Volcanic Ash Clouds - If I Am Delayed, Can I Claim For Business Interruption?

To answer the question, we need to consider what business interruption is

. Businesses survive by making generating income or revenue and deducting, hopefully, a profit from that amount. Where a business receives funding or the owners are investing their own cash, at start up stage, then there does not have to be a profit. Indeed, many business have seen their profits dip sharply and turn negative over the past 2 years.

Within a standard commercial insurance policy, you have the option of insuring for losses resulting from business interruption. The alternative description is consequential loss. What this element of cover means is that, if the business suffers an insurable and insured loss, that results in the business losing out financially, then this can be re-imbursed.

It does not pay the business the straight turnover they would have received, as this includes many things such as profit margins and the cost of goods purchased. What it will cover is a similar rate of gross profit. It is intended to pay ongoing costs associated with the business which cannot be paid as the business is not trading, because of the loss.

For example, if a business has a fire or a flood, then they may be out of action for 6 months. In this period they still have to pay rent and rates and possible salaries, this is where the business interruption kicks in.

But, the key thing about business interruption is that it must be as a result of an insured peril, in most cases occurring at the business address. You can have extensions for losses occurring at other locations which may have a consequent effect on the business. For example, a hotel may need to have denial of access cover. Therefore, if there was a fire down the road which stopped patrons visiting or staying at the hotel, as long as the hotel has standard fir cover they can also claim for denial of access.

Due to the volcanic ash cloud from Iceland, we are receiving calls from customers where key employees or directors are stuck overseas with no early prospect of returning. Whilst the travel insurance or airline should pick up there additional costs, there is the potential that their businesses have suffered before they return. Can this be paid out under a business interruption policy? Quite simply, no. Whilst the business may undoubtedly suffer, this type of eventuality is not one that a standard policy will pay out. The reason being that this is the tip of the iceberg, potentially you could face claims for people who are sick in foreign countries or stuck for some other reason. If they know there is a business insurance policy paying out when they are away, where is the onus on them to try and return and mitigate any loss?

As with any policy query, the best thing to do is to call up your business insurance broker and ask for their professional advice and opinion. If you are choosing to travel on business, in addition to your standard policy, makes sure that you have a suitable business travel insurance policy in force.

by: Jack Brown

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