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Small Business Insurance

Business Interruption Insurance: What it Covers, What it Does Not

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

business interruption insurance policy extensions

What Is Business Interruption Insurance?

Business interruption insurance is insurance coverage that replaces business income lost in a disaster. The event could be, for example, a fire or a natural disaster. Business interruption insurance is not sold as a separate policy but is either added to a property/casualty policy or included in a comprehensive package policy as an add-on or rider.

Key Takeaways

Understanding Business Interruption Insurance

Business interruption insurance premiums (or at least the additional cost of the rider) are tax-deductible as ordinary business expenses . This type of policy pays out only if the cause of the business income loss is covered in the underlying property/casualty policy. The amount payable is usually based on the past financial records of the business.

Business interruption insurance coverage lasts until the end of the business interruption period, as determined by the insurance policy. According to the Insurance Information Institute, the standard policy is 30 days, but using an endorsement can extend it to 360 days. Most business interruption insurance policies define this period as the date that the covered peril began until the date that the damaged property is physically repaired and returned to the same condition that existed prior to the disaster. There may also be a waiting period of 48 to 72 hours.

What Business Interruption Insurance Covers

Most business interruption insurance covers the following items:

Business interruption insurance is not sold as a separate policy but is an add-on to an existing insurance policy.

What Business Interruption Insurance Does Not Cover

According to the Insurance Information Institute website, you will not be covered for:

Special Considerations for Business Interruption Insurance

Note that the insurer is only obligated to pay if the insured actually sustained a loss as a result of the interruption. The amount that will be recouped by the business will not exceed the limit stated in the policy.

Business Interruption Insurance and Pandemics

Not surprisingly, what business interruption insurance does and does not cover has come under particular scrutiny during the COVID-19 outbreak and the business shutdowns and curtailments that resulted. The answer, unfortunately, is that for the most part policy holders will not be covered.

"The standard business interruption policy only applies when the business sustains direct physical loss or damage, such as a fire," says James Lynch, FCAS MAAA, chief actuary and senior vice president of research and education of the Insurance Information Institute. "Business interruption can also apply when a nearby business sustains direct physical loss or damage and a civil authority like the government closes all businesses as a result."

Viruses don't actually break anything. As Michael Menapace, a partner at Wiggin and Dana and professor of insurance law at Quinnipiac University School of Law, told Jeff Dunsavage of the Insurance Information Institute: "The virus...[compared to a fire or broken windows from wind damage], leaves no visible imprint."

Even all-risk business interruption insurance has exclusions. And, especially since the SARS outbreak of 2003, those exclusions have tended to include losses from viruses and communicable diseases, Dunsavage notes.

Insurance Information Institute. " Do I Need Business Interruption Insurance ?" Accessed July 8, 2020.

Insurance Information Institute. " Business Interruption Insurance: Policy Language Rules ." Accessed July 7, 2020.

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Safe and Insured

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Business Interruption Extension

7th March 2022 By Laura Edwards

Business Interruption is often an overlooked cover when people review their insurances. This cover can be critical as it covers businesses for loss of income if an insured incident occurs that means the business premises cannot be used such as a fire or flood.

Business Interruption is there to put the business back to the same trading position it was pre loss.

Three Main Type of Business Interruption

There are three types of business interruption, loss of revenue, loss of gross profit and increased cost of working. The type of business interruption your business would need depends on your business model and is something to discuss with your broker.

Business insurance can cover:

Depending on which cover you opt for would depend what is covered.

Extensions to Consider

Another element to Business Interruption to consider are the extensions. Extensions that may be available are:

We recommend you look closely at this cover when your policy is up for renewal and have a discussion with your broker to ensure you have the right level of cover and the correct option for your business. Should you wish to discuss in more detail please contact the team on 0808 161 7008.

Safe and insured is a trading name of Aspray Affinity Limited. Aspray Affinity Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register ( www.fca.org.uk/register ) under reference number 761162.

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Business Insurance

How To Get Business Interruption Insurance

Fact Checked

Updated: Jun 13, 2022, 5:15pm

How To Get Business Interruption Insurance

While you might keep meticulous business records and have all the best business practices down to a T, there are certain circumstances beyond your control that could wreak financial havoc on your small business. Business interruption insurance can help protect your business financially if you are forced to close due to an unexpected problem covered by your policy.

For example, say a nasty storm knocks a tree into your building and you need to close for a week (or longer) for repairs. How would you replace your lost business income?

Fortunately, the best small business insurance plans have coverage for these types of situations. Here’s how to get business interruption insurance.

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What Is Business Interruption Insurance?

Business interruption insurance helps to replace lost business income if you are unable to open your business on a temporary basis due to a loss covered by the policy, such as a fire or theft.

This coverage type is sometimes called “business income coverage.” It’s typically included as part of a business owners policy (BOP).

What Does Business Interruption Insurance Cover?

Business interruption insurance covers the operating expenses for a business due to a problem covered by the policy. The covered perils for business interruption insurance are generally theft, wind, fire, lightning and falling objects.

Covered operating expenses may include:

What Does Business Interruption Insurance Not Cover?

There are plenty of exclusions to a business interruption insurance policy, such as:

Who Needs Business Interruption Insurance?

While business interruption insurance is a good option for most small business owners, it can be a crucial coverage type for businesses that rely on a physical location (like your building) or assets (like machinery or equipment) that could be affected by problems, such as fire, theft, wind, lighting and falling objects. This includes businesses, such as:

How Much Business Interruption Insurance Coverage Do I Need?

Every business interruption policy generally has a coverage limit. This is the maximum amount your insurance company will pay toward a business interruption claim. Choosing a good coverage amount is essential because you’ll have to absorb any financial losses above your coverage limit.

Consider these factors:

Look at your gross earnings and earnings projections as guidelines for the right amount of coverage. You want the insurance to cover the costs of operating expenses while repairs are being made to the business.

How Much Does Business Interruption Insurance Cost?

The cost for a business interruption insurance policy is based on a variety of factors such as your industry, the number of employees and the amount of coverage that you choose.

Costs can also vary based on your business location and your risk of making a claim.

A business interruption insurance policy costs between $40 and $130 per month, or $480 and $1,560 per year, according to Insureon.

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Should I Buy Business Interruption Insurance as Part of a Business Owners Policy?

Great for small businesses and affordable, a business owners policy bundles general liability insurance, commercial property insurance and business interruption insurance into one policy:

How affordable is a business owners policy? It costs an average of $53 per month, according to Insureon. A BOP is worth checking out if you have a small or mid-sized business and are interested in buying all three of these coverage types.

Companies with 100 employees or fewer and revenues of up to about $5 million are good candidates for a BOP, according to the Insurance Information Institute.

How Long Does Business Interruption Insurance Coverage Last?

In most cases, there is a 48- to 72-hour waiting period for a business interruption policy to kick after a loss that’s covered by insurance. Look at your policy’s “restoration period,” which is the length of time the policy will pay for covered losses.

A restoration period usually lasts up to 12 months. So if your business was damaged on April 1, you would be entitled to business interruption benefits until April 1 of the following year. The restoration period begins with 30 days and then gets extended as needed up to a year.

Does Business Interruption Insurance Cover Covid?

The question of whether business interruption insurance should cover losses due to the pandemic has been a contentious issue. The insurance industry maintains that there is generally no business interruption coverage for pandemics, but many businesses have been pursuing arguments in court that their losses should be covered.

The University of Pennsylvania Carey Law School’s Covid Coverage Litigation Tracker has counted nearly 2,300 lawsuits over business insurance coverage for Covid, with many lawsuits coming from businesses in the food services industry.

“Business interruption insurance only provides potential coverage when there is direct physical loss or damage,” says Robert Gordon, senior vice president of policy, research and international for the American Property Casualty Insurance Association. “Pandemics do not cause direct physical loss or damage and are a largely uninsurable risk.”

“Most business losses following the spread of Covid have been the result of a plunge in demand for in-person commercial services, which does not involve physical loss or damage to property,” he says.

Also, business interruption insurance policies may have exclusions for communicable diseases.

“Most property/business interruption insurance policies include exclusions for communicable diseases and additionally require actual physical loss of or damage to property as part of the coverage trigger,” Gordon says. “Even before Covid, insurance coverage for pandemics was only available in very limited circumstances, such as for event cancellation coverage. Business interruption insurance does not generally include coverage for pandemics.”

Neil Alldredge, senior vice president of corporate affairs for National Association of Mutual Insurance Companies, says, “Before the pandemic, most business interruption policies did not cover infectious disease or pandemic related losses, and while there are thousands of pending lawsuits on the question of coverage, most believe that policy language was clear. Already, several lawsuits have been resolved in favor of insurers, and we expect that insurers will continue to prevail in the courts.”

“Going forward, many insurers will likely examine their coverage terms and clarify coverage if necessary. The fact is pandemic losses, as we’ve seen, occur at such a scale, they are simply not an insurable event,” says Alldredge.

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Jason Metz is a writer who has worked in the insurance industry since 2007. As a former claims handler and fraud investigator, he’s seen a lot, and enjoys helping others navigate the complexities and opaqueness of insurance. He has a B.S. in Criminal Justice from Kutztown University and an M.F.A. in Creative Writing from the University of California Riverside, Palm Desert.

Eight Key Concepts to Understand in Business Interruption Coverage

By Michael Rouse ,

US Property Practice Leader

The COVID-19 pandemic has resulted in unprecedented disruptions for businesses and the economy. Compounding the challenges for businesses are recent civil unrest in major cities along with the early days of what may be an active Atlantic hurricane season. These trends mean it’s vital for risk professionals to know how their property insurance policies — including business income or business interruption coverage — may respond to potential losses.

What’s in a Business Income or Business Interruption Clause or Endorsement?

Many insurers’ property policies include business interruption or business income either as a coverage within the form; others, including those insurers that use Insurance Services Office (ISO) forms for their policies’ content, add this coverage via endorsement. A business interruption clause or endorsement is designed to protect the insured for losses of business income it sustains as a result of direct physical loss, damage, or destruction to insured property by a covered peril.

While many such clauses are in use today, a typical business interruption insurance clause might read as follows:

We will pay for the actual loss of business income you sustain due to the necessary suspension of your “operations” during the period of “restoration.” The suspension must be caused by the direct physical loss, damage, or destruction to insured property. The loss or damage must be caused by or result from a covered cause of loss.

Although the contents of individual policies and endorsements may vary slightly, many use relatively consistent language to describe business interruption coverage. To better understand this coverage and how it might respond to potential losses, it’s important for risk professionals to focus on eight key concepts.

Actual Loss Sustained

Business interruption coverage protects against an actual loss sustained by an insured as a result of direct physical loss or damage to the insured’s property by a peril not otherwise excluded from the policy. The insurer is only obligated to pay if the insured actually sustains an interruption of business leading to a business income loss. This loss, however, is subject to the policy limit or sublimit that is applicable to the specific location where the loss occurs or the type of peril that leads to the loss.

Business Income

Usually, an insurer is responsible for the reduction in net income that results from suspension of operations — whether wholly or partially — due to a physical loss at an insured’s premises. Generally, insurers consider business income to include:

Period of Restoration

Insurers are liable for the loss of business income only during the period of restoration, which is often defined as the length of time required to rebuild, repair, or replace damaged or destroyed property. The period of restoration begins when the physical loss or damage occurs; it ends when the property should, with reasonable speed, be repaired or replaced and the location is made ready for normal operations to resume.

Expiration of the policy does not end the period of restoration; as long as the insured’s physical loss occurs during the policy period, a business interruption endorsement will provide coverage for the duration of the period of restoration.

