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Business Interruption Insurance Policy Wording: Important Terms Defined

When you own or operate a business, you will have various insurance policies in place to protect the business in the event a natural disaster or unforeseen event occurs. Business interruption insurance coverage, typically an add-on to an overriding business insurance policy, can provide valuable assistance for lost income if a business has to shut down. At Bentley & More LLP, we know that insurance policy working and terms can be confusing. Here, our California business interruption insurance lawyers want to discuss some important terms and their definitions you need to be aware of.

The most important terms for business interruption insurance

While this is not a complete list what you need to be on the lookout for in a business interruption policy, these terms are vitally important to know:

  • Actual sustained loss. Business income coverage will include the actual sustained loss that incurs due to a business disruption. The actual sustained loss is only for the time period which the business is not able to function normally.
  • Business income. The insurer is generally liable for a reduction in net income that is a result of the disruption in business, whether completely or partially. Business income includes the net income that would have been earned by the insured had normal operations continued.
  • Period of restoration. This is the time frame extending from the time the business interruption occurs until the time the property is rebuilt, repaired, or replaced, and business returns to normal operation. However, the period of restoration for events like COVID-19 may not have a clear cut time frame.
  • Evidence of losses. The business owners will need to provide evidence of the losses they sustained due to the business disruption. This can include historic profit and loss statements, tax returns, and rent rolls.
  • Interruption by a civil or military authority. This is meant to indicate the halting of business operations due to an order by the government to cease operation. This can include evacuation orders, closures due to civil unrest, or closures like we have seen due to the coronavirus pandemic.
  • Contingent business interruption insurance. This is a specific type of business interruption insurance that covers a loss caused by the inability of a supplier to perform their obligations with the insured, due to no fault of the insured.
  • Crisis management coverage. This is meant to indicate that the insurance will cover an interruption during a time of crisis, which could include a break-in or armed robbery. It could also include a shutdown due to food contamination or a communicable disease.

Contact us for help with your business interruption case

If your business has been adversely affected by a natural disaster or some other type of shutdown, you may need legal assistance. As California and the country continue to deal with the COVID-19 outbreak, the team of Orange County personal injury attorneys at Bentley & More LLP is standing by to help you today. We will work to determine whether you are entitled to any compensation for a stop in business operations. When you need a California business interruption insurance attorney, you can contact us for a free consultation by clicking here or by calling 949-264-0226.