EDITOR'S NOTE

While working through a BI insurance claim, the policyholder and the insurer need to reach an agreement on a number of variables, none more worthy of discussion than the question of how long does a business suffer the consequences after a disaster strikes?

This issue of Adjusting Today, “The Length of the Road Back from Disaster: Four Rules for Measuring the Business Interruption Period,” by Gary Thompson, brings into focus the elements that will help determine who is holding the map, and which route to take toward recovery of business interruption losses.

Drawing on more than seven decades of case law, Thompson compiles for policyholders the rules of the road when establishing their period of interruption, moving from “theory” to reality. His article cites decisions that are “remarkably consistent and harmonious.”

Policyholders will understand what course to take when the BI period is developed after reading this fundamental discussion of the topic.

Commercial property insurance policies commonly cover business interruption (BI) losses during the period of time that a business is interrupted by a covered peril such as a hurricane. The typical BI coverage within that period is for the “actual loss sustained” by the policyholder, usually further defined as the net profits that would have been earned plus any continuing expenses such as rent (or alternatively, gross revenues minus discontinued expenses). Apart from calculating the BI loss itself (the province of forensic accountants), adjusting the length of the “BI period”

(or “period of recovery”) is a common point of disagreement between insurer and policyholder. How long should the insurer pay such a BI loss?

This article addresses the proper approach for measuring the length of the BI period. There are four major, distinct rules that should be followed in this regard, including the rule that where an insurer acts to delay the BI period by failing to make sufficient partial payments, such delay is included in the BI period. The case law is remarkably consistent and harmonious in articulating and