Last month, Anthony Natole, MBA, CPA/CFF, CGMA of Risk Accountants, LLC, gave a presentation on “Hurricane Ian: All About Business Interruption” at Valuation, Forensic Accounting & Litigation Services Conference presented by the Florida Institute of Certified Public Accountants.1 I was privileged to be on the accompanying panel for this presentation along with Margaret Krichevets, CEO, MBA, PA of Best Public Adjusters. While listening to the presentation and the questions that followed, I began to think about how important it is to have a general understanding of interrupt coverage and when it comes to gaming.
For a business owner, the thought of being exposed to an unexpected hazard and having to close the doors of your business can be a harrowing thought. An unexpected and necessary shutdown can cause your business to suffer in several ways, including loss of income.
Some policies may provide business interruption coverage and protect against these types of losses. Business interruption insurance can help cover the cost of lost income in certain situations. However, it is important to understand that business interruption is only covered under specific circumstances outlined in your policy.
So, what would trigger an insurance outage cover? An insurance policy will contain its own specific definition of what is considered a covered business interruption, but the term business interruption generally consists of the following:
1) an event that caused physical damage
2) to a described property
3) of an insured peril
4) which causes a necessary interruption in operations.
If your business is hit by a disaster and must close, it’s important to read your policy carefully to see if you have business interruption coverage and if your loss meets your policy’s requirements and its definition of a covered business interruption.
Business interruption coverage can cover “fixed expenses, including costs incurred while operating at another location, while the property is closed for repairs and restoration.”2 Policies may also cover “lost revenue that would otherwise have been earned had the business remained open.”3
FEMA’s website states that “[a]About 25 percent of businesses do not reopen after disasters.”4 While this is an alarming statistic, knowing what your insurance will cover in the event of a disaster will help you be prepared for the unexpected.
By failing to prepare, you are setting yourself up to fail.
1 Preparations were made by Bruce D. Smith, CPA/CFF, CFE, who was unable to attend the conference. http://bdscpacfe.com/profile
2 Business Interruption/Business Owner Policies (BOP), NAIC. Available online at: https://content.naic.org/cipr-topics/business-interruptionbusinessowners-policies-bop#:~:text=Business%20interruption%3A%20While%20commercial%20property,%2C%20taxes%2C% 20and%20loan%20payments
4 Stay in business after a disaster by planning ahead, FEMA. Available online at: https://www.fema.gov/press-release/20210318/stay-business-after-disaster-planning-ahead.