An endorsement published by ISO includes a 30-day extended period of restoration provision beyond the standard period of restoration, as do some insurers’ forms. This provides additional coverage after an insured business resumes operations following the date of repair or replacement of the damaged property, which can be crucial since it may take time for the business to return to pre-loss income levels. However, if an insured requires more than this 30-day limit, it may be able to increase this limit — from 30 days to any multiple of 30 days up to 720 days — by purchasing an extended period of indemnity optional endorsement.

Extra Expense

A business interruption clause in a property policy or added endorsement can provide additional coverages, including for extra expense. This extension covers necessary expense sustained by an insured during the period of restoration that would not have been incurred had there been no physical loss to real or personal property caused by a covered peril.

When a business income loss occurs, an insured is obligated to take reasonable steps to prevent or minimize it. Any expenses incurred to reduce the loss are covered as part of the business income loss, as long as they do not exceed the loss itself.

An insurer will typically not pay any part of the expense that is more than the claim itself. For example, an insurer will reimburse an insured $100 to reduce the business income loss of $200, but will not reimburse the insured $100 if the claim is only reduced by $50. Any additional expenses above this $50 amount that are incurred to continue the business may be recoverable under an extra expense provision in an insurance policy.

Business income clauses or endorsements may also include “extensions of coverage” wherein the insured’s policy will insure against business income losses resulting from certain specified events. These include service interruption, contingent business interruption, leader property, and interruption by civil or military authority. A sublimit typically applies for each additional coverage.

Service Interruption

If included within the policy, a service interruption extension typically provides business income coverage arising from direct physical loss, damage, or destruction to electrical, steam, gas, water, sewer, telephone, or any other utility service’s transmission lines and related plants, substations, and equipment supplying such services to an insured business. The owners, managers, or operators of such utilities or services are not named insureds under the policy.

A physical loss, damage, or destruction at the location of the utility or service typically must be the result of a peril similar to those covered under the insured’s policy. Some restrictions on coverage may apply, however, including:

Contingent Business Interruption (CBI)

A CBI extension is designed to cover an insured’s business income loss resulting from physical loss, damage, or destruction of property owned by others. These typically include direct “suppliers” of goods or services to an insured and direct “receivers” of goods or services manufactured or provided by the insured. The physical damage to these suppliers or receivers usually must be of a type that would be covered by the insured’s policy had the damage happened to the insured’s property.

A CBI extension typically provides coverage for the “direct” relationship between an insured’s “suppliers” or “receivers” of its goods or services. Coverage can sometimes be extended for suppliers of a direct supplier — typically known as “indirect” or “second tier” suppliers. Such coverage may require, among other things, that indirect suppliers are specifically identified.

Leader Property (Attraction Property)

A leader property endorsement provides coverage to an insured for direct physical loss, damage, or destruction — of the type insured by the insured’s property policy — to property not owned or operated by the insured, located within a stated distance to the insured’s property or business, that attracts business to the insured. Examples would include a nearby amusement park, casino, mall, or destination retail store.

Interruption by Civil or Military Authority

This extension provides coverage to an insured for the actual loss of business income it sustains during the length of time when access to its premises is prohibited by order of civil authority as a direct result of physical damage — as insured against in the policy — to property of the type insured. An interruption by civil or military authority extension is commonly found under most policies insuring business income or business interruption.

The coverage time period most commonly specified in this extension is 30 consecutive days. An insurer may also impose a waiting period — typically 48 or 72 hours — that must be reached in order for coverage to apply.

Familiarity with these critical terms and specific relevant policy language is crucial to any organization’s understanding of how business interruption coverage may or may not apply to a loss, the preparation of potential claims, and future purchasing decisions. Risk professionals — working with their advisors — should carefully review their specific policy language and other coverage options that may be appropriate given their companies’ individual needs.

The Business Interruption Policy – unpacked

What is covered by the optional ‘Supplier/ Customers’ extension under the Business Interruption section of a policy?

The optional Supplier/ Customers extensions on a Business Interruption policy is intended to provide cover to a Business in the event that the Business has Suppliers or Customers which are critical to the continued operation of the Business.

If a key Customer or Supplier of the Business suffers damage (as a result of an insured peril) then the Business would experience loss of income as a result and would require cover under the optional extension on their Business Interruption policy.

An example – Business X purchases steel from Supplier Y. Supplier Y is able to provide Business X with a good-quality class of steel within a fast turnaround time. There are no other suppliers able to provide the steel to Business X within the required turnaround time. If Supplier Y suffers a business interruption due to a fire and is unable to provide Business X with the required steel in the necessary turnaround times, Business X will be unable to operate at required capacity and will experience a loss of turnover as a result. Business X will therefore elect to take the Specified Customers’ extension (noting Supplier Y as a specified customer) on its Business Interruption insurance to ensure that their loss of revenue will be covered in the event of an interruption in the business of Supplier Y due to an insured peril.

A Business Interruption policy can have Unspecified and Specified Suppliers or Customers as optional extensions however, the cover under these sections follows the definition of damage in the policy. As a result, the cover will only respond if the specified or unspecified supplier or customer has a loss which results from an insured peril (e.g. fire, water, etc.).

Common Exclusions To Business Interruption Insurance

Business interruption insurance is designed to cover income lost when an event beyond your control forces you to close your business temporarily. This extra layer of protection goes beyond common business insurance policies. For example, if a fire in your office forces you to shut down temporarily, property insurance will cover the damage from the fire, but not the loss of income. The lost income is covered by business interruption insurance. What Business Interruption Insurance Covers A business interruption policy can provide coverage for:

Business Interruption Insurance Exclusions Like any other insurance, business interruption insurance has limitations and exclusions. It does not cover every event that could possibly cause your business to close its doors. If a non-covered event such as a flood keeps your business from operating, you will not be covered by business interruption insurance unless you have a flood insurance endorsement to your property insurance policy. Generally, business interruption insurance will not cover:

Although there are exclusions, as with any insurance policy, business interruption insurance may provide the extra layer of protection your business need. Speak with an experienced agent about the best available rates for adding business interruption insurance to your business and commercial insurance package.

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“Oh no, am I covered for that?” is definitely not a question you want to be asking yourself after disaster strikes your business. When purchasing commercial property insurance, it’s important to understand the contract language so that you know the limits of your coverage, and insurance extensions are a key part of your policy. In order to understand how far your coverage extends, you need to understand what insurance extensions are.

For example, many commercial property insurance policies cover the buildings and other commercial property your business owns and what you list on your policy upon purchase. However, if your operation expands and you need to rent, purchase or build additional property, you’ll want to make sure the new location is covered, even though it did not exist at the time you purchased your policy. Whether you are in the construction business or a jewelry maker who owns your building, you’ll want to know when insurance extensions come into play.

In this post, you’ll find what you need to know about insurance extensions, so you have a better understanding of the scope of your policy.

Insurance extensions, or coverage extensions, include coverage that is already part of your policy but extended in some way. 1 In many cases, the extended coverage is small and provided at no additional cost.

An example of an extension on general liability insurance is called Customer Property Protection . This covers the property of others that is in your care, custody, or control up to a specific limit that will be detailed in your policy.

Another example of an insurance extension involves extending standard coverages to include newly acquired property. This insurance extension covers new construction projects on your existing site and any new buildings in a different location for a specified period of time to give you a chance to update your policy.

Coverage extensions are already provided by an insurance policy but are simply extended in some way to accommodate your needs. By comparison, additional coverage offers you limited protection against specific types of losses or for costs related to covered losses that would otherwise not be covered under the policy.

For example, a standard policy may cover costs associated with debris removal if a storm damaged your property. Additional coverage could include an added expense, such as a service charge from the local fire department. A sub-limit usually applies to additional coverage, and it is typically a lower limit than the policy limit. 2

Your commercial property insurance policy can cover your commercial property, your business equipment, and the cost of business interruption due to a direct physical loss. As we’ve already mentioned, insurance extensions extend your coverage in some way. Here’s a look at six common types of insurance extensions.

1. Newly Acquired Or Constructed Property

This insurance extension includes buildings or business personal property. Suppose your business is conducting new construction on the same premises or acquires buildings at a new location. In this instance, an insurance extension might cover a specified dollar amount for buildings up to a specified maximum amount per building.

Also, the extension for business personal property at newly acquired locations would cover a portion of the existing coverage amount for personal property, up to a specified maximum at each new building.

Take note that this extension typically applies for a maximum number of days and will not extend beyond the policy’s expiration date or the date you notify the carrier of the new locations.

2. Personal Effects and Property of Others

You may get an insurance extension on your commercial property policy to cover personal effects that are owned by you, your employees, your officers, or your partners.

For example, if you own a jewelry repair business and you have a fire in your workshop that destroys, among other things, an employee’s personal possessions, this extension is a good one to have in your policy because it will help to cover your employee’s personal property. One caveat is that this extension usually does not cover loss or damage by theft.

Also, this extension will help to cover the personal property of others in your care, custody, or control, such as the belongings of friends or family you may have on your commercial property.

3. Valuable Papers and Records

In the data-driven age, the most valuable items in a workplace are often its papers and digital records. If records are damaged or destroyed, restoring or reproducing them can be a costly, time-consuming process.

In the event of a loss, you may get an insurance extension to cover the costs of researching, restoring, and replacing the lost information on valuable papers and records.

4. Outdoor Property

You can also extend your coverage to apply to your outdoor property. This property may include fences, shrubs, and signage. This extension may also cover the costs of debris removal, providing the cause of loss is a covered peril, such as fire, lightning, explosion, aircraft, riot, or civil commotion.

5. Property Off-premises

This extension covers commercial property and equipment while temporarily off-premises at another location. However, this cover will likely not apply to the following circumstances:

6. Non-owned Detached Trailers

This extension covers property that is temporarily held in a portable storage facility or detached trailer. A common example is when truck drivers leave trailers at their destination for the recipient to unload. Later, the driver will return to retrieve the empty trailer. This extension will provide some protection for the property until the driver returns.

Despite its vital importance in our lives, insurance remains a mystery for many people. Sitting down to read an insurance policy from cover to cover doesn’t have the same allure as a Harry Potter novel. Let’s be honest — even if you take the time to study your policy word for word, the jargon can often leave you feeling more confused than before you started reading.

But you can’t sweep this under the rug — your business needs a reliable insurance policy. If Murphy’s law strikes, you want to be sure you have the cover you need.

One useful way to confirm that your policy covers you for all your needs is to talk to a knowledgeable agent or broker, who can help you figure out what extensions you have, how they will apply, and whether you will need additional coverage.

We know insurance can be a tricky topic, but you know how important it is to protect your business. When you buy commercial property insurance, you need to know the limits of your coverage.

Thimble makes insurance simple to help businesses succeed on their terms. Whether it’s hourly, daily, or monthly policies, we can provide you with protection against unexpected mishaps. With Thimble, you can get small business insurance in just 60 seconds .

Jamie Green, founder and president, ContentOvation

Jamie is a media executive and former head of content for PropertyCasualty360 , which serves the property and casualty insurance industry, and LifeHealthPro , which focuses on the life and health insurance industry. An award-winning content creator, he has a wealth of insurance and business knowledge.

Terri Hitchcock, JD Chief Insurance Officer, Thimble

Terri has 38 years of industry experience and knows a thing or two about insurance, so she reviewed and approved everything on this page.

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This month our technical briefing introduces the broad topic of non-damage Business Interruption (BI), including a discussion on:

Business Interruption (BI) Risk and Insurance

For most in the insurance industry, the phrase ‘business interruption’ leads to thoughts of property damage triggered BI insurance. However, even though traditional BI insurance policies offer only restricted cover following damage to physical assets, the events faced, and the causes of interruption, have no such restrictions. Most people outside of the insurance industry are oblivious of the dependency of standard BI cover on property damage, they recognise that BI is purely an interruption to business which can be caused by any event, damage or non-damage, internal or external, anywhere in the value chain.

