COVID - 19: Business Interruption Claims

How to Document Your Loss

Posted in Articles of Interest

Cross Insurance Risk Management Series

COVID-19: Business Interruption Claims 
How to Document Your Loss

State of the Industry  

  • Companies are experiencing reduced or complete loss of business because of the current COVID-19 pandemic 

  • Claims for business Income Loss are being submitted with increased frequency across all types of business 

  • We are observing that Insurers are denying many of these claims because of: Communicable Disease/Virus exclusion - or - No direct physical damage to property, no trigger of civil authority or Ingress/Egress Coverage 

  • A variety of activities are underway that hope to change how coverage is applied, including activities by state and federal government, as well as lawyers 

  • We recommend tracking your losses should something change with the current coverage environment    

Business Interruption  

What is it? 

  • Part of the Property Insurance Policy 

  • Replaces lost profit that a business suffers because of an interruption caused by a covered loss 

  • Subject to specific limits and deductibles  

How is it triggered?

  • The cause of the interruption must qualify as a covered peril 

  • No coverage exclusions apply to the claim 

  • Exceeds the policy deductible and/or waiting period

 What will it pay for? 

  • Virus clean up expenses 
  • Net Income (Recurring vs. Saved expenses) 
  • Extra Expenses necessary to maintain operations and mitigate lost business 

 Documenting a Business Interruption Claim 

Important information to include in the insurer lost notice 

  1. Name and address of the location(s) impacted by COVID-19
  2. Date when your business closed or when operations were interrupted 
  3. Reason for the closure or interruption 

Documents to consider 

  • Keep records of any communication from government bodies directing/advising/ordering self-quarantine, restriction of business hours, etc. 
  • Document any theft of inventory, equipment, etc. that takes place during self-quarantine, mandatory closings, etc. 
  • Keep records of any cancelled or changed orders due to COVID-19 
  • Confirmation/explanation from customers explaining cancellations or other changes may prove to be useful    

 Consider losses that may not be directly related to your ability to operate or supply goods/services, such as market demand being lower, even though you are fully operational. 

Track extra expenses necessary to maintain operations, for example: 

  • Additional cleaning related to COVID-19 impact to your location 
  • Set-up of work from home operations 
  • Expedited shipping due to delays caused by supply chain, staffing, etc. 
  • Establishing a new general ledger account to track COVID-19 related costs 

Use a spreadsheet to organize your documentation 

Business Income Loss 

Location Name Location Number  Address Date of Closure Reason for Closure Daily Net Revenue Date Reopened

Extra Expenses

Location Name  Location Number  Location Address Type of extra expense
(ex. Cleaning)
Date(s) extra expenses incurred Amount or extra expense 

Business Interruption Claims 
Claim Process 

1. Submit documentation supporting your claim 

  • The better the presentation, the easier for an adjuster to review 

  • BI claims are complex and involve a certain degree of being subjective in the measurement 

  • Records and documents should be complete and clear 

2. Adjuster review 

  • Policy terms, conditions, and exclusions are reviewed 
  • Questions or discussion regarding details of your claim 
  • Evaluation by insurer's accountant to verify amount of loss 

3. Adjuster response 

  • Communicate any coverage limitations or exclusions 
  • Request for additional documentation or other information 

If the claim is accepted 

  • Measurement of BI Loss is complex and subjective 
  • Any amount approved will be subject to the policy deductible and policy limits  

COVID-19: Business Interruption Claims 
A Final Note

At this time, we are finding that property insurers are excluding most claims that are related to COVID-19. This exclusion is very typical, and consistent across the industry. However, this pandemic is a very fluid and and evolving issue in the current business environment. If you feel you have suffered a loss related to COVID-19, then we recommend submitting a claim to the carrier at this time. If you have a business income loss, then please track all expenses, and accounting to quantify your loss. The claim may be denied presently, but just in case something changes with how insurers are applying coverage, we want to have positioned you in the most favorable situation should relief become available.   

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This is a descriptive summary and is for general information purposes only. It is not a detailed coverage analysis. Please refer to any actual policies you may have for specific terms, conditions, limitations, and exclusions that will govern in the event of a loss. The information contained herein is not intended to constitute and should not be considered a substitute for legal, accounting or other professional advice. Please consult your professional advisors for specific questions with respect to your insurance matters.