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Business Income

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.

An Introduction to Business Interruption Insurance

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.

Are Donations Made to Non-Profits Covered in a Business Income Loss?

Business income and extra expense coverage can be difficult claims to handle, and filling out the business income worksheet must be done with care. In this question, an agent asks if donations the non-profit include on their profit & loss statement covered after a loss. Our experts chime in, and this article is worth a read. The insurer’s underwriter also chimes in.

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 the Supposed Ambiguity of “…Direct Physical Loss of or Damage To…”

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.

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?'

Business Income, COVID-19, and Plaintiff Attorneys: They Keep Trying

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.

Business Income: Are You Sure You Protected ALL the Insurable Income?

Learn how to complete the business income worksheet (CP 15 15), a worksheet that has frightened insurance practitioners for decades.

Business Income: The KEY Concepts for Business Income Excellence

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.

Coronavirus (COVID-19): Does Business Income Respond?

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.

Coronavirus 'Civil Authority' Coverage May Hinge on Science

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.

Coronavirus Revisited – Should the Business Income Policy Respond?

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.

Coronavirus: Business Income Losses and a Covered Cause of Loss

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.

COVID-19: Extended Business Income Coverage

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.

DBAs: Back Again, With a Not Necessarily Surprising Decision

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.

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.”

How Business Income Responds to COVID-19 in Under 975 Words

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.

How Does the Business Income Policy Respond to a Concurrent Covered Loss?

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?

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.

Illinois DOI ‘Requests’ Insurers Not Apply Policy Provisions

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.

One (or Two) Key Property Loss Provision(s) Attorneys Keep Forgetting

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.

Property Damage: Is it “Property Damage” Just Because a Jurisdictional Order Uses the Term “Property Damage”?

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.

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.

Unwrapping Gregory Packaging: Proving No Business Income Coverage for COVID-19 Closures

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.

Why “Pandemic” is NOT Excluded in the Business Income Policy

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.

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 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

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.

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 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....

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....

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....

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?