Many businesses are not aware of just how exposed they are in relation to business interruption risk. Very few companies fit the traditional manufacturing firm model for which most BI insurance policies were originally developed. For a start, manufacturing firms often generate more profitable income through services rather than the manufactured product. Also, many companies are part of a complicated value chain from supplier to customer and everything in-between. A business relies on much more than its own assets to operate successfully. Traditional BI insurance was never designed for this type of business, so is it sufficient?

Here begin the issues with BI insurance – perception versus reality. Beyond the risk or insurance team, most businesses have high expectations of what their BI insurance actually covers.

So, with this in mind, it is important to understand the typical boundaries of traditional BI insurance. Property Damage BI insurance can be summarised as follows:

Businesses will always need insurance for damage to physical assets, as a major property damage event is often the worst loss scenario that many businesses face. But the insurance needs to cover losses from other events too, which can come from any event anywhere in the chain.

The potential worst-case loss scenario for some businesses is rapidly changing from property damage to a major cyber event, so the importance of Non-damage BI is rising. But also, it is not just total loss or the perceived ‘catastrophic’ events that businesses need cover for, as the ‘major loss’ definition depends on the size of the business, its cash-flow requirements, debt servicing arrangements, investors’ expectations and the sympathy and tolerance of customers…but that’s another topic for another day.

So, BI insurance covers the loss of income and increased costs involved in getting a business back on track, it is therefore the lifeline in any major loss. There are improvements that can be made to traditional business interruption insurance policies, but a key issue is that the damage trigger is too narrow for modern business. We need to take the view of the majority and will therefore adopt the broader view of business interruption risk for this paper.

Other Events and Risks

This ‘full horizon view’ of BI often distinguishes between damage and ‘non-damage’ BI, the latter being a term regularly used in our industry to describe anything that isn’t covered by a traditional property damage BI policy. There are many events that can interrupt business, that would result in loss of income/value, but without direct damage to assets. Examples include:

With the increasing exposure to global risks and a broader spectrum of risk, such as supply chain, infrastructure, service providers and transportation, the development of Business Interruption insurance needs to reach beyond physical damage to assets. Traditional business interruption policies often don’t provide sufficient protection; businesses and projects remain exposed to major loss, with the potential for significant impact on shareholder value.

The Evolution of Business Interruption Insurance

The industry therefore has an opportunity to develop insurance solutions to meet these varying needs; cover these diverse risks; and help businesses survive any major loss. Many Insurers already offer some cover for these risks in the form of specialist policies. The most common is the Cyber policy that can offer a BI extension clause (Cyber specific BI will be the topic of a subsequent paper). However, a separate new policy for each different event seems excessive and does not seem to be the answer, as we’d end up with hundreds of them. If a single broad policy is more attractive, Insurers and Insureds need to be ready to commit time and resources into to this development before real progress can be made.

For Insurers the development options and choices are vast but can be summarised into Cause and Effect.

Cause – Which risks should be covered from the broad spectrum, including non-damage events and contingent risk? The aim should be to provide cover that goes beyond the basics of damage to physical assets. In a non-damage claim situation, the issue of causation and linking loss to an event can be tricky for a loss adjuster, it’s not as clear cut as when physical damage halts operations. Pre-loss, MDD Forensic Accountants, working with loss adjusters, can conduct BI Risk Analysis including facilitated risk discussions to help identify the most likely causes of disruption and BI loss.

Effect – This is usually loss of income and/or increased cost. There are always decisions to be made on insurance capacity and limits to be offered, level of loss to be retained by the Insured and appetite of both Insured and Insurer. Whether under a pre-loss scenario test, or in a claim situation, it is the forensic accountant that will quantify this effect. This effect can be similar whatever the event – it is the impact on the business that counts.

An Insured needs to go through a basic process of understanding before making any decisions on risk transfer. Otherwise the question ‘is this insurance value for money? ‘ will never be answered. This understanding includes establishing how the business makes money, quantifying exposures using actual/expected losses (medium, large or catastrophic) and identifying the risks it faces directly and indirectly, both from itself and from the industry/community in which it operates. MDD helps Insurers and Insureds to understand risk and quantify exposures under relaxed and collaborative circumstances – before a loss occurs – not just afterwards when there is an insurance claim. This pre-loss BI Risk analysis is relevant for both damage and non-damage events, and deserves its own discussion paper.

Non-damage BI, including in-depth cyber BI, forms part of the MDD Risk & Forensics Development programme. This training and development service is designed specifically for the insurance community and its clients. The programme focuses on your objectives and needs, by developing both products (such as non-damage BI) and people. We can help Insurers to use BI as a leading positive differentiator, and help Insureds feel more confident and comfortable with all BI risk and exposures – the full horizon view.

ACMA, CGMA, CVA, MEWI, MAE, Partner

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What Is Business Interruption Insurance?

This important policy, clause or endorsement can help if an unforeseen event impacts your small business. Learn how it works, what it includes, and when to consider business interruption insurance.

An unforeseen adverse event, such as a fire, can have a devastating impact on your small business’s operations. Although standard property insurance may cover specific types of property damage, business interruption insurance (also known as business income insurance) fills in the gap, addressing lost income and other issues that arise when your business shuts down unexpectedly. Here’s what business interruption insurance covers, how it works, and how to obtain this coverage for your small business.

What is business interruption insurance?

Business interruption insurance kicks in when a business can’t operate normally because a specified peril caused physical property damage, rendering the business inoperable. It covers operating expenses and other lost income for a certain period of time after the business shuts down. The policy spells out the type of unforeseen events that qualify for coverage.

You can obtain this type of business insurance as a stand-alone policy from any of the best liability insurance providers . You can also find it as an inclusion in your business owners policy (BOP) , or you can purchase it as a rider to an endorsement or property insurance policy or package.

Editor’s note: Looking for the right liability insurance for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

What does business interruption insurance cover?

Most business interruption insurance providers typically cover the following types of perils:

Falling objects

Be sure to read your business interruption insurance policy documents so you know precisely which perils your insurer covers.

Here’s an example of how a boilerplate insurance clause or endorsement might read (from Pacific Coast E&S Insurance documents):

“We will pay for the actual loss of business income you sustain due to the necessary suspension of your ‘operations’ during the period of ‘restoration.’ The suspension must be caused by the direct physical loss, or damage, to property at premises … The loss or damage must be caused by or result from a covered cause of loss.”

Typical business interruption insurance policies include the following coverage areas (but note that these areas may deviate slightly according to a carrier’s formula for calculating financial losses):

You should also consider workers’ compensation insurance , which will be a separate policy.

Business interruption insurance example

Let’s say a fire damages your warehouse, leaving the building uninhabitable and destroying merchandise already packaged to send to customers. According to Allstate, there are two main ways business interruption coverage can reimburse you:

The property coverage in your business owners policy would help pay to repair the damaged building (if you own it). Business interruption coverage would not pay for these types of repairs.

Carefully review your business interruption insurance policy, since the insurer will have its own specifics on calculating lost income. Accounting criteria for lost income and expenses can include the following:

Financial loss calculation methods, such as net income vs. revenue, depend on your carrier. Accounting criteria for lost income and expenses, reimbursements for lost income, lost revenue based on prior financial records, and other calculations may also vary. Speak with your insurance representative for specifics.

What is a restoration period?

Your business interruption coverage likely has a restoration period – the length of time your policy will help pay for lost income and extra expenses while you reconstruct or restore the property to its original condition.

Read your policy documents to understand when your restoration period starts and how long it lasts. To qualify for insurance reimbursement, the restoration period typically begins when the peril occurs and ends after a reasonable period of time for the property to be restored and operations to fully resume.

Here’s an example Allstate provides: If your business was damaged on Oct. 1, you’d obtain business interruption coverage benefits until Oct. 1 of the next year, even if your policy expires before then. Your policy might end because your business was heavily damaged, and you may not have a business to insure.

If your business’s building repairs aren’t completed before the 12-month restoration period ends, your business interruption coverage will expire. This means you’d stop receiving reimbursement for lost income, for example. Check your individual policy for specifics.

Endorsements and extensions

When reviewing your business interruption coverage with a broker, you may want to discuss whether the following overages are included or can be added with an endorsement:

Extended period endorsement

Business owners experiencing difficulty during the restoration period can seek an endorsement that includes a 30-day extended restoration period provision.

Under Marsh McLennan’s policies, for instance, if an insured business needs more time to restore the property beyond the 30-day limit, they can buy an extended period of optional indemnity endorsement for various time periods, ranging from as little as 30 days or any multiple of 30 days up to 720 days. Check with your provider for specifics.

Coverage extensions

A coverage extension provides insurance for business income losses resulting from certain specified events, such as service interruption, contingent business interruption, leader property, and interruption by civil or military authority (for example, if a state, local or federal governmental entity restricts access to your property). A sublimit typically applies for each additional coverage, according to Marsh McLennan.

You can include a service interruption extension in the policy, so ask your insurance provider for details. A service interruption extension typically provides business income coverage arising from direct physical loss, damage, or destruction to any utility service’s transmission lines and related plants, substations, and equipment supplying services to an insured business.

Restrictions may apply, such as waiting periods, distance limitations, the exclusion of certain perils such as earthquakes, and exclusions for overhead and transmission lines. The owners, managers, or operators of such utilities or services are not named as insured under the policy, Marsh McLennan says. Again, check your policy specifics.

To cover damage from floods and earthquakes, you’ll need to purchase a separate type of insurance policy .

Loss limits and exclusions

Marsh McLennan notes that when a business income loss occurs, an insured business is obligated to take reasonable steps to prevent or minimize this loss and any further losses. Expenses incurred to reduce that loss may be covered under the policy as part of the business income loss, as long as these expenses don’t exceed the actual loss.

For instance, if there is a business loss of $200 associated with the interruption of business operations, the insurer could reimburse $100 to reduce the loss, but it will not reimburse the business $100 if the claim is reduced by $50. If the business incurs other expenses above this claim amount to continue to operate the business, those could be covered under an additional expense provision if one is included in the insurance policy.

Other items that a business interruption policy may not cover include utility payments, undocumented income, or damage from an event already covered by your policy.

Policy specifics

Coverage varies across businesses interruption policies, although policy specifics are key, and policy verbiage is important to note. CNA’s policy details require “a direct physical loss” or damage that interrupts your business to qualify for coverage. Terms and exclusions may also limit or preclude coverage.

This “direct physical loss” and exclusions verbiage may determine whether or not the policy is upheld or denied in court.

Other areas to note, particularly in light of COVID-19, are exclusions for microbes. Manufacturers should take note of exclusions for losses associated with pollutants and contaminants, as well as information about any deductibles, waiting periods and policy limits. This information is on the declarations page or within the section detailing your coverages.

COVID-19 repercussions

Temporary shutdowns due to COVID-19 restrictions have been a recent notable issue in business interruption insurance. For instance, a Pennsylvania state court judge ruled that a dental office was owed business interruption coverage under its business interruption policy with CNA Financial due to temporary shutdown orders in 2020 in the midst of the COVID-19 pandemic.

The courts determined that the specific policy verbiage of “ direct physical loss of or damage to property ” was a key factor in ruling for the insured.

The Pennsylvania case is one example of the 1,000-plus COVID-19 coverage claims businesses have filed against insurers. Many cases have been ruled in favor of the insurers, but policyholders, usually small businesses, have also won several rulings. In many of these cases, the main legal issues are either allegedly direct physical loss or damage to property, or whether the policy’s communicative disease coverage is associated with insurance policy stipulations of direct physical loss or damage to property.

