Valuing Business Income Exposures: A Case for Blanket Business Income Insurance

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...critical to the successful resolution of the claim.

Initially, the adjusters and forensic accountants representing the insurers approached the measurement of the business interruption/extra expense claim by requesting that the railroad identify only those costs associated with the detouring of trains around rail lines physically damaged in the flood. It was their belief that if you could identify the costs associated with moving trains from point A to point B following the flood, and subtract those costs that would have been incurred by moving trains from point A to point B had no flood occurred, you would have measured the full extra expense loss.

This approach to the loss would certainly have measured a portion of the extra expense losses experienced by the railroad, but it would have failed to capture all of the extra expense losses experienced as a direct result of the physical damage caused by the flood. A full understanding of the insured’s business and an appreciation for the global effects...

"Because this specific railroad transports freight throughout the United States through its integrated railroad network, disruption in any one area can ultimately affect all links of their highly interconnective system."


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