Category Archives: Property Losses

Fixed Versus Variable Expenses – What is the difference?

It may sound like a simple concept at first, but classifying expenses as fixed and variable in the context of a business interruption claim can be tricky.  The issue that often trips people up is thinking in absolutes, such as, how would the expense behave in the event the business is shut-down?  But, this is not the way to look at this issue.

Continue reading

Co-Insurance and Business Interruption – Nothing to be Afraid Of

In our experience, the concept of co-insurance in relation to business interruption is one of the least understood and most feared topics by all parties involved.  It could be the setting of appropriate policy limits for business interruption, determining co-insurance compliance, or insured’s feeling unfairly penalized when co-insurance requirements are applied following a claim. Continue Reading!

Business Interruption Policies…Things are a changing!

(Gross Profit vs. Gross Earnings vs. Hybrid Policies)

Traditionally, business interruption insurance policies have fallen under one of two styles, Gross Earnings or Gross Profits.  In recent years the consistency in policy styles has been eroding and new hybrid style forms are starting to become more prevalent.  Continue Reading

Lost Sales aren’t Always Lost (What are Make-up Sales?)

When a business suffers a loss it will often lose the ability to sell products or services to its customers. These lost sales, however, are not always permanent and at times the insured can “make-up” the losses after the business resumes operating. Without giving consideration to this fact claim costs may increase, and the insured may be over-indemnified. Continue Reading!

Saved Expenses – Overlooking These Can be Costly

Following a business interruption loss, you can expect many changes in the business to occur.  Revenues may drop, expenses could increase or decrease, and for a period the business may even cease operating.  Often when a business interruption loss occurs, the business is likely to experience a savings in certain expenses which would normally be a fixed monthly cost.  The longer a business is unable to operate, the more likely it is for otherwise fixed expenses to cease.  The degree to which expenses change is often dependent on the amount of damage which occurred.

This post is about the saved expenses which occur following a business interruption loss, and how they impact the resulting loss quantification. Continue Reading!

What is the Indemnity Period?

Business interruption policies exist to cover an insured following a loss incident. The two main issues are what is covered, and for how long.  In this post we address the issue of the indemnity period … the period over which losses are insured. Continue Reading!

The Basics of Calculating a Business Interruption Loss – Profits vs Earnings

Regardless of the specific language used, the rate applied in measuring business interruptions losses will fall under one of two different styles.  For ease of reference we will refer to these styles by their traditional names – profits and earnings.

While the following calculation methodologies outlined below are pretty basic, it should never be forgotten that the underlying assumptions which are used to calculate the rates can at times be very complicated. Continue Reading!