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The Deck Is Stacked Against Business Interruption Claims

In Hurricane Harvey’s wake, local communities rely on businesses to restart the local economy and renew a sense of normalcy. We’re not being overly sentimental when we say that—business losses are known to slow down disaster recovery because people do not receive services they need, or workers are left without work while their employers try to rebuild. A large portion of the $70 billion of property losses caused by Harvey is lost business income. In fact, after Katrina local companies suffered $25 billion in losses, with up to $9 billion stemming from business interruption.

Getting our local businesses up and running again is vital for Houston, Beaumont, Corpus Christi, and other cities to get back on their feet.

Business interruption insurance was designed to help facilitate fast recovery. The idea was that a business would pay for interruption insurance so that if disaster struck and closed their business for an extended period of time, they would be able to file a claim on lost profits, operating expenses, hiring costs, taxes, and other business losses.

However, like with most insurance industry products, buying a policy is far easier than benefiting from one.

Exclusions written in fine print, long waiting periods, and constant back-and-forth about how much “lost income” a business is eligible to recover means a business interruption claim can take years to settle. The issue is that business interruption claims are based on prior financial statements, which are used to “forecast” what the business would have made if there had been no interruptions.

As you might guess, agreeing about what a business “would have made” is a high-stakes discussion when the average interruption claim is worth $1.36 million, according to a report from Allianz Global.

Denial Based on a Technicality

Hurricane Harvey marks the second time Thomas Arnold was denied payment for a business interruption claim. Harvey caused him to lose 5 days of business because the roads leading to his optometry office weren’t accessible, keeping away both employees and patients. Arnold pays over a thousand dollars in premiums a month for just this type of event—when natural disaster causes a loss of revenue, he can claim the loss of revenue.

Or so it was sold to him. Reality is more difficult than that.

Business interruption policies are “triggered” by physical damage to the business’ location. If there’s no physical damage, then the insurance company won’t pay. Arnold experienced the same issue when Hurricane Ike knocked out the power to his office for 9 days in 2008. His business experienced losses in revenue, but the insurance company didn’t pay the claim. Now, he’s questioning why he pays for insurance that never benefits him.

The Only Option to Reclaim Lost Income

Even if he dropped his carrier, Mr. Arnold has few other options. Commercial insurers are the only providers for business interruption insurance. The National Flood Insurance Program also has commercial policies—but only for damages up to $500,000 for property damage and $500,000 for contents/equipment. Even with that protection available, few businesses get flood insurance—private insurers only offer it with high premiums to medium or large businesses, and the NFIP reports that barely 250,000 small companies have bought a policy from them. To put that into perspective, Florida alone has 2.4 million small businesses in the state.

Even “successful” claims don’t provide the fast relief businesses need. Many companies don’t receive payouts on their policies for years following the interruption event, and that’s after a prolonged fight with the insurance company about the company’s projected earnings, the seasonality of their earnings, whether they came off a slow or fast month, and other factors that affect revenue projections.

If you filed a business interruption claim, your insurer is almost certainly using a forensic accountant to pore over your records and minimize the amount you’re eligible to claim. Handling the claim alone means the deck is already stacked against you. Arnold & Itkin want to level the playing field, file a claim on your behalf, and ensure that you have everything you need to rebuild your business and your community.

We’ve fought against insurance companies for over a decade, securing billions in verdicts and settlements. We know how to protect your business and your livelihood—call our Harvey insurance claim attorneys at (888) 400-2101 today, or file a claim online.