Evidentiary Challenges in Proving Business Interruption Claims

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

When your business is damaged because of a natural catastrophe, the financial viability of your company often depends on efficient processing of your claim and a full recovery.  While repairing property damage to structures like offices, manufacturing plants, warehouses and other facilities is a critical aspect of getting a business back on track, the loss of profits resulting from the disruption of your business also will have a substantial impact on the ability of your business to protect its market share and to mitigate the loss of profits.  The essence of a business interruption claim revolves around a fundamental question: What would have occurred had the loss not been experienced by the business?

The answer to this question typically turns on certain abstract projections about future economic results from the time of the date of loss.  These calculations and projections are founded on actual past financial performance.  There also are other factors extraneous to your business that must be considered, such as analysis and projections regarding prospective market conditions in the future.  This analysis is only effective if the information used to support a claim for business interruption loss is supported by verifiable and objective evidence.

The type of evidence necessary amounts to information that a third party like your insurance company can rely on as establishing extra expenses and lost earnings.   Policyholders benefit from working with an insurance claims professionals because due diligence is necessary to develop the evidence to prepare the claim.  If the claim is properly documented and well-prepared, the business interruption claim will be supported by documents, such as customer invoices, tax documents, general ledgers, customer invoices, market forecasts, correspondence with customers and similar confirmable forms of evidence.

When companies prepare a business interruption claim under a commercial policy, they should consider certain questions, which include the following:

  • Do the assumptions relied on seem reasonable and consistent with standard business practices for the policyholder and similarly situated companies in the same industry?
  • Are the estimated wages, salaries and benefits supported by payroll registers?
  • Can the company produce material supplier and/or client data that supports the conclusions and verifies forecasts?
  • Do the expenses and revenue actually incurred correspond with financial statements, tax returns, general ledger entries and other financial documentation?
  • Will invoices, contracts and purchase orders support extra expenses?

When disputes arise between a policyholder and an insurer over business interruption claims, these disagreements typically involve more ambiguous issues as opposed to concrete data.  Areas that are ripe for such disputes include projected future expenses without the loss, period of loss and projected future revenue.  These issues are more likely to be the cause of a dispute because they are open to interpretation based on the assumptions and methodology employed. 

If you have questions about Florida commercial insurance claims, you are welcome to contact my Miami insurance dispute law firm.  My law firm represents policyholders in claims disputes 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.

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