When seeking insurance coverage for business interruption resulting from a hurricane or other casualty event, it is critical to arrive at a well-documented valuation of your company’s lost revenue. Insurance companies rely on trained adjusters and accounting firms to reach their own conclusions; and, to avoid having a less-than-favorable calculation dictate the amount of your coverage, you need to make sure you paint a clear picture of your business’s lost revenue.
According to a 2017 survey conducted by RIMS, more than half of all businesses that responded stated that quantifying their losses was the biggest challenge they faced when seeking coverage for business interruptions. If you are preparing to file a business interruption insurance claim, here are some tips for documenting your company’s losses:
1. Start Compiling Your Books and Records.
When calculating anticipated future losses, your company’s recent financial performance is a good place to start. While past earnings are not necessarily indicative of future revenue (a point which you can expect your insurance adjuster to hit home), they are critical to informing the analysis.
2. Collect Other Key Sources of Information.
In addition to your company’s books and records, collect any other sources of pertinent information as well. Were you preparing to launch a new product? Will a competitor be able to beat you to market due to the interruption of your business? Will you be forced not to bid on potentially-lucrative opportunities? The answers to these and related questions are all relevant to calculating the revenue costs of a business interruption.
3. Document the Damage to Your Business.
When seeking insurance coverage for loss of revenue, the nature and extent of the damage to your business is important. Does the damage affect certain areas of your operations more than others? Does damage to one area (such as an IT center) impact other areas of the business? If you have contingent coverage, you will need to fully document the damage to the affected third-party site as well.
4. Seek Outside Help.
There are accountants, public adjusters and other experts who specialize in assessing revenue losses due to business interruptions. When filing a business interruption insurance claim, it is generally advisable to assemble a team of experienced professionals who can guide the process.
5. Do Not Jump the Gun.
Finally, while you will ultimately need to hand over certain information to your insurer, you do not need to hand over all of your financial information, and you certainly do not want to submit your information in a way that leads your insurer to draw its own conclusions. Be wary of any early requests for bulk downloads or specific records, and make sure you know the potential impact before you disclose any information to your insurance company.
Saavedra | Goodwin, a Fort Lauderdale Insurance Claim Law Firm
For more information about protecting your company during the insurance claims process, schedule a consultation with the insurance lawyers at Saavedra | Goodwin. You can reach our Fort Lauderdale, FL law offices online or by phone at (954) 928-9568.