Business Interruption & Income Coverage

Recently, a debate amongst insurance carriers, insurance departments, and the government emerged. Each of these parties is attempting to resolve the effects of the pandemic on businesses and the application of business interruption coverage. This coverage helps replace income when your business is temporarily shut down following a covered loss, like fire or water damage. This coverage is included in a commercial property policy. For each business, determining the amount lost from the loss depends on business type, duration of the closure, location, etc. To ensure that an insured (the policyholder) is compensated for the loss of income due to a claim, carriers offer business interruption or business income coverage. The majority of carriers do not offer a specific limit for this coverage but offer on the actual loss sustained (ALS) for 12 months following the claim.

Be assured that each carrier works directly with the insured to determine the amount of income lost through reviewing business financials and industry information. At Northgate, there have been claims that have resulted in coverage for business interruption. This coverage is meant to sustain business in the short term.

The reason for the debate involves the various government mandates and shutdowns due to the COVID pandemic. The most affected include food service, hospitality, retail, etc. Depending on the policy wording, coverage may be excluded. Businessowners argue that coverage should be afforded because businesses are not-at-fault and are suffering from the closures. Shortly after the pandemic began, several states suggested that the insurance carriers provide coverage for business interruption due to the pandemic. Some states reached out to businesses and encouraged business owners to file insurance claims. In response, insurance carriers began to push back against the states for insufficient data. Insurance carriers use actuaries to determine costs and risk, and without the supporting data, these carriers are not able to appropriately evaluate the risk.

As the debate continued, the federal government offered additional options to help businesses sustain themselves as the pandemic continued. Although many were able to obtain assistance, several businesses were unable to overcome the challenges of the pandemic.

As you move forward in business, please ensure that you have business interruption coverage. Ask questions about coverage, and make sure you get an answer. If you need any assistance, please contact Northgate. We want to make sure that you are covered.