One of the biggest things about working at Merlin Law Group is the unwavering desire to get BETTER. The desire to learn more, achieve more and be more. One of the principles that our law firm gives us is to continue to learn as much as you can and challenge yourself to gain more knowledge through different stores.
Every week, Chip Merlin hosts meetings of the firm's newer attorneys, of which I am grateful to be a part. Recently, he has revealed to us a new way of learning. During one of our meetings, he discussed the importance of continuing to work with knowledge of property insurance legislation. Chip then signed us up for the Academy of Insurance. This is an online knowledge bank that consists of a mix between on-demand and live courses. The courses cover everything and everything insurance-related. Rene Sigman, Alyssa Salinas and I have decided to use this tool and explore all the valuable information that the Academy of Insurance has to offer. If you are an insurance agent, real estate insurance adjuster, general insurance adjuster or real estate insurance lawyer, it is very beneficial to have so much knowledge at hand.
In recent weeks, we have been evaluating the potential of Business Interruption claims. One of the first things I did was look at the Insurance Academy website and see if there was anything that could help me gain an understanding of "30,000 feet" about what we were going to deal with. I took an hour-long course on "The 4 Most Important Business Income Concepts." Christopher Boggs, who is one of almost 50 fantastic instructors that the academy has to offer, taught the course and did an exceptional job, as he always does, and explained the concepts in a tasty way. This specific course helped me gain a better understanding of the types of things we needed to look for in order to provide an effective case evaluation. The more effective we are at this as lawyers, the better equipped we are to help people in need.
"The 4 most important business income concepts" are:
- Business income
- Recovery period
- Operational Ability
- The time doctrine
Business income ̵
Restoration period – Begins the period after direct physical loss or damage and ends on the previous (1) date when the property is to be repaired, rebuilt or replaced at a reasonable rate and similar quality, or (2) the date on which the business resumes at a new permanent location. In these types of insurance, there is usually a "deductible" that is normally 72 hours, unless it is changed by approval. Termination of the policy does not change the recovery period. Some of the biggest issues insured between the insurer and the insured are:
- If there is direct physical loss / damage on the insured property,
- Has the loss caused a break in the business, and
- Was the damage caused by a "covered cause of loss."
These are just some of the ways in which insurers find liability.
Operational capability – This term is not included in the company's revenue policy, but it defines the end of the recovery period. This is more generally stated as a company's ability to operate or as close as possible at the sales or production level before loss. There are a couple of ways to define this depending on the type of business you are dealing with.
- Manufacturing: when the business can return to production and inventory levels before loss. (excluding the time required to produce finished stock)
- Non-manufacturing business: the point where the business can be conducted with the same level of stock, equipment and efficiency as before the loss of business.
Operational capacity can be achieved by repairing or rebuilding the current site at the time of the loss or by finding a new permanent site to operate from.
Time Doctrine – All income losses are deducted based on the purchased coverage limit. An accurate calculation of business income coverage calculation depends on the justified estimate of the worst case of restoration. Estimating the worst case of restoration requires an understanding of the time required to accomplish the following: Time to adjust the direct property loss, building plans drawn and approved, contractor found and rented, insured must apply for and wait for building permit to be issued, site preparation must be planned and completed – including cleaning of the site of damaged or destroyed property, time required to rebuild, time required to refill, hire and hire new employees, replacement machinery and equipment must be found, purchased, installed and put into operation, and federal, state or local authorities may become involved after a loss. The key to business income is accurate time estimation. 1
1 Christopher J. Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS Vice President of Education Academy of Insurance. (c) Wells Media Group, Inc. 2015