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Business Income Loss Coverage: Watch Out for Attempts by your Insurance Company to Limit your Insurance Payout.

By: Matthew H. Fry, Esquire

[email protected]

If you own a business or are in charge of purchasing insurance at work, then you may have heard of business income loss coverage. If your business is shut down by some type of covered loss under the policy, business income loss coverage is supposed to restore you back to where you were before the loss, including paying you for expected income and payment of expenses such as payroll or other covered expenses under the policy. 

            One of the things to be aware of when filing a claim for business loss coverage is the “period of restoration” which is typically defined in the insurance policy as the expected time it takes to make the repairs, order new equipment, or other restoration to get your business running again.  For example, damage to a retail business building could prevent the reopening of that building for customers until the damage is repaired. During that time, the business insurance coverage should be paid to you through your commercial insurance policy the same amount that you would have expected to earn during that time.

The “period of restoration” is not precisely defined but states that the restoration of the property must occur at a “reasonable speed” to be covered.  This language is presumably to prevent someone from not taking action to make repairs and instead relying on the insurance company to pay their bills until the coverage expired.

The “period of restoration” is calculated by the insurance company and may not reflect the actual time it takes to make repairs.  If this occurs the result is typically a reducing payout, saving the insurance company money and shorting the business owner.

So how can you make sure you are protected?  First, double check the insurance company’s calculations and whether the “period of restoration” actually matches the dates when repairs were taking place.  Business income calculations are typically done by the insurance company and their accountants.  It may be worth having your own accountant review the calculations for lost income to determine if they are fair and reasonable.  If after having someone review the business income calculations you find that there is a discrepancy between the amount offered by the insurance company and your professional’s calculations, and you cannot convince your insurance company to increase their payment, you may wish to contact an attorney to discuss your options.

            The Law Firm of DiOrio & Sereni, LLP is a full-service law firm in Media, Delaware County, Pennsylvania. We strive to helppeople,businesses and institutions throughout Southeastern Pennsylvania solve legal problems – and even prevent legal problems before they occur.  To learn more about the full range of our specific practice areas, please visit www.dioriosereni.com or contact Matthew H. Fry, Esquire at 610-565-5700 or at [email protected].

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