologies in advance. I am still learning about Business Income.”
I Lost Income Because of _______; Do I Have Coverage?
Business income coverage responds only when certain conditions are met. Simply losing business income is not enough to trigger coverage. This article explores the conditions that must be met using a water contamination incident in Corpus Christi, TX as the backdrop.
Understanding the Difference Between Insurable and Compensable Business Income
Business income coverage is unique because the factors used in calculating the amount of protection the insured is required to purchase differ from the factors used when calculating the amount of compensation owed/paid following a business-closing loss. Because of the different calculation methods, there is a difference between “insurable” business income and “compensable” business income.
Are Mortgage Payments Business Income "Continuing Expenses"?
Here's a recent 'Ask an Expert' question: 'We have a client that carries business income coverage. The question came up if mortgage payments were part of the continuing expenses of an idle business. I seem to recall that I learned somewhere that only the interest part of the monthly payment was a covered expense, not the principal part. I would appreciate any help that you could provide.'
Business Income "WITHOUT" Extra Expense
Following a covered loss, a replacement compressor was rented at the cost of about $100 a day. By the time repairs were made, the insured incurred $6,000 in rental costs. Because of this rental, the insured had no real loss of business income. The adjuster denied the claim for the rental because the insured had purchased the CP 00 32 Business Income (Without Extra Expense) Coverage Form. Is this correct?
Business Income and Additional Insureds
Your insured's bank has asked to be named as an additional insured on their business income coverage. Why? Could be that the insured has a loan or line of credit they want to secure. Could be that they're so used to being named as a mortgagee on the property policy, that this makes sense too. Not to me....
Business Income and Cancellation of Contracts
An entertainment center generates much of its income from the many contracts it has with various groups. If there was a major loss and the groups cancelled their contracts and went to other facilities, would there be any business income coverage?
Business Income and Civil Authority Curfews
An ice and windstorm shut down a 24-hour restaurant due to off-premises power failure. The power was restored fairly quickly but a 6 p.m. to 6 a.m. curfew was imposed on the city. Because of prep and clean-up time, the restaurant could only be open from 8 a.m. to 4 p.m., resulting in a significant business income loss. Is this a covered loss?
Business Income and Ordinance or Law
An apartment building is located in an area where a building ordinance mandates a certain amount of parking space per unit. As a result, if the building was rebuilt at this location, it would have fewer units to allow space for more parking, thus resulting in a loss of rental income. Is there an Ordinance or Law endorsement that can solve this business income problem?
Business Income Basics...Coinsurance Alternatives
Underinsuring property is a problem that can result in a significant coinsurance penalty. However, underinsuring business income is particularly troublesome given that coinsurance penalties can be catastrophic. This is particularly true when a business experiences sales and profits far beyond those anticipated or if the business is new and really doesn't know how it will perform relative to its pro forma budget. Sometimes it's a wise idea to insure the exposure without coinsurance.
Business Income Coverage for Mandatory Hurricane Evacuations
In a number of recent hurricanes, civil authorities ordered mandatory evacuations before the storms made landfall. The ISO Business Income form applies to losses arising from orders of civil authority under certain conditions. The coverage question is whether the storm has to hit first before coverage is triggered. If not, how close to the subject property must there be covered damage?
Business Income Coverage for NonProfits
We recently got this 'Ask an Expert' question from a member: 'What is the business Income exposure for a non-profit organization? We understand the extra expense component but are having trouble with the business income part.' Keep reading to learn that business income is often a LOT more than just lost profit.
Business Income Coverage for Unprofitable Businesses
If a business is operating at a loss, do they need business income coverage? The answer is usually 'yes,' though they may or may not be able to recover from it.
Business Income Coverage for Weather Damage to Golf Course Greens and Trees
High temperatures and drought conditions caused a golf course, despite its mitigation efforts, to lose most of its greens. A severe storm downed dozens and dozens of trees on a golf course. In both situations, business income was reduced or suspended for several months. Is this covered under standard ISO forms?
Business Income Coverage...What Does "Necessary" Mean?
Loss payment under the CP 00 30 business income form includes loss of profits during the 'necessary suspension' of operations, plus 'operating expenses, including payroll expenses, necessary to resume 'operations' with the same quality of service that existed just before the direct physical loss or damage.' What does 'necessary' mean? 'Necessary' from whose perspective...the insured or adjuster?
Business Income Loss Due to Mall Shooting
The tragic December 2007 shooting of innocent shoppers at an Omaha, Nebraska shopping mall brought two quick questions to the VU 'Ask an Expert' service. The entire mall was closed for 2-3 days during the peak holiday season and several stores were closed for two weeks, not reopening until the week prior to Christmas day. Does a business income policy respond to this business interruption?
Claims Adjusting in a Hard Market
Agents who've experienced a hard market know that claims are often scrutinized much closer than they are in a soft market. Unfortunately, there are circumstances that sometimes lead to the denial of claims that are covered regardless of market conditions. Here's an example of what you may be seeing more of in the months to come....
Extra Expense Coverage for an Advertising Campaign
A restaurant is closed for 4 months following a fire loss. The owner believe he needs to initiate a $300,000 advertising campaign to regain lost customers. His limit is adequate, however the adjuster says the CP 00 30 policy only covers 'necessary' expenses that reduce the business income loss. Is this correct? Would a CP 00 50 Extra Expense form be better?
Extra Expense...What Is "Necessary"?
An apartment building suffers a fire loss and the landlord offers tenants vacant apartments in other buildings. In the meantime, he puts them up in local hotels for two nights. Would the hotel cost be covered as an extra expense?
Hurricanes and Business Income
The ISO business income form(s) includes coverage for loss arising out of a civil authority prohibiting access to the insured's premises due to direct damage by a covered peril to property at that location or elsewhere. However, what if the civil authority doesn't specifically prohibit access to the insured's property, but rather to the insured's products? Intrigued? Then keep on reading....
Hurricanes and Commercial Insurance Q&A
Is there any business income coverage for flood losses? Would civil authority coverage apply to business income claims that resulted from the evacuation orders? Based on past hurricanes, what are some of the lesser-known issues that come to the forefront in business income situations? For the answers to these and many other questions, keep reading....
Net Income vs. Continuing Expenses
Business income insurance covers net income and continuing expenses while a business is interrupted due to a covered loss. What if the business would have been operating at a financial loss during this period...does the negative net income reduce the recovery? What if the business was losing more money than its continuing expenses...might it recover NOTHING under its business income coverage? The short answer: 'Yes.' For the long answer, keep reading....
Policy Intent "Suspended"?
Most business income policies provide coverage during a necessary 'suspension' of coverage. At issue is, 'Does 'suspension' require a complete interruption of business, or does it include a slowdown in business while the property is being restored?' In this article, we'll examine this issue from a legal and contractual perspective.
Selling Business Income Insurance
In 2003, Safeco published the results of a survey of small business owners indicating that over half of them do not have business income coverage. Why do so many businesses do without this critical coverage? More important, what can we do about it? In this article, we'll look at some of the reasons why businesses don't buy BI/EE coverage and provide some statistics and sales tips to help you convince them of its importance.
Understanding the Business Income Monthly Limit of Indemnity Option
The ISO Business Income program has a Monthly Limit of Indemnity option that allows the entry of factors of 1/3, 1/4, or 1/6 on the declarations page. Does this mean you have 3, 4, or 6 months worth of coverage? In addition, how does coinsurance work with this option and why is the option even available?