When your business is seriously damaged by a hurricane or fire or other covered peril that prevents operation of your business, you will look to your business interruption coverage to compensate you for your lost profits and other losses incurred because your doors are closed. Business interruption coverage is designed to protect business owners while their facility is being repaired or rebuilt so that it can again be used for operation of the business. Although businesses often purchase this type of coverage as part of their property-casualty insurance, the coverage is too important to treat as an afterthought.
Business interruption insurance can cover lost profits because of onsite damage that ceases operations, disruption in the supply of materials because of property damage to a supplier, the costs of temporary relocation of the business and more. One cost that many business owners do not consider when purchasing business interruption coverage is the delay in resuming business while a facility is brought up to code. Policies generally include the additional cost of making repairs following a flood, hurricane or other covered peril associated with bringing the property up to code when restoring the property to its pre-loss condition.
However, the process of implementing repairs that will bring the property into compliance with building, fire or other safety codes can extend the duration of time needed to repair the property. While the business losses during the period of restoration will fall within business interruption coverage, business owners might not anticipate potential losses suffered because of the additional time required to bring the facility into compliance with applicable codes. This is an important issue because many policies that offer business interruption coverage expressly exclude coverage for this period of time. The extra time that a business owner must keep the doors closed to rebuild or repair the property can result in substantial lost income.
While the specific terms of your policy will determine whether this period of time is covered, the starting point in analyzing business interruption coverage is the “period of restoration.” If you are trying to determine whether your policy includes coverage for this period, you should review your entire policy with particular emphasis on two sections of the policy: (1) the portion of your policy that defines “period of restoration” and (2) the part of your policy that outlines coverage for code upgrades. Some policies expressly include this additional time for code upgrades while other polices expressly exclude such coverage.
Another portion of your policy that you need to be aware of in this regard is the time cap on the duration of your business interruption coverage. Even if you have coverage for the additional time needed to repair or restore your business facility so that it complies with applicable codes, this coverage does not extend the maximum duration of business interruption coverage in your policy.
The bottom line is that certain changes in fire, building and safety codes can substantially extend the time that your doors are closed after a fire or other peril, so you should carefully review your policy to determine if this risk is covered. If your policy does not provide coverage for this form of loss, you might want to consider adding this coverage.
If you have questions about business interruption coverage or your insurance company is balking at the prospect of paying your business interruption claim, experienced Florida commercial insurance attorney J.P. Gonzalez-Sirgo can review your situation and advise you of your options. Mr. Gonzalez-Sirgo handles disputed claims in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.