Insurance Claims

Business Interruption from fire, flood or earthquake is often insured.  Preparation of a claim that measures economic loss from the interruption date to the date of normal operations and relates elements of loss to provisions of the contract of insurance is essential to obtaining a fair settlement from the insurance carrier.  This approach provides a foundation for discussions with the adjustor and others.  If negotiations go poorly, the loss is well-documented to support a legal claim for those who choose to follow that route.

Business Destruction refers to any situation where the viability of the business is destroyed.  This can result from fire, flood or earthquake, but can also arise from the destruction or loss of the ability to operate, or from the loss of the market formerly served.  Whether an insured loss or not, the measurement is based on the value of the business prior to the destruction.  Such valuation does not address rebuilding or re-launch costs, as none are assumed.  Rather, the value of the business in place prior to destruction is the central focus.

Complex claims involve both insured and uninsured losses and costs.  Sound accounting practices will assure that all such losses and costs are captured, but the language of contracts of insurance does not conform to the language of generally accepted accounting principles.  A careful analysis of all event-related costs, with a resulting categorization of such costs and classification as to the element of the contract of insurance that covers all, some or none of each such cost can facilitate discussion and settlement with the insurance carrier.

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Last modified: 02/09/10