The aftermath of a natural disaster can be devastating for all business owners, especially for those in the dealership, restaurant and hospitality industries, and can cause long-lasting interruptions in normal business operations. Business interruption insurance aids the insured in recovering lost income caused by damage to the insured’s property when an unexpected natural disaster hits. Depending on the policy, additional expenses incurred in an effort to return to normalcy may also be covered.
Once it is determined that a claim is appropriate, it will be important to read the policy and determine how the loss will be calculated. Generally, contracts refer to actual losses resulting from the inability to conduct business as a result of physical destruction (or damage). It is important to calculate the actual lost profits as well as expenses (such as repairs) incurred by the insured during a restoration period to return the property to its pre-loss condition.
Commonly, past historical results are used to determine whether the projected profits being offered as damages are realistic. The lost profits are not intended to be speculative but rather reasonably certain. For dealerships, lost profits could include items such as service, parts, F&I, etc. It is not uncommon to look to the prior twelve months immediately preceding the event causing the claim. With this in mind, the information to be assembled to file your claim may include the following:
- A detailed list of damaged property, including cost, quantity, and estimated value.
- Federal and state business income tax returns for the last two years.
- Financial statements, if any, for the last two years.
- Monthly profit and loss statements for the last twenty-four months.
- Damaged/lost inventory report at date of loss.
- Payroll records for the previous twenty-four months.
- Invoices for expenses used in calculating the loss and for additional expenses incurred.
- Loan agreements and record of payments over the past twenty-four months.
- Bank statements for the past twenty-four months.
Anyone filing a claim should expect that the insurer will request and review those items used to determine the claimed loss.
Finally, because filing a claim requires the provision of specific data, and the objectives of the insured and the insurer are often diametrically opposed, Withum is more than happy to assist in the preparation of damage calculations and the provision of underlying data in support of them.