Business Interruption Insurance — Make Sure Your Business Gets Paid in Full

by John Chapman

Hurricane Katrina flooded major portions of a company’s asphalt refinery and terminals on the Gulf Coast.* Fortunately, the company had business interruption insurance. Unfortunately, the insurance company denied coverage for the company’s Hurricane Katrina-related losses in excess of $5 million. The insurer claimed a particular flood zone limit applied to limit coverage. The company claimed the property was not in a flood zone subject to such a limit.

The company filed a lawsuit against the insurance company, seeking to recover not just to the amount of its insurance coverage but also alleging additional damages suffered because the insurer acted in “bad faith.” An insurer is obligated to treat its customers with “good faith” and to deny a claim only if it has a reasonable basis for denying a claim. The lawsuit was ultimately resolved by a settlement.

Of course, it doesn’t take a Hurricane Katrina to devastate your business. Manufacturers, retail merchants, professional service firms—any company of any kind can experience an event that results in a significant slowdown or cessation of productivity. Business interruption policies are specifically designed to protect a business under these circumstances.

From the more obvious causes such as physical catastrophes like fire or flood to less obvious causes such as theft of intellectual property, business interruption can result from a virtually limitless variety of possible sources. Having to temporarily close your business because of such an event can quickly cause significant financial hardship for you and your company. Although a commercial property insurance policy might pay to rebuild your physical property, you depend on your business interruption coverage to pay for lost income, operating expenses, and extra expenses while attempting to restore your business operations.

In addition to complying with the terms of the policy, your insurer is required by law to treat you and your claim fairly and in good faith. Often, the law requires specific time deadlines and other procedures related to the handling of an insurance claim.

At Heygood, Orr & Pearson, we have seen insurance companies refuse to conduct reasonable investigations into claims for insurance benefits, fail to consider and process claims for insurance benefits in a timely manner, and engage in an investigation regarding a claim for insurance benefits that clearly is designed not to “find the truth” but to simply find a way to deny a legitimate claim. We hold insurance companies to the highest standards and require them to live up to their legal obligations – namely to treat their insureds fairly and honestly and comply with the terms of their insurance policies when it comes time to pay an insurance claim, not just when it comes times to collecting premiums.

If you believe you have been a victim of an insurance company’s wrongful denial of legitimate claims for insurance benefits, Heygood, Orr & Pearson has the resources, experience and knowledge to protect you. Contact us today.

*In Re: Liberty Mutual Insurance Company, Arch Insurance Company And Speciality Adjusters, Inc., No. 14-09-00086-CV.