When to consider business interruption insurance

Retailers and businesses within the manufacturing and service industries should consider business interruption insurance. Any business that provides a service or goods should also consider this type of coverage.

Speak with an insurance representative or agent about your specific business. According to Allstate, there are several factors to consider when opting for business interruption insurance. Think about any potential risk associated with your building’s location, safety protections, and any added precautions made to secure your premises, such as cameras, sprinkler systems and fire alarms. Be aware of comparable real estate space availability if you need to move to a temporary location as well.

How much does business interruption insurance cost?

As with any business insurance policy, costs depend on underwriting standards, the size of your business, and numerous other factors. Those include the following:

Contact an insurance broker or agent for specific business interruption insurance quotes. Your location can also impact your policy’s price, according to Chubb (read our review of Chubb for more information). Similar to homeowners policies, if the geographic area is at higher risk for claims, the premium will be higher.

According to business insurer aggregator site Insureon, business interruption insurance premiums usually range from $40 to $130 a month. Rates can be higher for businesses with high liabilities.

Where can I buy business interruption insurance?

You can purchase business interruption insurance via major insurers that cover commercial liability. Before purchasing a stand-alone policy for business interruption insurance, find out if you have existing coverage.

If you already have a BOP with your insurance company, check the policy details, since these usually include business interruption coverage. Also, see if your general liability policy has an endorsement for business interruption insurance.

Allstate notes that business interruption insurance typically has a coverage limit, the maximum amount your insurer will pay toward a covered claim. You’ll pay out of pocket for any financial losses that exceed your coverage limit, so make sure the coverage amounts you elect are appropriate for your business, and speak with your insurance agent if you need additional coverage.

As always, discuss any concerns with your insurance agent and refer to your company’s risk management plan to make sure you obtain adequate coverage.

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Take into consideration the dependencies of your own business

Property Insurance indemnifies the effects of a physical damage on insured property. However, for a business to secure its long-term survival, Business Interruption Insurance is invaluable.

Generally speaking Business Interruption Insurance is always triggered by indemnifiable property damage, though there are some exceptions when certain extensions are incorporated into the insurance policy wording (e.g. the business is affected by a damage that occurs outside of the premises of the Insured). Therefore you have to take a wider perspective when you look at your Business Interruption cover and take into consideration the dependencies of your own business.

It is not an easy task but nevertheless a very important one. In addition, dependencies also have a tendency to cause accumulation problems, which is why mapping the risks is very important, not only for the Insured but also for the Insurer. Dependencies can be both internal and external.

This article focuses on the following types of dependencies:

Interdependencies

Suppliers and customers, public utilities.

Denial of Access

If a company within a group is dependent upon other companies within the same group this causes interdependencies. If each company is insured separately to cover the business interruption risk then each company has to have a Suppliers and Customers extension.

These extensions often have a stipulated limit, which is why there is a risk that the limit may not be enough. Another way to insure the interdependency risks is to have a group solution, which covers the business interruption loss of the group, and not have a solution based solely on the individual subsidiary company level.

This method of insuring is a better way of protecting the financial risk of the group, which in most cases should be the Insured’s main aim at group level. On the other hand the Insurer is reluctant to insure any unknown risks why they need to include a limit for interdependencies if such are unknown.

A company is nearly always dependent on services from suppliers. However, a company can also be dependent upon suppliers’ suppliers, to ensure that services/products are delivered to the customers. If the company does not get the required services/products from the suppliers it will have a financial impact on the business. This could result in higher costs, having to choose another more expensive supplier, or even in lost business.

There is insurance available that can offer protection to the Insured for the financial effects of damage occurring at the supplier/customer. However, this cover is subject to the proviso that the damage is indemnifiable (normally with a FLEXA cover).

If the damage is not indemnifiable it is considered a business risk and not an insurable risk. What happens if the problems start at a suppliers´supplier? The normal extension does not cover this type of risk. However, subject to a special agreement with an insurance company such risks can might be covered.

Claims due to damage that occur at a supplier are more and more common. At If P&C these types of claims have increased during the last couple of years. One reason could be that more complex products involve more sub-suppliers. Another aspect affecting the risk is the level of the stock. If you have a lean production system using the just-in-time principle then there is no space for problems in the supply chain.

Insurance claims due to damage occurring at customers are much less common than claims due to damage occurring at suppliers. One can ask why? Has the insured simply forgotten to notify the insurance company about a potential claim or is it easier to find a new customer than a new supplier?

The significance of companies' dependency on suppliers and customers

The catastrophe in Japan has highlighted the significance of companies’ dependency on suppliers and customers. The car industry is a good example. The lack of a small component can make it impossible to deliver the end product, the car. If a supplier/sub-supplier has a very strong position in the market then the risk of a huge impact is even greater. These NatCat risks are very hard to estimate and the consequences can be devastating.

When considering the sums insured for the Suppliers and Customers extension one often talks about named and unnamed parties where the limit is often higher for named parties. It is easier both for the Insured and the Insurer to pinpoint a risk and calculate the risk if the supplier/customer is identified.

One problem both the Insurer and the Insured have in common regarding this risk is that it is very hard to control and affect the physical risk at a named or unnamed supplier/customer. This makes it hard to calculate the real risk. Limits are a way for the insurer to minimize the effects of risk miscalculations.

When it comes to an unnamed supplier/customer the control is even weaker and therefore the limits for the sum insured are even lower. How do you minimize the risk and consequences when trouble arises at the premises of suppliers and/or customers?

Deal with it or be proactive

One way is to try and deal with it after the problems have started. Another method is to try to be proactive and minimize the risks before they have created a problem. One way to be proactive is to have a purchasing/customer policy stating that the company shall have at least some alternative suppliers and not be too dependent upon too few clients. Do not put too many eggs in the same basket!

The contracts can also be written in a way that the risk is minimized by using penalties or clauses that stipulate that the suppliers have to cooperate if something happens, etc. One can also demand that the supplier has an all-risk insurance to improve the possibility that the supplier has the means, for example, to rebuild after a fire.

One way of knowing your risk is to map it using a business continuity plan, which includes the dependency risks. It is a bit like the elite athletes and their preparation before competitions, which includes both physical and mental training. A problem that can arise if there is a loss at a supplier or a customer is in regards to claims handling.

It is much harder to discover the root cause of the claim, which is very important in Machinery Breakdown claims, i.e. to determine whether the loss is indemnifiable or not. Neither the Insured nor the Insurer has direct access to the place where the breakdown happened. It is also much harder to mitigate the loss since the decisions for expediting operations etc. are not decided directly by the Insured. It is even harder if the damage happens at a suppliers' supplier.

To be able to manufacture products/deliver services the business is almost always dependent upon public utilities such as electricity, gas, water, etc. If there is an unforeseen interruption in a delivery there is an extension that can cover the effects of such an interruption.

If it is a planned stoppage it is not covered under the extension. There is an argument for stating that such an unforeseen interruption could also be indemnified under the extension for named/unnamed suppliers.

Denial of Access

There are different types of extensions for Denial of Access. One type is coverage for Denial of Access due to an indemnifiable loss occurring in the vicinity of the insured’s premises.

Another type is cover for an unforeseen shut down decided upon by a public authority. For example in a bomb threat physical damage has not actually taken place and the business interruption loss is not covered if you do not have the relevant extension for Denial of Access.

Waiting period and dependencies

The normal way of insuring Business Interruption is to have a specific indemnity period, a sum insured, which is normally the annual gross profit and a certain waiting period, which is a kind of deductible based on a time element. The most common way is to have the same waiting period for both the normal Business Interruption coverage and for the dependencies.

The waiting period works as intended if there is a property claim at the Insured’s production site. The principle is that the indemnity period starts from the occurrence of the indemnifiable property damage. When the insurer indemnifies the loss the economic consequences due to problems in the production process during the waiting period are deducted from the overall loss.

If you apply the same principles to a damage occurring at say a supplier there might not be any effect on the Insured’s production process for a long period due to, for example safety stock/delivery times etc. The waiting period in such claims will be consumed as the principle of occurrence will tick and take away the share of the loss meant to be retained by the Insured.

A way of avoiding this is to have a monetary deductible regarding dependencies, which could correspond to the waiting period on normal Business Interruption claims. Another way is to have a combination of a minimum deductible in monetary terms and a waiting period. The wording could also be rewritten to clarify how to apply the waiting period and how to calculate the indemnifiable loss.

To be able to minimize the risks for your business it is very important to map not only the risks within your company but to have a wider perspective. The Business Continuity Plan must include the dependency risks. When the risks are known it is very prudent to minimize those risks by working proactively.

When that is done the appropriate insurance cover will have to be created to cover the risks still remaining. Through this working method you will minimize the actual risks, sleep better and hopefully also have a more accurate sum insured which could save you a lot in premiums!

Text revisited in October 2021. Original article published in If News, Lessons from Losses 6/2011.

Business interruption

Aston Lark provides clients with a variety of commercial insurance packages that will respond to the specific risks and challenges you face every day.

From Employment Practices Liability to Business Interruption, Professional Indemnity to Trade Credit, the range of our insurance cover is vast. This means whatever the nature of your business, we can help you protect it.

Covering your assets, consequential losses, legal liability and infrastructure, the business combined policy will provide the core insurance protection you need.

Cyber Risk insurance, also known as Cyber Liability insurance, is one of the fastest growing areas of cover as businesses become ever more reliant on technology.

Directors and senior managers can be held personally liable for their actions and decisions, resulting in significant legal costs and in some cases, awards.

Employers can be held liable for claims made by employees alleging discrimination based on sex, race, age or disability, as well as wrongful termination, harassment and other employment-related issues.

Often, running a successful business or organisation relies on your employees – whether that’s a full-time team, temporary staff, or volunteer workers. But if an employee gets injured or becomes ill as a result of working for your business, they may have a right to claim for compensation – and this can come at a high price.

Aston Lark can arrange many types of business indemnity insurance, to cover a wide range of situations, from chancel repair liability to administration guarantee.

A Professional Indemnity insurance policy is designed to offer protection for liabilities incurred as a result of negligent acts, errors, or omissions in the course of a business’ professional service.

After a product has been handed over to the customer, Product Guarantee insurance will provide cover against the cost of replacing, reworking or recovering products that have failed to perform their intended function due to faulty design, manufacture or installation.

What is Trade Credit insurance? In its simplest form, it is a way in which companies can protect themselves if customers who owe your company money are unable or unwilling to pay.

A Surety Bond provides the back-up guarantee for a contract between two commercial parties.

Building warranties are specialist insurance products which provide financial protection against construction defects that aren’t solved by the original contractor.

A Personal Accident and Travel policy provides business travellers with cover for costs arising from unexpected events during business travel, including medical expenses, loss of baggage or money, cancellation or delay as well as compensation in the event of injury, disability or death.

Providing coverage against terrorism risk.

If you import, export or manufacture goods, then the success of your business relies on those goods arriving in one piece. But sometimes, the journey can be risky.

As well as our general commercial insurance offering, we arrange insurance for several specialisms, including Care Homes, Funeral Directors, Diplomats and Embassies, and Masonic Lodges.

From independent motor trade professionals to franchise dealers, recovery operators to auction houses, we provide Motor Trade insurance for motor traders of every shape and size.

The Aston Lark Classic Motor Trade team has a real passion for helping people who collect and work with classic and historic vehicles. We provide tailored insurance cover for specialists in every part of the classic car industry

At Aston Lark, we design cover for cricket and sports club insurance as well as teams, leagues and associations throughout the UK and Europe, based on specific needs.

At Aston Lark, we understand the high level of care and service required to run a care home, and we aim to provide the same to you.

