How to Prepare for a Business Interruption Claim

Published: Jul 8, 2024
By: Troy Rush
Topics: Disaster Recovery
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With hurricane season off to an active start and cyber incidents impacting critical operating infrastructure at a record pace, organizations should prepare for the potential impact of these devastating events, including reviewing the business interruption provisions of their insurance policies.

What is a Business Interruption Claim?

A business interruption claim can result from various unforeseen events, such as:

Natural disasters: Hurricanes, fires, tornadoes, etc.
Accidents: Notable incidents like the Francis Scott Key Bridge collapse.
Cyber incidents: Whether on-premise or involving trusted vendors.

An interruption occurs when an organization experiences an economic loss due to an insurable event. The purpose of business interruption insurance is to restore the organization to the same or similar position as it was “but for” the event.

Key Documentation for Business Interruption Claims

You’ll need specific documents and information to defend your loss when pursuing a claim.

Insurance policy provisions, coverages, and limits differ. Still, most business interruption claims require an analysis of lost revenues and the costs associated with generating those revenues over a “period of restoration.”

Well-documented and supported claims tend to be processed and settled more quickly and favorably, which may be crucial for cash flow during recovery. Documentation needed to support a claim includes, but is not limited to, the following:

Date of loss and description of the impact
Photos of property damage, if applicable
Summary of actions taken by the business immediately before and after the date of loss
Monthly profit and loss statements, typically for two years before the event
Tax returns
Budgets and forecasts
Payroll records
Records of extra expenses from mitigation efforts

How to Prepare for Business Interruption Claims

Business interruption claims are becoming more frequent in the insurance landscape as natural disasters intensify and cyber incidents target business and vendor systems. Organizations need to harden their physical and digital infrastructure.

Preparation includes a combination of risk management strategies, such as business continuity planning, backup processes, communications strategies, and disaster recovery protocols that can mitigate the impact of an interruption. The response includes forensic accounting to quickly identify and analyze insurable business income losses and assist in preparing a well-supported claim.

EisnerAmper’s experienced team can help you prepare for and respond to insurable events. Talk with us today so that your organization can be prepared for when, not if, disaster strikes.