February 16, 2016

The Real Value of Commercial Property Insurance – Covering Both Property Loss and Business Income Loss

When disaster strikes, whether fire, earthquake, flood or hurricane, corporations look to commercial property insurance to cover their losses. This insurance cornerstone of every company’s risk management program is designed to cover damage to buildings, machinery, products/goods, and other physical assets. Disasters such as these, however, almost always involve another type of loss – business interruption or business income loss. These business income, or BI losses, can, in some instances, be more costly than actual loss of property. When companies have to re-build a manufacturing plant, replace machinery, restore utilities, or re-connect with customers lost as a result of a severe disaster, they lose a lot of money. Often times, that lost business income places a company in dire financial distress.

Today Miller Friel Managing Partner, Brian Friel, talks about the importance of property insurance, particularly business interruption coverage. What companies need to understand is that these policies, although simple in concept, can be incredibly difficult to understand, in part because of 19th century language still employed by the insurance industry. The complicated nature of the various policy conditions places before the policyholder a series of hurdles that can cause even the most sophisticated policyholder to misstep. In addition, the various time elements and sub-limits contained in these policies, and the archaic and decidedly pro-insurer appraisal system to quantify covered losses, are designed to minimize coverage. For significant losses, this is the reason that most businesses retain insurance coverage counsel. Given the series of policy deadlines that are triggered by any given loss, it is critical that such expertise is retained within the first few days, if not hours, of when disaster first strikes.

To learn more, please watch the video and contact us with any questions or concerns about your own business insurance. The telephone number for our office in Washington, DC is 202-760-3160.

Below is a transcript of today’s video:

Another area of insurance that we specialize in is property damage and business interruption claims.

So, here at Miller Friel, one other area that we specialize in, with respect to insurance, is property damage and business interruption claims. These are claims where you have physical damage to manufacturing plants, storage facilities, operational centers caused by storms, floods, hurricanes, fires so you have the actual property damage. Equipment is destroyed. Product is destroyed. Actual physical machinery is destroyed. Typically what happens also is the business interruption claims. A BI claim. Because of the physical damage caused by the storm or some other act of God, the facility is no longer in use. Or it is closed down for a year or two because they have to rebuild.

So what happens? There is not only the expense of rebuilding and moving employees and other service providers around but you’re also losing income. It’s interrupting your business income.

You have a facility that’s making widgets and you make 10 million widgets a month. And you’re not in production for 10 months. You’re out 100 million widgets and you’re selling those for $25 on the shelves at the store. That’s a lot of lost income, lost revenue and that is insured under a corporate commercial property business interruption policy. So as you can see from a corporate standpoint these policies are an incredibly important asset of the company.

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