18 October 2024 Business interruption can occur at any time as a result of many unforeseen circumstances including flood, fire, storm, infectious disease and cyber-attacks. Where does a business owner start when they suffer from a significant event which causes financial losses?
The initial shock of the incident can be difficult to get over but steps to mitigate the loss or further loss should be taken as quickly as possible. This could include moving undamaged stock or contents, business equipment or plant and machinery but of course, this should only be done if it is safe to do so.
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Begin Making a Business Interruption Claim
Once the initial clean-up or mitigation is over thoughts can move to initiating a claim. The starting point is the policy schedule and policy documents as ultimately these confirm the cover provided. Also included in these documents will be the level of cover that your insurer will provide.
Once you have your policy to hand, it’s time to call the insurer and notify them of the claim. The information you provide at this stage will help the insurer triage your claim and assign it to the relevant teams.
Making a business interruption claim can be a lengthy and complicated process but the sooner a business takes action the sooner that the business will be back to trading at pre-loss levels. Increased cost of working or additional increased cost of working cover are very helpful additional covers to have on your business policy.
If you have either of these additional covers it usually allows for initial spending (such as temporary working facilities or even moving premises) to help limit or reduce future business interruption losses.
Other important information that is likely to be needed early in the claim process is the lease agreement if you occupy the premises as a tenant. The lease would identify whether you or your landlord are responsible for certain damaged items.
Find out why business interruption insurance is essential for your company
Evidence the Loss
Attention would naturally move to evidencing the losses to the business and presenting these losses to the insurer. Typically, this begins with reviewing and considering company accounts, P&L, management accounts and sales information. When using the loss of gross profit or loss of revenue calculation you will need to maintain your P&L following the date of the incident so any savings can be identified.
Savings are “any usual expenses that are no longer incurred as a direct result of the insured peril”.
The main savings that can be applied when making a business interruption claim include: –
- Rent
- Staff salaries/wages
- Loan payments
- Utilities (gas, water or electric)
More savings can often be applied to the business interruption claim calculation and they can have a significant effect on the overall amount a business receives back from the insurer.
Savings are deducted from the loss of gross profit after the rate of gross profit percentage has been applied to give the loss of revenue or loss of gross profit. It is usually calculated on a monthly basis and multiplied by the loss period.
Indemnity Period when Making a Business Interruption Claim
Most business insurance policies provide a 12- or 24-month indemnity period which is the maximum length of time that a business interruption claim can go on for. An insurance professional will assist in creating a loss calculation specific for your business and requesting interim payments throughout the claim to assist with the business’s cash flow through the claim process.
Seek Independent Advice
With the complicated nature of making a business interruption claim it is always advisable to obtain your own independent advice or assistance, such as a Loss Assessor.
There may be other associated losses such as stock, contents, and business contents (plant and machinery). These typically fall into two categories – restorable or beyond economic repair. Listing, evidencing and pricing can be overwhelming and difficult but it’s essential if you are to agree the value of the claim with your insurer for these items. You may be required to provide a Value at Risk of all contents, stock or plant and machinery and this is usually done on a “new for old basis”.
Once the business is trading to a pre-loss level, or the indemnity period concludes, the insurer will close their claim and ultimately this should mean the business is no worse off than it would have been had the incident not occurred. The ultimate goal when making a claim for business interruption and other associated losses.
If your business has suffered from an insured peril and is suffering from business interruption or other associated losses, then please call 0808 161 7021 or send an enquiry to claims@majorloss.com. One of our experienced members of staff will be happy to assist.
Find out more about how Major Loss can help with you business interruption claim