While business interruption claims are not new, recent events mean they are top of mind now more than ever. In addition to losing income from tornadoes and other weather disasters, many companies are experiencing widespread business interruption from the COVID-19 pandemic. As a result, businesses are increasingly asking whether they can leverage business interruption insurance to make a claim.

How does a business interruption insurance policy work?

For business interruption insurance coverage to begin under most policies, the business must experience physical loss, or the damage must generally occur on the insured’s premises. Business interruption extensions such as contingent business income, ingress/egress, loss of attraction and even civil authority claims all require physical loss or damage by a covered peril.

Many property policies are subject to exclusions for pathogenic organisms, viruses, and disease- or illness-causing agents, so a careful review of the policy is prudent.

LBMC partners with attorneys in three ways as part of the filing process.

Quantify lost business revenue.

If a client plans to make a claim, make sure the claimant can accurately quantify lost business profits and revenue. Consult an expert who can calculate and validate the financial impact and provide a precise number that can withstand external review. An expert can effectively substantiate the claim based on data analysis and insights.

Partner with the insurance company to address the specific claim.

As you work with a client to evaluate the legitimacy of a potential claim, leverage an expert to work with the insurance company. Forensic accountants are well-versed in business interruption insurance claims and can help you simplify the calculation and presentation for your client. An expert who is experienced in research and financial analysis can confirm whether a client’s claim is reasonable.

Provide litigation support and expert witness testimony.

In the event a client pursues a claim and it is litigated, an expert can provide litigation support and expert witness testimony. A forensic accountant can be an extremely valuable asset as an expert witness in a deposition, mediation or trial.

As businesses continue to experience financial strain from the COVID-19 pandemic, the number of business interruption insurance claims is likely to increase. Make sure you partner with experts who can sort through the nuances and help yield a successful result.

Contact us.

Chris Lovin is Shareholder and Practice Leader of LBMC’s Valuation and Litigation Support Services team. He can be reached at clovin@lbmc.com.

Lee Tabor is Senior Manager in LBMC’s Valuation and Litigation Support Services team. He can be reached at ltabor@lbmc.com.