In rebuilding after a devastating commercial property loss, the last thing any responsible business owner wants to expend their valuable time and energy doing is arguing with their insurer.
Unfortunately, when it comes to determining the length of vital business interruption coverage, this is all too often the case.
The trouble arises when insurers fail to uphold their end of the bargain. In the interest of reducing costs, the insurer misrepresents the methods by which business interruption coverage is calculated. Often, repairs or reconstruction have been delayed because of inactivity or inattention to the claim on the part of the insurer.
Requests for work approvals may not have been responded to promptly or sufficient money advances may not have been issued to pay contractors. The blame for these delays is wrongly placed on the policyholder, and the insurer refuses to extend the business interruption coverage. Fortunately for those insured, there is recourse. The correct method for calculating this type of coverage is well established and backed up by nearly a century of case law.
By understanding how it applies to the following common scenarios, you can better determine if your insurer is giving you everything you’re entitled to.
After a loss, most often a property will be repaired or rebuilt. When this is the case, the correct starting point for determining the period of business interruption coverage is the actual time it took to complete the work, including any delays. At this point, if the insurer believes the delays were the result of any lack of diligence or inaction on the part of the insured, the burden of proof falls to them.
Contrary to what insurers often insist, the coverage in this scenario is not determined by a theoretical estimate of the repair timetable, almost as it might exist “in a perfect world.” Common sense would dictate that most construction projects are subject to some form of delay, especially in the wake of a natural disaster, when material and labor shortages may be a factor.
…Or Not to Repair.
In some cases, a property may be sold after a loss, it may be condemned, or rebuilding may occur elsewhere. In these instances, a theoretical approach is necessary in order to calculate business interruption coverage. Even so, courts have previously ruled that in calculating the purely theoretical length of coverage, typical construction delays should be factored in. Even though this method of calculating coverage is speculative in nature, the correct application takes into account realistic contingencies and circumstances.
Another common source of contention over a claim of this type occurs when a delay is caused by neither the insurer nor the policyholder, but by the actions of a third party. Typical examples include contractors, subcontractors, landlords, and building code or other regulatory officials. Also, as stated above, in the wake of a natural disaster, the labor market in a given area may not be able to supply sufficient skilled building trades-people to complete work in the amount of time expected under normal conditions.
In these instances, though the delay is not the fault of the insurer, the language of the policy dictates that they are responsible for continuing business interruption coverage. Again, insurers may attempt to approach the issue in an entirely “theoretical” manner, but this is contrary to correct procedure and legal precedent. The coverage afforded to the insured should not be adversely impacted.
Facing the challenge of rebuilding your business after a disaster is tough enough. When progress is impeded because your insurance provider isn’t dealing with you fairly and honestly, you need someone with experience on your side to help fight for your best interests. Our expert public adjusters have years of experience in successfully negotiating business interruption claims and getting our clients what they deserve. Contact us today.
Have questions about your property insurance claim? Feel free to contact Stark Loss for more information about how a Public Adjuster can help.