Business Interruption Issues

There are two primary causes of a business stoppage or slow down:

·?????? Damage due to wind or flood or both, fire or explosion or supply chain failures.

·?????? Cybersecurity attacks that cause financial loss, damage to the firm’s reputation, and possibly legal and regulatory consequences.?

Small businesses are particularly vulnerable to cyber threats.? It is estimated that between 30%-40% small businesses carry business interruption/cyber insurance and, conversely, up to 70% do not have this insurance.? A common reason for cyber loss is an employee inadvertently giving their password to a “threat actor.”

About 25% of businesses fail to reopen after a disaster strikes, according to the Federal Emergency Management Agency (FEMA)

Disclaimers:? I have no affiliation with any insurance company.? I do not sell insurance in any form.? I am not an attorney.? Nothing in this material is legal advice.?

I am a Certified Valuation Analyst and an IRS qualified appraiser of businesses.? ?I have been trained and tested on how to determine the financial cost to recover from a business interruption.? I am in the process of becoming a Certified Cyber Professional.

A Business Owner’s Insurance policy may include general liability, commercial property/business property coverage and business interruption insurance.

Business interruption insurance covers loss of net income due to the closure of the business during the period of restoration.?These policies may cover rent or lease payments, relocation costs, employee wages, taxes, and loan payments.?These “extra expenses” could be rent in a temporary facility, additional payroll or replacement of equipment, if replacement is less expensive than repairs.

Business interruption does not typically cover damages or losses from flooding, earthquakes, and mudslides, although business owners can purchase additional coverage for these specific perils.?Exclusions from coverage include losses unrelated to property damage, such as lost revenues due to viral outbreaks or pandemics.

A policy may include “civil authority” provisions, which provide coverage if a government entity prohibits access to the business, forcing a temporary closure.

A supply chain issue is when the vendor, providing an essential item, can no longer deliver that part or service. This provision is often overlooked when a business has a supply chain problem.

It is common for a policy to include a 72-hour (three day) waiting period before coverage begins.

Parties to a claim resolution may include the business owner, a Certified Valuation Analyst, a public adjustor and the insurance company and its claim processing team.?

Some claims are disputed by the insurance company, which may lead to litigation.

It is always a good idea to review your business insurance and, especially, examine the provisions for cyber loss.