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Business owners often purchase business interruption insurance to protect them and their business from unexpected events, such as natural disasters and other catastrophes. With the ongoing coronavirus pandemic, as well as wildfires, floods and other weather events affecting everyday life, many business owners find themselves in the position to make a business interruption insurance claim. Read on to learn more about filing a business interruption claim letter with an insurer.
What is Business Interruption?
Business interruption refers to business losses experienced due to unforeseen events, like floods, earthquakes, fires, and other natural disasters. Insurance companies sell policies that are meant to protect businesses from these losses.
Business interruption insurance should cover “losses caused by the perils listed in your policy,” according to the Insurance Bureau of Canada’s website. Losses can include physical damages, payroll and revenue losses, supply chain losses, and loan payment losses. In addition, the Bureau says that business interruption insurance coverage may also cover fixed costs, relocation, and other costs due to the unexpected event.
Variety of Business Interruption Insurance Policies
There are several types of insurance policies business owners can purchase to help cover business interruption losses. Generally, there are two types of policies: limited indemnity policies and extended business interruption insurance.
Under a limited indemnity policy, insurance companies will pay claims for damage caused by the event until the damage is repaired or replaced and may also pay for lost earnings. The Insurance Bureau of Canada warns that these policies may stop paying out before the business returns to its pre-disaster income levels.
Extended business interruption insurance policies are usually more expensive than limited indemnity policies, but provide more coverage. Under extended policies, businesses may be able to recover lost profits and earnings until the business returns to its pre-disaster income levels.
Experts also note that business interruption insurance policies are subject to indemnity periods. Indemnity periods generally begin on the date of the event that caused the business interruption and ends when the company is back in business.
Business Interruption Insurance Providers
There are a number of insurance companies that offer business interruption policies in Canada, including:
- Aviva Insurance Company
- Continental Casualty Company
- DesJardins General Insurance Services, Inc.
- Economical Mutual Insurance Company
- Gore Mutual Insurance Company
- Intact Insurance Company
- Lloyd’s Canada
- Northbridge General Insurance Company
- Novex Insurance Company
- Royal & Sun Alliance Insurance Company of Canada
- Travelers Insurance Company of Canada
- TD General Insurance Company
- The Wawanesa Mutual Insurance Company
- Wynward Insurance Group
How to File a Business Interruption Claim
Business owners should refer to their policy for exact instructions about how to file a business interruption claim, but should keep in mind a few factors that may help.
Experts say that a complete and accurate business interruption claim letter is essential. A business interruption claim letter should include the following:
- A cover letter describing the business, business location, details of the damage, current operations, the impact of the natural disaster or other event, and a timeline of events
- A calculation of business losses
- Documentation that supports the business loss calculations
Presenting a business interruption claim well is key. Insurance experts point out that, in the event of a natural disaster or other event leading to business interruption, insurance companies are likely inundated with business interruption claims. Having claim documentation that is clear and concise will help them process the claim quickly and accurately, as well as hopefully with a payout.
Claims should also be simple. Experts say that business interruption claim letters do not need to include detailed information about prior financials, estimated losses, and other information that is not yet clear.
In addition, the cause of the business loss should be accurate. For example, instead of referencing COVID-19 or the coronavirus, experts recommend indicating the cause of the business interruption was government orders requiring the business to close.
Experts also recommend having an accountant review the business interruption claim letter. If possible, the review should be conducted by a forensic accountant who is independent from the business. Further, insurance brokers should be contacted in the event of a business interruption insurance claim. A lawyer can also help you through the entire process.
What if My Business Interruption Claim is Denied?
Many businesses are finding that their business interruption loss claims due to government mandated shutdowns due to coronavirus have been denied. Often, the insurance companies say that a business interruption insurance claim requires a physical loss, such as damage to a building.
Businesses are fighting back, however, noting that the plain language of their business interruption insurance policies appears to cover losses due to COVID-19 restrictions. Several class action lawsuits have been filed in Canada over these claims and the courts have yet to rule on the issue.
Experts recommend making a business interruption claim in the event of a closure due to a natural disaster or other unforeseen event, being sure to include a clear and concise business interruption claim letter. In the event of a denial, business owners can appeal the decision.
An experienced business interruption insurance lawyer can help at all stages of the claim process, from ensuring the initial claim letter is as strong as possible, to helping throughout the internal appeals process and, if necessary, taking the insurance company to court. Submit your information on this page for a free case review by an experienced lawyer.
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