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Business Interruption Insurance

What is business interruption?
Some issues you need to consider when assessing your business interruption loss:

• developing a working relationship with all parties
• the claims process
• anticipating potential contentious areas

What do you do next?
Developing a working relationship with all parties If Fabian has interrupted your business, your company should identify all parties that will be involved in the claim and assign related roles and responsibilities. It is important that the business interruption claim process is a team effort with all players. Internally, your company should appoint a project leader, who can eliminate confusion, errors and conflicting information.
Externally, your company's advisory team should include an accountant, lawyer and your insurance broker. Early agreements as to applicable coverage, loss mitigation, restoration and loss calculations are very valuable to the claim process. Advisory team meetings can help keep everyone on the same page and the recovery process on track. The claims process

1. Review your insurance policies and identify any coverage issues
   The first step in the claims process is to review your insurance policies for business interruption coverage. During this process, you want to identify any coverage issues such as limits, sub limits, deductibles and co-insurance clauses. A key point of interest is to determine if your coverage includes cash advance payments and related requirements. Your policy should outline the time period in which you can make a business interruption claim, as an extension request may be necessary.
2. Documentation of your losses
   The second step is to gather information to support your business interruption claim. You will need to identify and document how all of your operations have been affected by Fabian. It is important to immediately begin to track all extra costs, maintain separate records of accounting files and all communications. Documentation of your losses is important for preparing the filing of your claim. Most insurance companies will require extensive supporting detail in order to process your claim. The level of documentation required is the amount needed to support your loss calculations. There are various methods that you can use to determine the extent of your loss. The objective of the loss calculation is to estimate what your business operation results would have been in the absence of the loss event.
   Documentation that could be helpful to the process includes:
3. Prepare the claim
   The third step is to complete the business interruption claim. This step will require the co-ordination and co-operation of your internal and external advisory team. Frequent communication is key during this process to ensure expectations are clarified and that there are no surprises that could arise if there are inconsistencies between the claim and the insurance coverage.
   • historical financial statements
   • budgets and forecasts
   • actual results during the period of interruption
   • inventory documentation
   • contract documents and letters of intent Potential contentious areas Subjectivity may come into play when dealing with loss projections and anticipating future outcomes. Subjective factors may include:
   • estimate of lost income
   • sales margins and profitability
   • different approaches in claim calculations
   • depreciated value of assets
   • interpretation of insurance coverage
   • overall scope of damage and length of the loss period

The First 30 Days
Right after the loss, there are some things that need immediate attention. Essentially, you should take steps to make sure the loss will not get worse, including the following:

1. Restore sprinkler protection wherever possible;
2. Close up all building openings to protect against vandalism and the elements;
3. Obtain extra security service;
4. Arrange for temporary electric power, if possible;
5. Remove smoke, water, and debris;
6. Protect equipment and goods against moisture both from rain and excessive humidity.

Protection - Protect undamaged property. Segregate damaged from undamaged property and begin salvage operations. Generally, it's best to keep on hand any damaged goods until an insurance adjuster has visited the premises, but if the damaged material is seriously in the way and exposure to the elements won't make things worse, it can be moved outside. In all questions, simply use your judgment as to what you would do if it was your money. No one could ask for a higher standard. Accounting - Begin accounting for damage-related costs. Initially, all hourly labor will probably be directed toward setting things right. Later the insurance company will accept, without question, the first day or two of reasonable payroll expense as chargeable to the property loss. However, special job order numbers should be established as soon as possible along with separate charge codes for purchases and work by contractors. Salvage - Inventory damaged goods. Generally, this is done in conjunction with the adjuster, or the adjuster's salvor if there is any appreciable amount of goods and/or value. This should be a joint effort with your people serving as the experts on whether the items are damaged or not, and handling identification. Sometimes you may have an outlet for "seconds" that can be employed. However, if your company is concerned about damaged merchandise appearing on the market with your name on it, you have the right to have "salvage" stamped on the goods, or have the labels, removed, at your cost. If this would damage the items, or if you don't want them placed up for sale, then you have the option of repurchasing them from the insurers at a negotiated price. Keep in mind that the adjuster disposes the goods through a salvor, who generally receives a 10% commission, plus all labor and expenses.