Calculating Business Interruption In A Florida Property Damage Claim
Business interruption coverage in Florida is intended to cover lost revenue as well as unpaid bills and other expenses due to a business shutdown after a covered loss. For revenue, insurers typically classify this as taxable income that results primarily from business activity.
For example, if a fire or hurricane leads to a week-long closing of your business while repairs are made, insurers look to the revenue that would have been derived from regular business activity during that period. Business interruption insurance can also cover additional expenses if you need to conduct business elsewhere or relocate completely. This type of coverage is also intended to cover any costs required to get your business up and running in the same shape as it was before.
In short, business interruption coverage seeks to cover the business owner as if nothing happened at all, to make the business “whole” again.
Examples of expenses that business interruption coverage may reimburse for include:
- Lost income and profits. This is the most obvious result of a business interruption after an unexpected closure. Each day that the business must be closed results in more lost revenue.
- Business owners also face the task of keeping their employees onboard and paid while the business must be closed or has its hours reduced. Meeting payroll is just as important as covering lost revenue for business owners with a staff that depends on them.
- Unfortunately, utility bills don’t stop for natural disasters and business closures. Owners still need to cover electricity, water, cable/internet, and other utilities vital to the operation of their business.
- Your business might find itself behind on tax payments due to the unexpected loss of revenue. Your insurer will typically cover these expenses to help business owners meet their tax obligations.
- Mortgage or rent. For a business that owes rent or works under a commercial lease, they are still expected to make these payments if they want to keep their space on the property (assuming that repairs are possible).
How to Calculate Business Interruption for Insurance Coverage Purposes
Following an event such as a hurricane, fire, or other disaster, business owners will seek compensation for business losses as soon as possible from their insurer. However, they’ll often run into problems proving the amount that should be paid.
Insurers rely on a general formula for business interruption coverage as follows:
Business Interruption = T x Q x V, where:
T = Time that the business lost revenue due to closure, measured in hours or days;
Q = Quantity of good produced or sold per unit of time
V = Value of each unit or good sold, in terms of profit
Business owners may refer to profits from past weeks to generate an estimate, but insurance companies usually demand a more specific calculation before they pay out. This is where problems usually arise and disputes happen.
An insurer will always seek to pay the minimum amount possible to resolve the claim, while insured business owners seek to maximize their claim. (It is not uncommon for both sides to fudge some numbers in their favor at this point.) Unfortunately, this process can drag out longer than most business owners would like when they are rushing to get back on their feet and resume business.
When insurance companies fight back against insureds on a business interruption claim, it is important for the business operators to hold firm and aggressively pursue their rights to fair compensation under their policies. At times, this requires the assistance of a Florida property damage attorney with years of experience in this area.
Our Daytona, Florida Business Interruption Attorneys Will Fight to Help You Recover What You Are Entitled to Under Your Policy
The Daytona business interruption attorneys at Bundza & Rodriguez, P.A., know that successful businesses can’t afford unplanned and extended closures. They depend on their business interruption coverage to keep them going. When insurance companies play hardball, insureds may need to rely on expert legal help to make their voices heard. To learn how our legal team can help you, call our Daytona law offices today at 386-252-5170, or schedule a consultation with our Daytona Beach property damage attorneys online.