Business interruption claims help businesses recover lost income when operations are disrupted by a covered event, such as fire, natural disaster, or other catastrophes. However, successfully proving these claims requires substantial documentation and clear evidence showing how the interruption directly impacted your financial position. Without proper preparation and evidence, insurers may deny claims or significantly undervalue the compensation owed to your business.
At Callahan & Blaine, PC, our business litigation attorneys have over 40 years of experience representing companies in complex insurance disputes. Our team of 30 highly experienced trial lawyers understands the intricacies of business interruption claims and can help you navigate the challenging process of documenting and proving your losses to obtain the compensation your business deserves.
Document Your Pre-Interruption Financial Position
The foundation of any successful business interruption claim is establishing your business’s financial condition before the interruption occurred. This creates the baseline against which your losses will be measured.
Comprehensive financial documentation is critical to establishing your pre-interruption position. You should gather and organize business tax returns for at least three years prior, monthly profit and loss statements, sales records showing consistent patterns, payroll records, and expense documentation. These documents allow you to demonstrate normal business operations and establish revenue patterns that would have continued if not for the interruption.
If your business was experiencing growth before the interruption, this should be factored into your claim. Document any upward trends in sales, new client acquisitions, expansion plans, or market share increases. This information can help support projections of what your business would have earned if the interruption had not occurred.
Demonstrate the Direct Cause of Business Interruption
Insurance policies typically require that the business interruption be directly caused by a covered peril. You must establish a clear causal link between the covered event and your business losses.
For interruptions caused by physical damage to your business premises, thoroughly document the damage through:
- Detailed photographs and videos of property damage
- Reports from fire departments, police, or other first responders
- Independent assessments from structural engineers or building inspectors
- Witness statements describing the event and resulting damage
This documentation helps establish that a covered peril directly caused physical damage that prevented normal business operations.
Creating a detailed timeline is also essential for connecting the covered event to your business interruption. Your timeline should include when the incident occurred, when operations ceased or were reduced, the duration of the complete shutdown, any phases of partial operations during recovery, and when full operations resumed (if applicable). This timeline helps demonstrate that your business losses occurred as a direct result of the covered event.
Calculate and Document Your Losses
Once you’ve established your pre-interruption position and the cause of the interruption, you must accurately calculate and document the resulting losses. Begin by calculating the difference between expected revenue and actual revenue during the interruption period. This includes lost sales during the shutdown, reduced income during partial operations, continued losses during recovery, and lost opportunities from canceled contracts.
You should also document all expenses that continued despite the interruption, such as rent or mortgage payments, loan payments, insurance premiums, utilities, essential staff salaries, and equipment leases. These continuing expenses often form a significant portion of business interruption claims, as they represent costs that couldn’t be avoided despite the inability to generate normal revenue.
Additionally, track any additional costs incurred specifically because of the interruption, such as temporary relocation expenses, equipment rental, overtime pay, outsourcing costs, and marketing expenses to recapture lost business. Many policies cover these extra expenses if they helped mitigate overall losses.
Work With Professional Experts
Complex business interruption claims often benefit from professional expertise. Consider enlisting help from forensic accountants who specialize in calculating business interruption losses, public adjusters experienced in negotiating with insurance companies, and attorneys with experience in business interruption claims.
Throughout the claims process, maintain detailed records of all communications with your insurance company. Keep copies of all correspondence, document phone calls, respond promptly to requests for information, and meet all deadlines for submitting documentation. Effective communication can help prevent unnecessary delays and denials based on procedural issues.
Contact Callahan & Blaine for Assistance With Your Claim
Business interruption claims can be complex and challenging, particularly when dealing with substantial losses or resistant insurance companies. At Callahan & Blaine, PC, our attorneys have extensive experience helping businesses navigate these claims and secure the compensation they deserve.
With a proven track record in complex business litigation, including securing the largest jury verdict in Orange County history of $934 million, our team has the knowledge and resources to handle even the most challenging business interruption claims. We understand the financial pressure businesses face during interruptions and work diligently to help you recover your losses quickly. Contact us today at (714) 241-4444 or through our contact form to discuss your business interruption claim.
