business income coverage
Property Casualty

B.I. — Two Letters, Multiple Headaches

Rod Miner
Rod Miner
Vice President of Commercial Claims, Property Casualty

In the Property Casualty claim world, B.I. is a costly and often frustrating acronym. It means one of two things.

  • Either “bodily injury,” which are the costs associated with a claimant’s or plaintiff’s injury claim stemming from alleged negligence on a client’s or insured’s part.
  • Or, “business income,” which is the lost revenue and extra expenses incurred in a covered, first-party claim.

For purposes of this blog, I’ll discuss the latter of the two.

When triggered and available, business income coverage is there to pick up what revenue is lost due to covered damages to physical property. Often, extra expenses necessary to avoid or minimize a business income loss are covered as well. Most times, business income is net profits and includes continuing expenses. Remember, this is for the actual lost revenue, not the delayed revenue.

Like any other risk management strategy, thinking ahead and planning accordingly can minimize some of the work, confusion, and headaches in presenting such a claim if a loss were to occur.

Questions to ask yourself, include:

  • What are your business’s estimated annual net profit, revenue, and gross earnings?
  • What are your business’s estimated continuing and non-continuing expenses?
  • What are your business’s catastrophic exposures?
  • Does your business have any indirect exposures, such as damages to a supplier or vendor?
  • Does your business have any ingress/egress exposures?

Holmes Murphy strongly encourages all businesses to have a business continuity plan in place. This should include messaging to the employees, public, and/or investors in the case an event takes place; lining up other facilities to conduct business; and creating an internal team specifically designed to manage such situations.

Once a loss takes place, it’s essential to quickly identify all possible losses, which can include:

  • Loss production, volume, orders, etc.
  • Production inefficiencies and increased production costs
  • Ordinary payroll
  • Extra expenses for maintaining operations

It also encourages teams to quickly decide such things as:

  • Using alternate facilities or outsourcing work
  • Rebuilding exactly as before or improving (or even moving) the impacted facility
  • Repairing or replacing damaged contents
  • Repairing now or later

As your claim advocate, one suggestion we always encourage is having your business designate an Accounting point person to connect with the insurance carrier’s Forensic Accountant as soon as possible. This would help begin building common ground on what is needed and when…as well as the expectations of both parties. It’s not uncommon for larger property losses involving business income to take well more than a year to completely resolve.

Holmes Murphy will be presenting webinars on October 30 and November 8 focusing on how to best plan for a business income loss as well as how to best manage and handle a business income loss. Please look for the UART webinar series invitations soon. We’ve also posted information about this webinar series on the Events page of our website. Be sure to check there for more information and additional events.

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