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Guide for COVID-19 Business Interruption

April 15th, 2020 Post By :

Cumbre has determined that wherever possible, we want to encourage Business Interruption and other claims be reported to the insurer. Business Interruption insurance (also known as Business Income insurance) provides coverage for the loss of income that a business suffers after direct physical damage to the business.

Business Interruption Vs. Property Insurance

Business interruption differs from property insurance in that a property insurance policy only covers the physical damage to the business, while the additional coverage allotted by the business interruption covers the profits that would have been earned.

If you think you have suffered a BI loss

Report it to your insurer immediately. As you prepare to report your claim, the following is a guide for the information most carriers will require. It is better to approach this on an offensive basis rather than having the insurer drive the information.

History of the loss

Prepare a timeline in the form of a summary of the key events and dates leading up to and following the loss. Below are some events to consider

  • A description of the incident
  • Narrative and time of events and key decisions made
  • General overview of the impact and changes to operations
  • Describe what is or will be done to minimize and address the loss
  • Keep a schedule of all Government and Insurance regulations and orders that impact the business

The Loss Itself

Document all income losses and the expenses to mitigate additional losses. The data will vary by industry, but some common information for a BI loss would be:

  • Status of open orders, reservations and/or planned events, including changes to production schedules
  • Historical sales data and business performance trends
  • Actual experience during the indemnity period
  • Sales journals and forecasts before, during and after the indemnity period
  • Industry trends
  • Production schedules along with inventory reports and manufacturing cost statements, etc.
  • Extra expenses to mitigate the loss or indemnity period
  • Profit and loss statements
  • Purchase and payroll journals

Additional Considerations

Consider the following additional actions to protect the business and streamline the documentation process in case of a loss:

  • Set up an internal cost code
  • Identify if leases/contracts allow for rental abatement, etc. under current/specific circumstances
  • Begin to track customer inquiries and log cancellations, rejected inquiries and other information to confirm an order has been or may have been lost
  • Retain all production schedules and planning documentation, including forecasts, demand or backlog forecasts prior to the loss
  • Track additional outsourcing of production to other operations, outside vendors or alternative locations
  • Evaluate the potential for production/sales “make up” through delayed sales, use of inventory, etc.
  • If operations have ceased, track the impact on variable and fixed costs noting what continues and discontinues.

With the current landscape of the workplace changing at a rapid pace. It is important to be completely transparent with the insurance company and file these claims. Business Interruption in regards to COVID-19 is new for everyone. Use this guide as a starting point to discuss this with your current carrier.

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As always, Cumbre Insurance is here to support your organization’s growth and security. Please contact us to discuss your specific ransomware concerns and develop appropriate prevention and coverage measures.

Cumbre Insurance is a proud agency partner of Acrisure, a top 10 global insurance broker. Our relationship with Acrisure allows us to provide our clients access to policies, resources, and expertise often outside the reach of stand-alone agencies. Along with competitive pricing, our service is backed by dedicated, local customer service.

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