We offer comprehensive Chauffeur Insurance cover at a competitive price, whether you’re a chauffeur or an executive private hire driver, get a quote today.

With our knowledge of the funeral profession, Aston Lark is the right choice for any funeral professional looking to source tailored insurance solutions that will provide cover that fits their needs.

We have many years’ experience arranging insurance for recruitment consultants and agencies and can arrange cover to meet your needs.

When Pharos Insurance Brokers became part of Aston Lark in 2018, they brought with them their experience of providing Diplomat and Embassy Insurance.

We’re the market leader in Masonic Insurance, insuring over 80% of the Masonic buildings in England and Wales

We provide haulage and Heavy Goods Vehicle insurance cover for a variety of transport companies.

As technology develops and cyber threats increase, Freelance IT Contractor Insurance has become more in demand than ever.

Aston Lark provides insurance solutions especially designed for professional hire fleet operators, combined with friendly support and expertise.

Whether you have a smallholding with a few animals, or a more complex agricultural business, you need to have specialist advice on the right smallholding & farm insurance for you.

Aston Lark has a wealth of experience in arranging insurance programmes for property owners, developers and investors. We have strong relationships with managing agents enabling us to provide our clients with an unrivalled level of service and advice.

BPIF Insurance Services has recently undergone an extensive review to see how we can better serve members which has resulted in wider covers designed specifically for the printing industry which are exclusive to BPIF members.

Claims are bad news. When your clients rely on your expertise and advice to keep them fit and healthy, an injury could easily expose you to a claim, leaving you and your business vulnerable.

We have specialist knowledge of the metal recycling and vehicle dismantling industries which stretches to over 20 years.

Whether you’re a filmmaker or a financial advisor, a restaurateur or a rail contractor, Aston Lark has you covered. Our specialist knowledge in these sectors means we can offer you the most suitable cover at a competitive price.

Providing film & media insurance for over 20 years

Providing insurance for construction companies is one of Aston Lark’s key strengths. Our experienced staff can help with all aspects of construction insurance, and can support single subcontractors, large corporate developers and main contractors.

Jobson James Rail is our Rail Insurance provider. They have a widely recognised specialism in the Rail Industry.

Professional insurance services, risk management and employee benefit solutions for all types of financial services firms, including independent financial advisors and fintechs.

With access to a wide range of insurance companies, all with strong financial ratings, we can recommend solutions that are specifically tailored for your activities, ensuring you are comprehensively covered.

Aston Lark offers bespoke insurance solutions that are crafted to cover your activities. We will offer a personal service and work alongside you to fully understand your business, operations and staff.

Our knowledge from working with manufacturers puts us in a great position to understanding the important factors when creating comprehensive insurance solutions.

Aston Lark offers tailor-made insurance solutions that cover the different risks faced in the food and drink sectors.

Through many years’ involvement in the education sector, we understand the unique insurance needs of our clients, the pressure on budgets and the need to deliver real value for every penny spent.

At Aston Lark we have a passion for working with the full spectrum of businesses in the Life Science sector. Whatever stage you are at, we can guide you through how to identify and manage your risks through a bespoke insurance programme.

We are able to provide flexible cover to cater for the unique challenges that can come from such a wide variety of different organisations.

Aston Lark has a wealth of experience working with a variety of different businesses in this sector including hardware and software, e-commerce, internet and telecommunications companies, to name a few.

We place much importance on understanding the risks faced by our clients as this enables us to tailor insurance products to meet with the variety of risks and requirements that clients may have.

We arrange cover for motor traders, haulage operators, self-drive hire companies, vehicle recovery operators and classic car restorers, as well as a whole fleet of others.

As specialists with over 15 years’ experience arranging chauffeur fleet insurance, we provide tailored cover to meet the unique needs of your business.

Commercial Motor Fleet insurance is vital for many organisations, as their fleet of vehicles is a significant investment and is often a key part to ensuring their operations are efficient and successful.

Aston Lark arranges insurance for a significant proportion of the car transportation industry, helping them find the right insurance solutions for their business.

Aston Lark understands that running a small business is always personal. So your SME insurance should be too. Our dedicated team will take the time to get to know your business – so we can find you exactly the right cover.

Bringing insurance policies back to basics – Glossary

Business Insurance from Aston Lark

Our risk management solutions at Aston Lark help you identify, manage and reduce your risks, ensuring that your business continues to run in a balanced and cost-effective way.

We provide a variety of health and safety solutions to help you reduce your risks, improve the safety and well-being of employees, and ensure your business is legally compliant.

To improve your business’ health and safety, we offer a web-based risk compliance portal supporting you in areas such as human resources, business continuity and legislation.

Risk Manager is our web-based health and safety management system for performance reporting and task management with SME and corporate versions available.

Our Business Health & Safety Review packages provide you with a health and safety action plan to improve your risk management in areas that are not being well-managed.

IOSH Managing Safely training is aimed at line managers to encourage safety in the workplace and is delivered through a variety of learning methods.

We offer various business continuity, resilience and disaster recovery services, supported with software, to get you back on track following a disruptive event.

Our cloud-based risk management tool has a range of valuable resources to help you fulfil your regulatory compliance and improve your operational resilience.

Here at Aston Lark, we offer a range of tailored reviews, helping you understand your ability to withstand and recover from major, unplanned disruption.

For companies that rely on technology to conduct business, it’s more important than ever to take steps that can prevent cyber criminals getting hold of information.

We provide cost-effective solutions that help visualise risks to insurers, as well as provide all the information an underwriter needs to put forward the best terms possible.

Our risk control survey menu offers three different and innovative ways to carry out a survey, no matter when and where.

We offer two building insurance rebuild valuation services to support your asset management and ensure they are valued correctly.

Fire safety assessments will reduce risks and help keep employees, customers and others at the property safe, whilst protecting the business.

We provide services that are designed to help you manage, review and reduce your occupational road risks, to improve the running of your fleet and save money.

Our fleet auditing service provides you with a clear and detailed report which identifies the strengths and weaknesses in your overall Occupational Road Risk programme.

Continuum is a driver risk management platform where you can easily and quickly manage your entire driving community, ensuring real-time compliance with HSE legislation.

We have two solutions available to ensure that your fleet management is applicable to current legislation: Driver Licence checks and Grey Fleet Management.

To ensure compliance with health and safety and road legislation, we offer several driver training courses delivered through different channels.

Lightfoot is an innovative driver reward platform that utilises in-cab technology to provide real-time feedback to drivers and rewards positive driver behaviours.

VisionTrack is Europe’s leading provider of cloud-based video telematics, vehicle cameras and computer vision, improving driver engagement and behaviour.

Our Benchmark Review service is a health-check where we’ll identify key issues and provide you with a tailored risk management plan to address.

Welcome to Aston Lark’s Resource Hub where you can find everything you need to help you better understand Risk Management and stay up to date on what we’re up to.

At Aston Lark, we will search the market to find a fitting provider and relieve you of the administrative burdens of running your employee benefits scheme.

Aston Lark’s Private Medical Insurance can cover the cost of your private hospital treatments for curable medical conditions. Contact us today to get a quote.

We can help you find effective company medical insurance that combats long treatment waiting times, employee absences & helps your employees recover quickly.

Aston Lark provides you with specialist advice on dental medical plans for your employees. Contact us to get your dental medical insurance quote.

At Aston Lark our specialist Group Risk Team help you find the right benefits solutions and Group Risk Insurance for your business. Contact us to get a quote.

Aston Lark’s Critical Illness Cover provides vital support for your employees when they need it the most. Contact us today to get your critical illness cover.

Aston Lark’s Group Income Protection provides your employees with peace of mind, covering essential monthly costs during recovery. Contact us to get a quote.

Aston Lark’s Group Life Assurance allows your employees to choose their beneficiary and care for the people they love. Contact us today to get your quote.

At Aston Lark we can help you provide a competitive Group Pension Scheme that your employees will value. Fill in a quote for our our Group Pension Scheme today.

At Aston Lark we provide interactive workshops aimed at members of employer sponsored pension schemes. Contact us today to learn about our retirement workshops.

Help your employees understand their benefits with Aston Lark’s group sessions and one-to-ones. Contact us to learn about our workplace engagement sessions.

Aston Lark’s Business Protection Insurance protects your business against the sudden loss of a key figure or shareholder. Contact us today to get a quote.

Aston Lark’s Key Person Cover protects your business against the sudden loss of a key figure. Contact us today to get your key person cover quote.

A relevant life plan helps make sure their dependents will be looked after in the event of their death, helping your team run your business with peace of mind.

Aston Lark’s Shareholder Protection Insurance Policy, funds the purchase of shares after a shareholders death or critical illness. Contact us to get your quote.

At Aston Lark we can help you take care of your employees wellbeing which will also protect the heart of your business. Contact us today to get a quote.

Aston Lark’s Employee Assistance Programme gives your employees support for personal and work-related issues, 24/7. Contact us today to get a quote.

At Aston Lark we can help you support and engage with the holistic health and wellbeing needs of your staff. Contact us to get a workplace wellbeing quote.

Your employees are your most valuable asset – and taking care of their wellbeing will protect the very heart of your business. Enquire now for healthcare cover.

Aston Lark’s Health Cash Plans reimburse your employees routine healthcare expenses and provide immediate value to your employees. Contact us to get a quote.

A flexible employee benefits package shows that you recognise that different employees will have different needs, across a range of life stages.

Aston Lark are delighted to be working with Pirkx, who offer a employees benefit package that helps companies of all sizes support the wellbeing of their teams.

Check out Aston Lark’s Resource Hub for all the information you need about our Employee Benefit options, and how they could benefit you and your employees.

Browse through Aston Lark’s wide selection of case studies; find out what worked for us and where we learned how to overcome difficulties across various situations.

Browse Aston Lark’s archive of testimonial videos & reviews. Download our testimonial brochure for a comprehensive view of how we’ve helped our customers.

Our Employee Benefits Glossary is an overview of some of the main employee benefits we offer at Aston Lark as well as commonly used terms.

Check out Aston Lark’s Literature for all the information you need about our Employee Benefit options, and how they could benefit you and your employees.

Meet the team at Aston Lark who take care of your employee benefits packages. Contact us today to get a quote for setting up your employee benefits.

Check out Aston Lark’s latest articles for all the information you need about our Employee Benefit options, and to stay up-to-date with the latest health and wellbeing insight.

To support your journey to workplace wellbeing each quarter, we will provide you and your employees with a Journey To Wellness roadmap.

Late last year, we partnered with a research agency to look at the evolving employee benefits landscape, flexible working patterns, current trends, and the anticipated future direction of employee benefits strategies amongst UK SME private sector businesses.

Our Private Client division is an award-winning personal insurance specialist. From buildings insurance to contents insurance, call our team of specialists today.

At Aston Lark, our personal insurance team is entirely focused on people whose properties, possessions and assets fall outside the ordinary.

Extraordinary families require extraordinary service. Find out more about the risk strategies and portfolios we offer for affluent families.

As your world expands you might like to add some simplicity. Find out about our simplified cover for people with growing assets

Irregular properties can still get regular priced insurance. Find out more about our insurance solutions for particular or peculiar circumstances.

Your home is likely to be your most valuable asset, so it makes sense to take expert advice to protect it.

At Aston Lark, made to measure is our mantra and we’ll ensure the policy you get meets all your requirements.

Contents insurance is much more than simply protecting a random collection of items. It’s about protecting possessions that are precious to you.

It is likely that you have a lifestyle that is worthy of a little extra protection and you appreciate the importance of bespoke insurance to truly safeguard what is yours, supported by exceptional service.

