To property claim adjusters, “BI” used to mean “business interruption.” However, because many businesses can no longer afford to interrupt their business, the newer forms now refer to “business income” loss. This is a broader concept that includes not only the lost earnings during a period of suspension, but also the extra expenses incurred to keep the business going during the time damage is repaired or a new location is found. It also includes aspects of rental income and other aspects of indirect loss.
Business Income forms are generally attached to the Commercial Property form, and are subject to whatever “causes of loss” endorsement the insured has selected. Not all causes of indirect loss will be a covered peril under insurance forms. For example, there is no business income or other indirect loss coverage in a National Flood Insurance Program policy. Another example of a non-covered loss might include where a road reconstruction blocks the entrance to an insured’s store.
Adjusters must understand the difference between direct and indirect loss, regardless of how closely related they may be. Unless a policy of insurance contains coverage for both direct and indirect, loss of use, or business income loss, it is likely that only the direct loss will be covered. Occasionally a policy may cover some aspects of indirect loss. For example, some environmental impairment (pollution) policies cover both direct damage, including loss of use, and indirect loss, referred to as “remediation,” the costs of restoring what was damaged. However, individual insurer forms may read differently and not provide coverage beyond the direct damage.
Understanding coverage is the key to a proper claim adjustment. Adjusters cannot assume that what was learned five or ten years ago, or even earlier, will still apply, because policy languages and coverages are constantly changing. Boiler & Machinery forms are now called Equipment Breakdown coverages, and although the basics may remain the same or similar, every word of the policy needs to be reviewed whenever a claim arises.
Not all insurer or manuscript forms are identical, so each claim requires individual analysis. Knowing what to do when the coverage no longer fits the claim is just as important as knowing what to do when the coverage does apply. Coverage analysis is one of the most important parts of adjuster education that is taught by Crawford Educational Services. Check out our class line up today!