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Business Income

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.
Many agents struggle to understand business interruption (BI) insurance, also called business income insurance. This important coverage protects business owners if a covered property loss, or in some cases government shutdown, causes them to close their business and reduces them income. This article covers the basics of BI coverage.
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?
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?
Is the phrase, “…direct physical loss of or damage to…” ambiguous? Plaintiff attorneys are trying to convince courts that it is. Simply, it’s not, and this article explains why.
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.
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.
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 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.
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?'
Plaintiff attorneys think they have figured out a way to squeeze coverage from the business income policy. It’s an interesting attempt, but it's still a “no go.” Hopefully they will keep on trying because it makes for great entertainment.
Learn how to complete the business income worksheet (CP 15 15), a worksheet that has frightened insurance practitioners for decades.
Business income is the most undersold property coverage likely because it is the most misunderstood and scary. In reality, BI is quite once these basic concepts are understood.
During this pandemic panic the most common question asked of agents dozens of times every day, “Does my business income policy cover the shutdown mandated or recommended by the government?” The short answer is, no. But you need more detail than that; so here you go.
Many readers may have heard that the first business income/civil authority lawsuit was filed in New Orleans on March 16, 2020. It’s no surprised it was filed; nor was it a surprise how quickly it was filed. Law360’s insurance writer, Jeff Sistrunk, penned a thought-provoking article on the scientific research that may play a part in the coverage debates certain to follow this case.
During the pandemic panic, one of the most common question received by the VU was, “Does the Business Income policy cover government-mandated shutdowns?' The answer then and the answer now is, no, the business income policy was not designed to cover these types of situations. That’s the short answer, but you probably need the longer answer included in this article.
How is the actual loss of business income deciphered? Both ISO-promulgated business income policies (CP 00 30 and CP 00 32) provide guidance on how the actual loss of business income is calculated.
Even though COVID risks have lessened, this article is still a great primer on extended cusiness income coverage. Following a business-closing loss, insureds suffer two income loss periods. Obviously, income is lost during the period the business is shut down or slowed down because of the property loss. But less obvious is the fact that income is or may continue to be lost AFTER the operations resume.
Massachusetts highest court refuses to expand coverage beyond “DBA” in named insured, resulting in no coverage for $14m consent judgment in April 2022. Read on to learn more.
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.”
Before any insurance policy responds to a claim, the loss must first meet all the requirements of the insuring agreement. The insuring agreement is the broadest the coverage will ever be. If the loss is excluded by the insuring agreement, there is no coverage.
An agent asks: Several of my clients’ have suffered damage as a result of the riots in the area. However, prior to the riots they were already closed as a result of state-wide COVID-19 closures. How will the business income policy respond? Will loss payment be affected by the previous closure order?
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.
Company Bulletin 2020-15 issued June 8, 2020, by the Illinois Department of Insurance (IDOI) threw key provisions of the business income policy out the proverbial window. This article examines how the IDOI addressed the recent riots and how the department expects insurance carriers to respond.
Plaintiff’s attorneys are looking for any and every means possible to trigger business income coverage from COVID-related shutdowns. One method is asserting that the presence of a virus on surfaces is like smoke damage and thus causes property damage. While admirable, this, too, is a fallacious article easily defeated by two loss conditions within the policy.
Some plaintiff attorneys are almost giddy over the fact that several jurisdictions used the term “property damage” in their respective emergency declarations to justify closing “non-essential” businesses. These attorneys are hopeful that such wording gives them the ability to trigger a business income claim.
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.
Several lawsuits have already been filed across the US attempting to prove the business income policy is triggered by the presence of COVID-19 or the government shutdowns as a result of COVID-19. Many, many more are sure to come. Gregory Packaging, Inc. v. Travelers Property and Casualty Company of America is a favorite precedent put forth by these plaintiffs and their lawyers - and every insurance carrier and defense attorney should be happy when this case appears. Why? Gregory Packaging proves or, at the very least, strongly supports the fact that there is ultimately no business income coverage for COVID-19 business closures.
There doesn’t need to be a “pandemic” exclusion in the business income policy. The absence of the word or an exclusion containing the word does not change the facts of coverage.
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?
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?
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?
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?
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.
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?
This question was posted to our 'Ask an Expert' service from a Big 'I' member: 'What is the business Income exposure for a nonprofit 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.
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.
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?
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?
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....
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....
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....
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.
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?
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