Business Interruption Lawyers in Denver

What Does Business Interruption Insurance Cover?

Business interruption insurance, or business income insurance, is designed to help business owners recover financially after unexpected events disrupt operations. This coverage can mitigate financial strain following natural disasters or other unforeseen emergencies.

Depending on the policy, business interruption insurance may cover the following:

• Lost Revenue: Compensation for income your business would have generated during the interruption period.
• Payroll Expenses: Ensuring employees continue to receive wages even when the business is temporarily closed.
• Rent or Lease Payments: Covering ongoing rent obligations to prevent lease termination.
• Commercial Mortgage Payments: Helping businesses stay current on property loans despite income loss.
• Outstanding Business Loans: Assisting with scheduled payments on business-related financing.
• Temporary Location Costs: Expenses related to moving to and operating from a temporary location if necessary.
• Retraining Costs: Covering expenses associated with training employees to use new equipment or processes after a disaster.
• Extra Expenses: Reimbursement for reasonable expenses (beyond the fixed costs) that allow the business to continue operation while the property is being repaired.
• Civil Authority Ingress/Egress: Coverage for losses incurred when a government authority restricts access to your business premises due to a covered event in the vicinity.
• Fixed Costs: Coverage for operating expenses and other costs still being incurred by the property (based on historical costs).

Potential Risks Associated with Business Interruption Insurance

One common challenge is failing to thoroughly document both observable and non-observable income before a disruptive event.

Observable income includes tangible revenue streams such as:

• Sales figures
• Service fees
• Other direct earnings

Accurate and detailed records of these income sources are essential, as they form the basis for any claims made under a business interruption policy. Insurers may dispute the claimed losses without precise documentation, leading to reduced compensation.

Alternatively, non-observable income encompasses intangible assets like:

• Business reputation
• Customer loyalty
• Potential future earnings

While standard business interruption insurance primarily covers tangible income losses, the impact on a company's reputation and future income can be significant. Quantifying these losses is inherently challenging, and many policies do not provide coverage for such intangible losses.

Keep the following in mind:

• Policy Exclusions: Colorado businesses should be aware that standard policies may exclude coverage for specific perils common to the region, such as floods or earthquakes. It is advisable to review and, if necessary, augment your policy to include these risks.
• Documentation Requirements: Colorado law necessitates comprehensive documentation to substantiate income losses in the event of a claim. This includes financial statements, tax returns, and other relevant records. Failure to provide adequate documentation can result in claim denial or reduced payouts.
• Consultation with Professionals: Given the complexities of documenting income losses, it's wise to consult legal and financial professionals familiar with Colorado's insurance landscape. They can provide tailored guidance to ensure your business is protected and claims are substantiated.