Business Interruption and Contingent Business Interruption
Most business interruption policies provide coverage for the consequences when the policyholder suffers a physical loss to its property. The first-party property insurance usually responds regarding repairing or replacing the physically damaged item. That type of insurance does not generally reimburse the insured for the operational consequences to the insured from not having the damaged physical property in use. If a barge suffers a physical loss, the owners' loss is more than the repair costs, but also is the cost of not being able to make timely delivery. At the same time, the counterparty has to take its own steps faced with nonperformance by the seller to protect its interest. Accordingly, the lost profits the damaged company suffers often is not considered within the antecedent property-damage claim but is insured separately under business-interruption policies, including new coverages given the moniker "time element coverages."
Essentially, during the period that the property is unable to be used due to the damage and ongoing repairs, the company is losing business or losing profit on extant contracts. A rational businessperson might decide that keeping the customer relationship is quite important and is willing to divert other production or to obtain alternative supplies in other get product flow moving to the customer. Those additional costs may be covered under a combination of "business interruption and extra expense" coverage." Policies may have special amounts available to pay for data reconstruction, relandscaping of property, and other items that may help restart a damaged business. Unfortunately, these are sometimes overlooked by policyholders and thus not even put on the table to negotiate with insurers. As a policyholder lawyer, Marc Mayerson has represented numerous companies facing these challenges from losses from natural disasters, explosures, and other events, in the US and in Asia, Europe and Africa.
These coverages have requirements to provide notice to the insurance company and usually call for the submission of a very detailed proof of loss. As coverage counsel, The Mayerson Firm LLC aids in putting together the proof of loss and preliminary paper work. Usually, the work can be turned over to the clients' staff at that moment, with only minimal intervention (i.e., costs) to the client.
Contingent business interruption (CBI) is different and more complicated. In today's world with just-in-time factory inputs, an inability to deliver by the supplier, not the insured, may still qualify for recovery by a client if it purchased CBI coverage. CBI coverage applies with respect to your supplier's property that was damaged that precludes its delivery of materials, and is for your benefit and covers your loss from what happened to the supplier, if what happened to the supplier would be covered by your policy had it happened instead to you. Though the coverage is complicated, the idea from a business perspective is clear: you want compensation now for the failure to perform by your supplier on whose input stream the company is dependent, and while you may later be able to sue for breach-of delivery, the policyholder may be stretched for resources (and its credit downgraded when its key supplier has difficulties); to guard against this risk, "contingent business interruption" can protect the policyholder's income when the policyholder is scrambling for new supply and to maintain production that would held up by the failure of the "old" supplier to be able to deliver. Marc Mayerson has more than thirty years' experience as a policyholder lawyer representing clients on complex business interruption and time-element claims.
As coverage counsel, Marc Mayerson has worked on matters involving business interruption and extra expense in the US as well as for such claims when foreign factories face natural disasters, such as flooding at an industrial park in Thailand, This coverage is a crucial adjunct to the property program and can provide important sources of capital when bank loans are drying up due to the more precarious position the company finds itself when a major supplier has difficulty.
Marc has advised on Covid19 business-interruption insurance matters including regulatory and legislative proposals.
For this reason, clients turn to The Mayerson Firm PLLC as coverage counsel to be sure also that those policies they are purchasing meet their needs in a reasonable range of scenarios. Moreover, using the perspective gained from our experience as policyholder counsel pursuing coverage for claims, we assist in reviewing the wording of such policies when purchased and in presenting new claims for recovery in the event loss arises.