Business interruption insurance claims and the period of restoration are two intertwined concepts in the world of insurance, and while they don’t sound intertwined, they’re quite important to one another.
Insurance can be super confusing and for a lot of people, the insruance-ese of their policy does not benefit them in the long run when trying to file a claim.
One specific type of coverage is called “business interruption coverage.” The point of this type of coverage is to protect against any loss of income you might experience if your business property suffers damage and you’re unable to actually run your business.
The period of time during which the business property is repair or restored, is called – not surprisingly – the “period of restoration.”
The period of restoration is a strange thing. According to Kevin Pollack of Property Insurance Law Blog fame, the period of restoration has a few quirks including:
…the coverages grant states that the insurer is only required to pay for loss of business income and extra expense incurred during the period of restoration.
More interestingly, the courts have interpreted certain period of restoration definitions differently. Pollack elaborates, pointing out a certain theoretical element in these definitions, namely, that a hypothetical amount of time to repair or restore the property can be applied to the business interruption coverage.
This can at times cause issues when a claim goes to court. Pollack points this out saying:
Disputes often arise between insurers and policyholders regarding what is a reasonable restoration period. In fact, insurers routinely argue that the restoration period is always the theoretical time it should take an insured complete repairs and resume business—even when the theoretical approach is completely removed from any of the actual facts and circumstances.
In conclusion, Pollack also makes the very valid point that a policyholder should not allow an insurance company to dictate the terms of the claim in court by trying to push hypotheticals.