The “Loss Determination” and “Re-
sumption of Operations” provisions of
of the business income forms will inform
the adjuster of the process of quantifying
the loss. The BP and CP provisions pro-
vide guidance in establishing the insurer’s
obligations as to payment. The following
are comments and some supporting case
law regarding the process:
• Reduce business income loss to the
extent the business can resume opera-
tions. The loss to the insured business
is determined by comparing the actual
income earned and expenses incurred
during the projected period of restora-
tion and the resumption of operations
to the same period assuming there has
been no physical loss or damage that
occurred. (See W.S. Shanban & Co. v.
Commerce & Industry Ins. Co., 475
• The business must use damaged and
undamaged property (merchandise,
• Deduction of salvage retained in the
extra expense provisions regarding re-
pair or replacement of any property.
•;Expenses;are;recouped;when;the;busi-ness resumes operations at the loss location or elsewhere and the business
makes a net profit. [See Legier & Co.
v. Travelers Indem. Co. No. 09-6674
and Consolidated Companies, Inc. v.
17, 2010 (Westlaw — WL 211751).]
The policyholder is not permitted to
recover continuing expense if the business resumed operations and had a net
profit. A provision regarding recouping expenses is not listed in the BP or
CP policies, but it is proper in practice.
• Deduct expenses paid by others or
other insurance. Provisions of BP and
CP include provisions regarding other
insurance and others that pay the loss.
A basic principle of all insurance is
to protect and indemnify the insured
from loss and to make the insured whole
again. Insurance is not intended to put
the insured in a better position than be-
fore the date of loss. Business Income
insurance is designed “to prevent the in-
sured from being placed in a better po-
sition than if no loss or interruption of
business had occurred.”
It’s clear that business income and
associated coverages provide excellent
protection and benefits that allow the
insured to resume normal operations.
With some training, front-line adjusters
and examiners can acquire the skills to
handle and adjust business interruption/
Mike Boyer is the author of Small
Business Net Income Loss Fundamentals
and the Property Investigation Checklists
— Uncovering Insurance Fraud, 11th
Ed. He has worked in the insurance
industry, exclusively in property
and casualty claims, since 1966.
Knowledge Unlocks Opportunities
April 17-20, 2016
San Antonio, Texas