The business section of the Post Dispatch had an article over the weekend discussing the damage caused by rioters to Ferguson Businesses. As indicated in the article (and this post) most businesses will be covered for this type of loss. The article also mentioned most of these businesses have loss of business coverage, that is correct, the coverage is called Business Income (BI) coverage. As pointed out this coverage will replace loss of profit, which it will and more.
If correctly insured most of the Ferguson Business Owners will have a Businessowner’s Insurance Policy commonly referred to as a BOP. BOP’s typically include BI coverage, which will replace Business Income during the period of restoration (the time to repair the Insured premises).
As defined by the policy Business Income includes not only the profit that would have been earned if the claim (the damage by rioters) had not occurred, but also the continuing normal operating expenses. So, during the period of restoration, the owner likely still has an obligation to pay rent and utilities – this would be considered continuing normal operating expenses which would be covered - this is helpful since very little or possibly no income can be earned during renovations.
Also included in the definition of Business Income is ordinary payroll for up to 60 days. This means employees will continue to receive a paycheck for up to 60 days after the date of loss. This can help the business to retain valued employees.
Coverage will cease for these owners as soon as the "Period of Restoration" ends – meaning when the business is repaired or a time when it should have been able to have been reasonably restored. Unfortunately for the Business Owners, unfavorable business conditions (e.g. people afraid to return to the business due to the nature of the loss) will likely continue for several months after the period of restoration causing a massive reduction in income. Unfavorable business conditions is not something that is covered by a BOP.
If properly written a BOP also includes Extra Expense coverage, which could prove even more valuable for the Ferguson Business Owners – this will be discussed in the next post.
Posted by Dan Hebbeln: firstname.lastname@example.org