With people increasingly investing in properties in the UK, the need for adequate insurance for second homes is essential.

Whether your holiday home is in the UK or overseas, a sprawling villa or a country gite, it still deserves the same quality of policy and service.

With the rise of the ‘staycation’ and the growing presence of online rental companies, renting your property has never been easier. However, making sure you have the right insurance in place has become increasingly complicated.

With a property being unoccupied there comes increased risks such as burst pipes and burglaries. You therefore need to ensure that you have the correct insurance in place so that in the event of a claim you are fully covered.

If you are working from home for your employer, as a freelancer, or running your own business, there are a few things you ought to consider in respect of your home insurance.

A listed property is a special place to call home. Alongside the privilege and prestige of owning a listed property, there are some serious responsibilities and obligations.

Renovation Plan is a specialist insurance product for all types of properties undergoing construction, renovation or conversion.

As a property owner, insurance policies need to be flexible enough to suit your unique needs.

If you own a property which insurers consider to have a non-standard feature, you may require a specialist home insurance policy that is not always available from traditional home insurance providers.

Finding insurance for a home that’s unusual, unique or quirky can be difficult. Insurers’ definition of ‘standard’ can vary greatly and often there isn’t the tick box that perfectly reflects your home.

Understanding the specific needs of a thatched property owner is key to the service and advice we provide.

If your home has a flat roof, it is considered by most insurers to be a “non-standard construction” and you will need specialist flat roof insurance.

If your home is timber-framed, how confident are you that it is insured properly?

If your home is non-standard and you’ve not told your insurer, you run the risk of a claim not being paid or even your policy being cancelled.

If your home has flooded in the past or is deemed to be in a flood risk area, you may find it difficult to get buildings and contents insurance.

If your home has a history of movement or is known to have subsidence then you need subsidence insurance. Call our team today to discuss your needs.

Before you fit solar panels to your home, whether on the roof or in the garden, you should check with your home insurer that they’re covered.

When insuring your home remember to insure your outbuildings. Sounds obvious, but people often overlook this. Call Aston Lark today to discuss your cover.

The things you collect require specialist insurance. A standard home contents policy is unlikely to be suitable as it will contain sub-limits and exclusions.

We take insurance for jewellery seriously. We provide you with high quality advice and guidance gleaned from more than 60 years of operating in this field.

Whether you have a large art collection or just a few pieces, you should check it has the correct insurance cover.

Whether you have just one piece of antique furniture, or a house full, one item or an entire collection it’s important you insure it properly.

Lark Music is a trading name of Aston Lark and has been providing specialist music insurance across the world for over 20 years.

Do you invest in wine or buy it to drink? Either way it’s very important to protect your collection, Speak to Aston Lark about specialist wine insurance.

People are often unaware of the true value of their watch and that, in the event of a loss, their home insurance may not fully cover the cost to replace it.

Whether it’s a Renault or Ford, a Rolls Royce or a Bentley, a single vehicle or a multi-car policy requirement, we will be able to reach out to our panel of specialist insurers to obtain competitive quotations.

We will find you a policy that suits you and we can arrange cover for multiple cars and multiple drivers if needed.

At Aston Lark, we understand how valuable your classic car is and we share that passion. We pride ourselves in being customer focused and will always strive to find you the cover you need.

Electric cars are the future, so don’t get stuck in the past when finding the right insurer.

From experience, we know that generic insurance products don’t always fulfil the needs of the most affluent and high net worth clients. And this is especially true for those in need of cover for multiple high-value or prestigious vehicles.

At Aston Lark, we understand that your motorhome is not just any vehicle, it is your home away from home and provides you with the freedom to just up and go on holiday whenever you please.

A campervan provides an outdoor family fun experience for a staycation – essential when ‘camping’. We also understand that your campervan is not just any vehicle, it provides you with the freedom to just up and go on holiday whenever you please.

As specialists in touring caravan insurance, we make sure you have the correct insurance in place.

High value motor insurance policies are available from our experienced team, ideally suited to individual vehicles or collections.

As one of the most luxury car manufacturers, we have a knowledgeable team to offer advice and guidance to find you the right Bentley Insurance cover.

However you choose to use your Porsche, we will take your specific circumstances into account so please call a fellow enthusiast for a Porsche Insurance quote.

At Aston Lark we understand that, like Ferraris, your insurance policy requires extra care and attention. Get a quote for Ferrari Insurance with a personal touch.

Finding the optimum balance between cover and price for your Jaguar can be difficult. We have the ability and knowledge to find a Jaguar Insurance policy that suits you.

Aston Martin is one of the most prestigious brands in the world, so you need car insurance to suit. Aston Lark offer Aston Martin insurance that includes extra care.

Finding the optimum balance between cover and price for your Lamborghini insurance can be difficult. This is where Aston Lark excels.

Finding the right insurance policy for your high value supercar can be challenging. Aston Lark the ability and knowledge to find a supercar insurance policy that suits you.

Whether is it a single electric supercar insurance policy you are looking for or a personal collection of supercars under one policy, we can help.

In the excitement of booking a holiday, it’s easy to forget about the less fun, but still important, things to organise, like travel insurance.

Here you can access our insights on market trends, read our advice on managing your property and see examples of clients we support.

Personal Insurance from Aston Lark

Whoever you are, however you live, and wherever you do business, we’re by your side when you need us most.

Find your closest Aston Lark office

Aston Lark is a diverse insurance broking organisation that is continually acquiring new specialisms into the group.

Aston Lark Executive Team

We pride ourselves on the service we provide and our high calibre of staff, and are proud this has been recognised within the industry.

Whether you’re early in your career or a more experienced insurance professional, Aston Lark offers a great opportunity to develop your career.

Sharing and promoting our values of sustainability and good corporate citizenship with all our stakeholders and with our local communities is vital to who we are as a business.

Talk to us about the future of your business. Joining forces with Aston Lark could be the perfect solution.

Keep up to date with the latest news and views from Aston Lark.

We’ve produced a library of articles which will help you understand what underinsurance is, what the consequences are, and how you can avoid it.

The dark, cold, wet and sometimes snow-filled months of winter can often bring increased insurance risks, particularly in relation to property and vehicles. We’ve therefore produced a library of articles to help you identify and manage those increased risks.

We’ve produced a library of articles to help you understand whether your home is classified as non-standard, and how to get the best insurance policy for your home.

In this library we share advice from some of our partners on market trends for particular assets, as well as advice on how they should be insured.

In this library we offer advice on how you can help protect your property and how having the right security in place can influence your home insurance premiums.

Listen to the latest podcasts from Aston Lark.

Make an enquiry or find your most relevant Aston Lark office

Business Interruption Insurance

Helping your business recover after a loss.

Give us a call

Request a quote, is your business interruption insurance sufficient for your business needs.

For many businesses, it can be difficult to predict the financial implications a major interruption would have on their balance sheet.

The potential consequences can be more devastating to a business than the loss of any physical assets.

When a business suffers damage, it is almost certain that two things will happen:

This is where Business Interruption insurance steps in. It will alleviate the financial headaches whilst the business attempts to recover following the major incident.

Business Interruption cover will indemnify your lost income and cover fixed costs to ensure you can continue to recover. Consideration should be given to your indemnity period (the agreed time period for which your insurance company will continue to indemnify you). If this is too short, your business may not be able to fully recover.

A Business Interruption policy can benefit from a variety of additional extensions. Careful consideration should be given to the extensions you may need. Click here to find out more.

Whether your business operates from a single site or you have operations across the globe, our team has the specialist knowledge and experience to ensure your Business Interruption policy is fit for purpose.

Business Interruption Explained

Watch this short video to learn more about Business Interruption insurance.

What our clients say

“Without Aston Lark’s involvement, I wouldn’t be in business today. When we tested our insurance policy, it proved to be the right one.”

Neil Sampson – Automated Gate Group

Additional Considerations

Frequently asked questions, when is business interruption insurance required.

Business Interruption insurance (BI) is required following a material damage loss affecting your business to assist you with regaining the predicted pre-loss trading position, had the loss not occurred. The cover aims to maintain the turnover of the business during the chosen indemnity period so that trading is not unduly affected.

How does Business Interruption insurance work?

Business Interruption insurance works by indemnifying the insured so that they are put in the same financial trading position that they would have been in, had the loss not occurred. Trends of the business will need to be taken into consideration in the calculation of the BI sums insured to ensure that any settlement is calculated accurately. It is important to remember that for BI cover to operate, there has to be an insured incident which has not been excluded from the property damage section of the material damage policy, that causes interruption and/or interference with your business. This incident must have occurred during the policy period.

In what ways can I insure for Business Interruption?

You can either insure for your ‘Gross Profit’ (commonly used for manufacturers), your ‘Gross Revenue’ (typical for businesses such as accountants or solicitors) or you could insure for ‘Increased Costs of Working’ (often used if you do not believe that either your Gross Profit or Revenue will likely be affected by a loss). ‘Increased Costs of Working’ will be incorporated into both a ‘Gross Profit’ or ‘Gross Revenue’ sums insured.

What if I need to temporarily relocate my business?

An example such as this is exactly why Business Interruption insurance cover will be integral to the continuation of your business. You may well need additional funds to arrange the rental of another office or factory location and when calculating the BI sums insured, it is important that you allow for such an occurrence. How much additional funding would be required to relocate the business? Would you need to continue paying the rent at your current location and pay staff overtime costs too? These are examples of the factors that you will need to consider when assessing your business interruption requirements; Business Interruption insurance can indemnify you for such costs.

How long will I need this insurance to protect me?

You will need to consider how long it will take following the first day of the loss for your business to fully get back up and running and return to the trading position it would have been in had the loss never occurred. All Business Interruption cover will cease at the point the business is fully recovered or on the expiry of the indemnity period, whichever happens first. If this period is too short, you will not be allowing for the business to fully recover and potentially the future of the business could be at risk.

We can provide you with different lengths of indemnity periods to consider the relevant premiums payable. Some of the factors you will need to consider are rebuilding time, planning consents and enquiries, regaining lost market share and customer base, retraining staff and lead time for replacement machinery/plant.

How is business interruption insurance calculated?

The calculation of your BI sums insured depends on the method of insurance (referenced above under ‘In what ways can I insure for Business Interruption?’) When insuring your Gross Revenue, this will be the sum of your total turnover of the business, without any deductions (except for any savings made) and for the length of the indemnity period. When calculating an appropriate Increased Costs of Working sum insured, a suitable figure will need to be chosen by you to allow for potential increased costs; please discuss this with your dedicated Aston Lark contact(s).

It is vital the sum insured you select is sufficient for the full length of the indemnity period. If you are underinsured, your insurance policy will not work as intended and the claim settlement will not be sufficient to support the business. If the underinsurance is severe, the future viability of the business could be at risk.

Do I need to adjust my sums insured for business trends?

Yes. If you are a rapidly expanding business with a demonstrable growth potential, you may well receive a settlement based on a figure higher than the current turnover (on the basis that your BI sums insured have been calculated correctly).

We are a small business; do we need Business Interruption insurance?

Regardless of the size of your business, if a material damage loss occurs, it is highly likely that you will require additional support in ensuring that your turnover is maintained. This insurance is there to protect you from a situation whereby the business potentially suffers so badly that you are no longer able to trade or worse, you fall into liquidation.

What Business Interruption insurance extensions are there?

