Armed with a sound understanding of the fundamental principles of BI, such as this book provides, most BI claims can be settled to the satisfaction of all interested parties. The book also flags up those issues where additional research and experience may need to be brought to bear.
Sources of additional analysis, such as Riley on Business Interruption Insurance and Business Interruption Policy Wordings – Challenges Highlighted by Claims Experience, provide in-depth coverage of the topic of BI. The latter concentrates on recurring issues surrounding policy wordings but it presupposes a detailed knowledge and experience of matters pertaining to BI. This book does not assume any prior BI knowledge – the reader is, however, expected to be familiar with the fundamental principles of insurance, particularly property coverage.
Forward v
Abbreviations vi
1. Introduction to Business Interruption Insurance 1
1.1 Property Damage and Business Interruption 3
1.2 Core Cover 3
1.3 Gross Profit 4
1.4 Increase in Cost of Working 4
1.5 Indemnity Period/Maximum Indemnity Period 5
1.6 Consequences and Policy Cover 5
1.7 Policy Wordings 5
1.8 Cash Flow and Interim Payments 6
2. Is it covered? 7
2.1 The Operative Clause 8
2.1.1 Damage 9
2.1.2 Owned or Used By 13
2.1.3 The Insured 14
2.1.4 At the Premises 15
2.1.5 For the Purpose of the Business 17
2.1.6 Material Damage Proviso 17
2.2 Extensions 18
2.2.1 Denial of Access 19
2.2.2 Loss of Attraction 21
2.2.3 Failure of Utilities 21
2.2.4 Suppliers/Customers 23
2.2.5 Notifiable Disease 24
2.3 Specialist BI Covers 25
2.3.1 Engineering BI 25
2.3.2 Cyber BI 26
2.3.3 Advanced Loss of Profits 27
2.3.4 Other Specialist Covers 28
2.4 Not All Consequences are Covered 28
3. How does the cover work? 30
3.1 Overview 31
3.2 Indemnity Period 32
3.3 Calculation of the BI Indemnity 33
3.3.1 Reduction in Turnover 34
3.3.2 Gross Profit 40
3.3.3 Increase in Cost of Working 48
3.3.4 Additional Increase in Cost of Working 56
3.3.5 Savings 57
3.3.6 Proportionate reduction 59
3.4 Declaration Linked Policies 60
3.5 Interim Payments 62
3.6 BI/PD Overlap 62
3.6.1 Overlap in Salvage Sales 65
4. Concluding Remarks 67
Appendices 69
Appendix A Terminology 70
Appendix B Loss Calculations − Worked Example 76
The Chartered Institute of Loss Adjusters (CILA) is a globally recognised membership organisation for claims professionals. The Institute sets the professional and ethical standards for those who work in the handling of claims through its qualification framework and guide to professional conduct.
The CILA Council is the governing body for the Institute. Day to day activities are overseen by an Executive Committee, which is chaired by the CILA’s Executive Director.
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