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Risk Management Bulletin


By January 1, 2010No Comments

It’s easy to express some of the most important business concepts in clear terms: “Buy low, sell high.” “The devil is in the details.” “Time is money.” However, implementing such familiar phrases often requires complex thought processes, calculations, assumptions, expertise, and creativity.

When a business is interrupted, the owner makes a seemingly clear request to an insurance company: Pay me for the sales I would have had. Yet, a complex reality can underlie this reality. When the owner has to prove the sales that they would have had, the projected or estimated amount is often a challenge. And because insurers often hear “We were having our best year yet …” from claimants, it’s no surprise that they often view Business Interruption claims with a measure of skepticism.

These claims can become more difficult and even contentious if differences of interpretation arise. A successful claim might require maneuvering through such inherently gray areas as financial projections, consumer demand, and policy interpretation, to reach a number that’s reasonable, credible, defensible, and well supported.

This equation summarizes the formula for determining Business Interruption losses:

BI = T x Q x V


BI = Business interruption looses


T = The number of time units (hours, days) that operations are shut down
Q = The quantity of good or services normally produced, or sold, per unit of time used in T
V = The value of each unit of production or service, usually expressed as profit.

When you file a Business Interruption claim, we stand ready to help you implement this equation. Feel fee to get in touch with us.