A standard BI policy will only cover those losses that are as a result of insured damage at your own business premises but your revenue may be affected by a third party premises or other circumstances. The following extensions are the most common that can be applied to a BI policy:

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Business interruption: infectious diseases extensions

The latest case to grapple with the coverage of business interruption insurance in response to the covid-19 pandemic is that of the irish high court in hyper trust ltd v fbd insurance plc [2021] iehc 78; [2021] lloyd’s rep ir plus 6. this was the hearing of four test cases, representing some 1,300 others, based on fbd’s standard business interruption policy wording for public houses. the evidence showed that fbd had a long-standing relationship with the vintners federation of ireland, a trade association representing irish publicans, from which it may be assumed that the wording of the policies had been thought suitable for the industry – at least until the outbreak of the pandemic..

The relevant extension was somewhat differently worded from the clauses discussed by the UK Supreme Court in The Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1; [2021] Lloyd’s Rep IR 63, although the judgment of McDonald J refers at various points to the conclusions reached by the Supreme Court.

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Mar 29 2021

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What Is Contingent Business Interruption Insurance?

Last Updated: September 15, 2022 By TRUiC Team

There are so many insurance options available to business owners these days that it can be hard to keep track of them all. Some coverages, like general liability insurance , apply to a wide variety of business types and sizes.

Others, like business interruption insurance , and by extension contingent business interruption (CBI) insurance, are reserved for companies with some level of risk of their business being unable to operate for a period of time.

If your company requires business interruption insurance, you may also want to consider adding contingent business interruption coverage to that policy—especially if your business relies heavily on a supply chain. But does your company really need CBI coverage? And what exactly does it cover?

In this article, we’ll break down several different important aspects of contingent business interruption insurance. From who needs it, to how it works, to some of the disadvantages, we’ll cover all the bases. Read on to discover if CBI insurance is a smart acquisition for your company.

Recommended: Next Insurance combines a high level of protection with the best premiums. Get an online quote.

Contingent business interruption (CBI) coverage is not typically available as a standalone insurance policy. Instead, CBI insurance is an extension of business interruption insurance that expands the coverage beyond your own company, encompassing lost profits and extra costs that result from a customer- or a supplier-related business interruption.

Of course, things can get a bit confusing because business interruption insurance is an add-on to property insurance, and CBI is a rider attached to the business interruption coverage, so you’re looking at a sort of daisy-chain of commercial insurance coverages.

With this in mind, it may not surprise you to hear that these coverages are most often purchased as part of a business owner’s policy (BOP) or a commercial package policy (CPP)—forms of insurance specifically intended to bundle multiple policies into one more-convenient policy.

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Who Needs CBI Coverage?

Contingent business interruption insurance is only really necessary for companies that rely heavily on a supply chain—but if that description fits you, it’s coverage that you probably do need. Especially if your business depends on just one supplier for materials or just a few suppliers, CBI is a really smart acquisition.

Some other situations where you may want to consider contingent business interruption coverage include relying on:

In short, ask yourself the following question: “Does my business rely on other companies to be able to operate?” If the answer is yes, it’s probably time to at least take a long look at acquiring CBI coverage.

What Does Contingent Business Interruption Insurance Cover?

In general, CBI insurance covers your business operations if another company that your business relies on has to shut down for a temporary period. CBI is very similar to standard business interruption coverage except that it covers other companies going down instead of your own.

To get a bit more specific, there are three general categories that CBI coverage breaks down into:

What Does CBI Insurance NOT Cover?

Although contingent business interruption insurance does cover a fairly broad range of potential claims, there are certain areas where CBI coverage will not help you. This is by no means a comprehensive list, but in general your CBI policy will not cover the following claim types:

For more information on what specific types of claims are excluded by your contingent business interruption policy, consult with your insurance provider.

How Does Contingent Business Interruption Coverage Work?

Rather than a simple cause-and-effect model, contingent business interruption coverage pays out benefits if a series of events take place. You can think of CBI coverage as working in four layers, and the conditions of all of those layers must be met if a claim is going to be covered.

To begin with, there needs to be some sort of physical damage for CBI coverage to kick in. If that first condition is met, your claim then needs to fit all four of the following conditions:

If all of the preceding conditions are met by the claim, then the CBI insurance will cover a business interruption loss for the indemnity period specified in your policy.

What Are the Disadvantages of CBI Insurance?

First off, it’s incredibly complicated. We’ve done our best in this article to make everything easy to understand, but don’t let us distract you from the fact that contingent business interruption insurance is one of the most complex and layered business insurance policies we’ve dealt with on a regular basis.

Beyond that issue, there are some tricky spots that can cause snags with CBI policies that could result in your claim not being covered. For example, consider the following disadvantages. Could one of them apply to your business?

How Can You Mitigate Supply Chain Risk?

Of course, insurance coverage isn’t the only way to mitigate risk factors associated with your supply chain. If you follow these relatively simple steps, you will go a long way toward safeguarding your business against supply chain interruptions and also possibly reduce your premiums with your CBI insurance provider.

Final Thoughts

If your business relies heavily on the production of other companies to sustain itself, it might be a good idea to acquire contingent business interruption insurance as an extension of your business interruption policy.

When any one link on the supply chain experiences an interruption—whether on the customer or supplier side of your business—it can have significant consequences for your company as well.

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Contingent Business Interruption insurance: Key considerations for manufacturers

Authors: Larissa J. Gallagher Michael Burg

Contingent Business Interruption (CBI) is an often overlooked but critically important property insurance coverage. In most cases, the coverage is an extension to the business income coverage part of a property insurance policy. In short, CBI provides important protection against loss of net income, continuing expenses and extra expenses resulting from a shutdown of a key supplier a customer.

CBI coverage terms and conditions vary significantly between insurers, and the coverage is subject to significant nuances. Critical analysis by an insurance broker with knowledge of the insured's supply chain and operations is critical to developing and negotiating the necessary coverage.

Note that Contingent Business Interruption is commonly referred to as Contingent Time Element or Dependent Property. The terminology may differ by insurer, but the intent is generally consistent.

Exposure and environment

It's no secret that supply chains have become increasingly complex in the past 25 years. As supply chains become more complex, they are subject to more disruptions that result in significant financial impact. Consider the following drivers of supply chain complexity:

While supply chain complexity and the frequency and severity of disruptions have been building for some time based upon the above points, the COVID-19 pandemic has profoundly impacted global supply chains. Key drivers of the current supply chain challenges include:

The ongoing war in Ukraine has only further challenged already strained supply chains.

As the supply chain becomes increasingly vulnerable and prone to disruption, contingent business interruption becomes more important than ever.

Coverage basics

Coverage terms and conditions vary greatly between ISO standard forms, proprietary insurer forms and manuscript broker or insured forms.

However, in general terms, CBI coverage responds when direct physical loss of damage to a dependent property (supplier or customer) caused by a covered cause of loss on the insured's policy results in suspension of or reduced operations at the insured's covered location.

Example of a CBI covered event

Example of a not-covered event

When the conditions are satisfied, the policy pays for loss of net income, necessary continuing expenses and extra expenses incurred during the period of restoration. The period of restoration is generally defined as the reasonable amount of time necessary for the dependent property — i.e., the supplier or customer — to return to normal operations.

Coverage nuances

The devil is in the details. Too often inadequate time and energy are spent reviewing and understanding the contingent business interruption coverage provided within a property insurance policy. The coverage is often subject to limitations and exclusions that may result in an unexpectedly uncovered claim.

A few key items — many of which are negotiable with insurers — to look for as you evaluate contingent business interruption cover include:

Named vs. unnamed dependent properties. CBI coverage may specifically identify dependent properties subject to coverage. More commonly, however, the cover is provided on an unnamed or blanketed basis applying to all qualifying dependent properties. In certain cases, a hybrid approach is used by providing a lower sublimit to unnamed dependent properties and a higher limit to specifically scheduled dependent properties.

Sub-limited coverage. CBI coverage is generally sub-limited to amounts well below the broader business interruption or time element coverage. The sub-limits are often quite low and not commensurate with the loss exposure. If the insurer will not agree to provide the appropriate limits on an unnamed (blanket) basis, consider scheduling key-dependent properties with higher specific limits.

Coverage territory. CBI coverage generally follows the coverage territory identified in the broader property insurance policy. If the policy coverage territory is the United States, insureds will not have coverage for contingent business interruption losses arising out of dependent properties internationally. This limitation is concerning, given the global nature of the supply chain.

Certain insurers with a U.S. only coverage territory have a broadened territory clause to extend CBI coverage on a worldwide basis.

Direct vs. indirect dependent properties . CBI coverage is often limited to direct dependent properties — direct suppliers and customers. In reality, a contingent business interruption loss could be realized when an indirect — or second-tier — supplier or customer is impacted by a shutdown.

If your policy is limited to direct dependent properties, and you have key tier two or beyond suppliers or customers, request that your insurer schedule coverage for those key indirect dependent properties.

Excluded perils. CBI coverage is predicated upon the loss being caused by a peril insured against in the insured's property policy. If the insured's policy excludes flood, earthquake or high-hazard windstorm (as examples), contingent business interruption coverage would not be available for losses caused by these excluded perils.

A manufacturer with a single plant in Wisconsin may not see exposure to earthquake loss, but their supplier in California certainly does.

Furthermore, we do see certain insurers excluding defined perils within the CBI coverage even when the coverage exists elsewhere in the policy. Pay attention to these exclusions and the extent of the coverage grant.

Mitigating supply chain risk

This coverage provides a great opportunity for risk transfer. There are, however, key actions manufacturers should take to mitigate supply chain and contingent business interruption risk. These strategies include, but are not limited to, the following:

Managing a contingent business interruption claim

Too often insureds and brokers lack awareness of CBI coverage. This lack leads to bonafide claims not being filed with the insurance carrier and money being left on the table. Key considerations in the event of a CBI event include:

CBI coverage is a key component of the property insurance policy for manufacturers. This has never been more the case given the ongoing supply chain issues impacting manufacturers and the global economy more broadly.

Too often CBI insurance is treated as a "throw-in coverage" and not provided the appropriate attention. The details matter and can be the difference between a covered claim and an uninsured loss.

Author Information

Larissa J. Gallagher

Regional vice president.

Bloomfield Hills, MI

Michael Burg, CPCU

Managing director manufacturing practice.

Appleton, WI

The information contained herein is offered as insurance Industry guidance and provided as an overview of current market risks and available coverages and is intended for discussion purposes only. This publication is not intended to offer legal advice or client-specific risk management advice. Any description of insurance coverages is not meant to interpret specific coverages that your company may already have in place or that may be generally available. General insurance descriptions contained herein do not include complete Insurance policy definitions, terms, and/or conditions, and should not be relied on for coverage interpretation. Actual insurance policies must always be consulted for full coverage details and analysis. Gallagher publications may contain links to non-Gallagher websites that are created and controlled by other organizations. We claim no responsibility for the content of any linked website, or any link contained therein. The inclusion of any link does not imply endorsement by Gallagher, as we have no responsibility for information referenced in material owned and controlled by other parties. Gallagher strongly encourages you to review any separate terms of use and privacy policies governing use of these third party websites and resources. Insurance brokerage and related services to be provided by Arthur J. Gallagher Risk Management Services, Inc. (License No. 0D69293) and/or its affiliate Arthur J. Gallagher & Co. Insurance Brokers of California, Inc. (License No. 0726293).

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What is Covered Under Business Interruption Insurance?

Preparing for the unexpected is essential for business owners to protect their livelihoods. Situations like natural disasters, fire, hail, theft, and vandalism all have the potential to greatly impact not only the business’s property but its revenue. One way to mitigate these frustrations is by ensuring the company has a comprehensive business interruption insurance policy in place. Having a good understanding of what’s covered under a business interruption insurance policy can help business owners discern whether or not a claim can be filed.

What is Business Interruption Insurance?

Business interruption or business income insurance is a type of insurance coverage that can help commercial property owners replace income the business lost in the event it is unable to open for an extended time following a covered loss. Business interruption coverage is often bundled into a business owner’s policy (BOP). These policies combine property, liability, and business interruption coverage for small and midsize businesses.

