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!

What is included in Gross Income from Employment? (post-Sept/2010)

Summary: There does not appear to be any significant changes to what should be considered in calculating the Gross Income for a claimant under the New SABS. However, we finally have a definition.

We have previously explained what is included in Gross Income from Employment as it relates to the SABS-1996 (see link at bottom of this post).

So what has been the impact of the changes in these New SABS?

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How You Can Get More Out of the Employer’s Confirmation Form (OCF-2)

As we mentioned in our blog post on common errors and deficiencies found in the OCF-2 form, there are ways to make the form work better for you.

By requesting not only the correct supporting documentation, but asking the right questions, as well, you can ensure a correct Income Replacement Benefit (IRB) calculation every time.

Supporting documents

Let’s start with the documentation. Why are these so important?

As noted in our previous blog post, the people completing the OCF-2, don’t always have the requisite knowledge to correctly and completely provide answers to the questions they are asked. As such, supporting documentation helps to support the amounts noted on the OCF-2, and ensure it has been completed correctly. Continue reading

How are loans considered in an Income Replacement Benefit (IRB) calculation?

Generally, loans received by an insured, regardless of the source, are not considered income for IRB purposes. But, as with most situations, and because this would be a really short topic otherwise, it’s not quite so cut and dry.

Traditionally, this issue is more prevalent after an accident than before, but the same principles apply. Whether it is a self-employed individual who cannot work post-accident and is taking loans from their business to survive, or an employee who is receiving loans from his employer, family, or friends, you need to understand whether the receipt of money is related to employment or self-employment activities.

Background:

Subsection 4(1) of the SABS defines gross employment income as “salary, wages and other remuneration from employment…”

Subsection 3(1) of the SABS defines self-employment as a “trade, occupation, profession or other type of business…” It would appear then that income from self-employment would be as a result of providing services as a business to customers in return for money or other payment type.

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When and how is interest payable on overdue benefits?

Summary

The interest rate on overdue benefits is now payable at a rate of 1% per month, compounded monthly, for accidents on or after Sept. 1, 2010.

Any accidents prior to Sept. 1, 2010, are still payable at the rate of 2% per month, compounded monthly.

What does this mean?

The current low interest rate environment might have helped insurers, as the New SABS (Ont. Reg. 34/10) dropped the interest rate on overdue payments from 2% to 1%.

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Is Interest Income Considered when Calculating an Income Replacement Benefit?

There are a number of ways that someone might earn interest income, be it on an investment, or as a result of late payment from a client. As with any income, interest must be reported for taxes. But, whether interest is included in the calculation of an income replacement benefit (IRB), is entirely dependent on whether the income was earned as a result of employment activities.

For the difference between employed and self-employed, please see our blog post on employment status.

Background

Subsection 4 (1) of the Statutory Accident Benefits Schedule (SABS), defines gross employment income as “salary, wages, and other remuneration from employment.” We note, of significance, is the connection between the income and employment.

For employed individuals, excluding self-employed, there are limited situations in which interest income is received as a result of their employment.  Continue reading