Advanced BI subjects

The Overlap Between Manufacturers' Stock Claims and BI Claims

If a reduction in turnover results from damage to manufactured stock there is a potential for duplication between the BI and stock claims, both of which reimburse manufacturing overheads.  If the stock could be insured at a value that included profit would this avoid the need to make a BI claim? This article explains how the overlap arises, provides a case study and comments on practical resolution of claims.

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Wages Claimed Under Material Damage Policies and Also Insured Under the BI Policies

If wages are insured by a Business Interruption policy but also paid in a Material Damage claim (for staff cleaning up debris, handling a salvage sale, repairing plant) there is a potential double-recovery. If we assume that this should be avoided, what is the correct mechanism for doing so?

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The Potential Overlap Between Retailers' Stock Claims and BI Claims

A Business Interruption claim can be modified according to how the proceeds of a "fire sale" are treated in the stock claim.  As a result the practice has developed, of deducting the total value of the salvage from the stock claim. This is not a problem for an insured that has a BI policy but it is not an equitable treatment for one that does not insure BI.

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Time Deductibles

Business Interruption policies usually state the length of a time deductible but make no further reference to it in the specification of "the amount payable".  This can create problems in the adjustment of claims or allow flexibility, depending on one’s perspective. 

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"But for the Damage" in Natural Disasters

The standard against which BI claims are measured is what the insured would have achieved "but for the damage". How do they respond to a claim by an insured that was not damaged but suffered an interruption to its business because a cyclone or earthquake caused damage throughout an entire region. This article makes an important distinction between the results of the damage and the results of the peril.

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Damage to Excluded Property in Natural Disasters

As a follow-on to the preceding article, this one makes a distinction between the loss resulting from damage to insured property and the loss caused by damage to excluded property, when the insured and excluded peoperty are both damaged by the same event or peril.

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Adjusting the Rate of Gross Profit

The Adjustments Clause provides flexibility in calculating a BI claim that allows for the impact of business trends, variations and other circumstances. It is commonly used to reflect sales trends but rarely to adjust the Rate of Gross Profit for changes in the cost ratios. I think that the possibility of an adjustment to the Rate of Gross Profit should be considered in many more BI claims.

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