One of the most important things for commercial property owners to remember when purchasing business interruption coverage is that like most standard “all risks” property insurance policies, for coverage to be triggered, a physical loss or damage must be present. Meaning that if the property has to close for any other reason other than direct physical damage, business interruption coverage would not apply.

However, the physical damage requirement is not the only stipulation commercial property owners should be aware of when it comes to this specific type of insurance coverage. Business interruption policies have other requirements that must be met regarding the type of damage sustained, the type of property that is insured under the policy, and the timing of the claim. It’s also important to ensure policy limits are sufficient to cover the business’s losses of more than just a few days or even weeks in some cases. This is because following a major disaster that affects the business, it can take much more time to recover than most realize.

Some of the most important factors to consider when purchasing business interruption coverage include:

Contingent Coverage

Contingent business interruption coverage protects against loss of revenue a business suffers when a third-party supplier, distributor, or other key business it relies upon to produce a product or service suffers physical property damage. Coverage is thus “contingent” upon a loss suffered by a different business that directly impacts the covered property or any location referenced in the policy upon which the covered business depends for its success.

For example, a product distributor takes out a contingent business interruption policy, listing its manufacturer as a “Covered Location.” The manufacturer suffers a fire, and its building – and all of the products inside of it – burns down. Unfortunately for the product distributor, the products have been destroyed and are unable to be distributed, meaning the product distributor cannot generate any revenue without them.

Since the forward-thinking distributor insured against this type of loss with contingent business interruption coverage, even though the distributor itself did not suffer physical damage, the product manufacturer – a “Covered Location” under the policy – did. And this may trigger contingent business interruption coverage.

The Period of Restoration

When discussing business interruption coverage, it’s important to note that coverage does not extend for an indefinite period; it extends only within the “period of restoration.” In measuring the period of restoration, most policies are very specific as to what constitutes a beginning point and an endpoint. The beginning point is usually pretty easy to determine; the endpoint is where it can get complicated and contentious.

The period of restoration indicated in business interruption policies dictates a set length of time before which policy coverage will trigger. Typically, there is a 48- to 72-hour waiting period before the period of restoration kicks in. In standard business interruption policies, the period of restoration is limited to 30 days, although purchasing policy endorsements can extend this period.

For instance, businesses may not be able to fully reopen at the same working capacity they had before the event that triggered the business interruption coverage. When this happens, a period of indemnity endorsement can be used to extend the time needed for the covered loss period beyond the ‘theoretical’ time required to restore the property – usually a more specific timeframe of 30, 60, or 90 days.

The period of restoration is critical for commercial property owners to understand because the full operating costs remain their responsibility during that timeframe but with little to no corresponding income. Because this revenue shortfall will likely keep businesses from resuming operations as before, the period of indemnity endorsement extends this time, allowing the insured to be indemnified for the shortfall. The period of indemnity also enables a policyholder to recoup significant pre-opening expenses accrued to restore revenues to their pre-loss levels.

Policy Sublimits

A sublimit is a limitation within an insurance policy on the amount of coverage available for a specific type of loss. When it comes to business interruption claims, the use of sublimits is slightly different than under other commercial policies.

For business interruption, or “time element” losses, policies often provide coverage for loss of earnings or profits and extra expenses for an identified period resulting from a direct physical loss of or damage to the insured’s property. Sometimes, those extensions of coverage are subject to a period of restoration that effectively caps the recoverable proceeds for that coverage. So, although there might not be a specified dollar amount as a sublimit, the period of restoration acts as one.

Civil authority coverage, for example, is applied when a government body prohibits access to certain areas or businesses following a natural disaster or another large-scale event. Coverage is designed to compensate the insured for losses sustained during the time access to the businesses is prohibited by an order of a civil authority. The closures or lack of access must be due to damage to the covered property on the described premises or property adjacent to the premises as described in the insured’s policy.

Civil authority endorsements typically cover a period of either 14 or 30 consecutive days. The carrier may impose a waiting period before coverage applies; this is typically up to 72 hours. As with other business interruption coverage extensions, there might not be a specified dollar sublimit, but rather, a temporal measurement that caps coverage.

Business Interruption Insurance Coverage

For commercial property owners to ensure coverage is triggered under a business interruption policy, physical damage to the property or a contingent property nearby must be present. Physical damage typically occurs following a storm or natural weather event, fire, and/or other types of unexpected events that cause significant property damage to the physical location of the business. Once it has been determined that such damage is present, a business interruption policy will typically cover the costs associated with:

Business interruption insurance does not cover:

Commercial Property Damage Lawyers

While navigating and running a business is difficult on its own, it can be almost impossible following a devastating event that causes physical damage to the location. Although insurers will attempt to deny rightfully filed claims to avoid paying the full amount owed or paying at all, an experienced commercial property damage lawyer can help you recoup the amount you are rightfully due under your insurance policy.

At Raizner Slania LLP, we’ve successfully handled thousands of complex insurance disputes against major insurance companies and we will fight to get you the coverage you need. If you need assistance in navigating a business interruption claim for your commercial property or your claim was wrongfully denied or underpaid, we can help.

News & Events

Business Interruption Insurance: what is it and how does it work?

2 February 2022

When you make an insurance claim on your buildings, stock, or contents, it would be great if everything was replaced immediately. However, this replacement can often take time.

So, what happens to your business whilst you’re waiting on planning permission? And who pays your employees' salaries whilst you’re waiting on a specialist bit of kit to be made to order? This is where Business Interruption Insurance comes in .

What is Business Interruption Insurance?

Business Interruption Insurance will cover your downturn in income from the date you have a material damage claim to the point at which your income is back up to regular levels.

There are 3 main types of Business Interruption Insurance:

After a basis of cover has been picked and the amount to insure has been worked out, an ‘Indemnity Period’ is then selected. This is the length of time the insurer will pay you for, from the date you have a material damage claim to the point at which your income is back up to regular levels, so it’s very important to get this right.

Cover that suits your business

You can also buy various extensions to Business Interruption Insurance to tailor cover to your requirements. Here are just a few examples:

Why have Business Interruption Insurance?

How we can help

At Sutton Winson, we can help you navigate the complexity of arranging Business Interruption Insurance and ensure that it remains adequate over time, so you can rest easy knowing both your business and staff are protected in the event of a claim.

If you don’t have Business Interruption Insurance and are interested in finding out more, email us at [email protected] or speak to your usual team.

Category: Commercial Insurance

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COMMENTS

Business Interruption Insurance: What it Covers, What it Does Not
According to the Insurance Information Institute, the standard policy is 30 days, but using an endorsement can extend it to 360 days. 1 Most business interruption insurance policies define...
Business Interruption Extension
Extensions to Consider Another element to Business Interruption to consider are the extensions. Extensions that may be available are: Denial of access - an event preventing you from being able to access your business premises. Suppliers' extension - this is often overlooked.
PDF Section: Business Interruption Optional Extensions
Utilities (including Telecommunications) - Extension This clause applies to the Business Interruption Insurance section of this Policy The insurance is extended to cover the property at the land-based premises of any supply undertaking service provider or producer from which the Policyholder obtains:
How To Get Business Interruption Insurance
A business interruption insurance policy costs between $40 and $130 per month, or $480 and $1,560 per year, according to Insureon. Business Loan Offers Loan amounts $2,000 to $250,000...
Business Interruption Insurance Disease Extensions and the CoViD-19
Evolution of Business Interruption Policy Wordings The complexity involved for courts in dealing with how business interruption (BI) insurance should respond to the CoViD-19 pandemic is bewildering.
Eight Key Concepts to Understand in Business Interruption Coverage
An interruption by civil or military authority extension is commonly found under most policies insuring business income or business interruption. The coverage time period most commonly specified in this extension is 30 consecutive days.
The Business Interruption Policy
The optional Supplier/ Customers extensions on a Business Interruption policy is intended to provide cover to a Business in the event that the Business has Suppliers or Customers which are critical to the continued operation of the Business. If a key Customer or Supplier of the Business suffers damage (as a result of an insured peril) then the ...
Common Exclusions To Business Interruption Insurance
Business interruption policies typically require a business to be shut down for a minimum of 72 hours before benefits go into effect. Although there are exclusions, as with any insurance policy, business interruption insurance may provide the extra layer of protection your business need.
Insurance Extensions 101
Here's a look at six common types of insurance extensions. 1. Newly Acquired Or Constructed Property This insurance extension includes buildings or business personal property. Suppose your business is conducting new construction on the same premises or acquires buildings at a new location.
Non-Damage Business Interruption
Property Damage BI insurance can be summarised as follows: Cover for loss of revenue, net income or gross profit and increased costs. Loss in consequence of damage (used to be referred to as 'consequential loss'). The trigger is usually damage to owned physical assets only.
Do You Need Business Interruption Insurance?
A coverage extension provides insurance for business income losses resulting from certain specified events, such as service interruption, contingent business interruption, leader property, and interruption by civil or military authority (for example, if a state, local or federal governmental entity restricts access to your property).
Dependencies and business interruption
If each company is insured separately to cover the business interruption risk then each company has to have a Suppliers and Customers extension. These extensions often have a stipulated limit, which is why there is a risk that the limit may not be enough.
PDF BUSINESS INTERRUPTION INSURANCE
Business Interruption Extensions -Firstly the most common 1. Specified Customers 2. Unspecified Customers 3. Specified Suppliers 4. Unspecified Suppliers 5. Prevention of access (damage) 6. Prevention of access non damage (Action by police or other authority) 7. Public Utilities 8. Terminal ends (accidental failure of utilities) 9.
Business Interruption Insurance
Business Interruption cover will indemnify your lost income and cover fixed costs to ensure you can continue to recover. Consideration should be given to your indemnity period (the agreed time period for which your insurance company will continue to indemnify you). If this is too short, your business may not be able to fully recover.
Business interruption: infectious diseases extensions
The latest case to grapple with the coverage of business interruption insurance in response to the Covid-19 pandemic is that of the Irish High Court in Hyper Trust Ltd v FBD Insurance plc [2021] IEHC 78; [2021] Lloyd's Rep IR Plus 6. This was the hearing of four test cases, representing some 1,300 others, based on FBD's standard business interruption policy wording for public houses.
What Is Contingent Business Interruption Insurance?
Contingent business interruption (CBI) coverage is not typically available as a standalone insurance policy. Instead, CBI insurance is an extension of business interruption insurance that expands the coverage beyond your own company, encompassing lost profits and extra costs that result from a customer- or a supplier-related business interruption.
Contingent Business Interruption insurance: Key Considerations for
Contingent Business Interruption can be a critically important property insurance coverage. ... In most cases, the coverage is an extension to the business income coverage part of a property insurance policy. In short, CBI provides important protection against loss of net income, continuing expenses and extra expenses resulting from a shutdown ...
Business Interruption Insurance Disease Extensions and the CoViD-19
Although the 9/11 event was unprecedented (and insurers initial reaction was to look for ways to avoid or limit liability, e.g. the World Trade Centre case), the insurance market ultimately did ...
What is Covered Under Business Interruption Insurance?
Business interruption or business income insurance is a type of insurance coverage that can help commercial property owners replace income the business lost in the event it is unable to open for an extended time following a covered loss. Business interruption coverage is often bundled into a business owner's policy (BOP).
Business Interruption Insurance: what is it and how does it work?
You can also buy various extensions to Business Interruption Insurance to tailor cover to your requirements. Here are just a few examples: Specified Customers/Suppliers - If your business is heavily reliant on a single customer or supplier, you can insure your own loss of income if they suffer a material damage claim at their premises.