Don’t Neglect Business Interruption Insurance in Construction Contracts
Date Posted: July 24, 2018
Posted In: Ideas,
From Construction Executive: Insurance for business interruption loss tends to be forgotten when construction deals are negotiated and finalized. Construction contracts generally provide clarity and attention when it comes to insurance requirements for property damage, but insurance requirements for business interruption loss are often left on the cutting room floor.
When one considers exposure to risk, it is hard to comprehend this lack of attention to business interruption insurance. Major property damage events can have lengthy impacts on the policyholder’s ability to get back to business, and extensive delays in the ability to perform business activities can have monumental impacts on profits. The following provides a summary of the coverage provided by business interruption insurance and the complexity of business interruption claims, as they pertain to construction projects.
WHAT DOES BUSINESS INTERRUPTION INSURANCE COVER?
At its core, business interruption insurance provides coverage for the policyholder’s lost profits during the period needed to recover from an event of property damage. The period of recovery is, at least, the time necessary to repair the damaged property and is not limited to the policy period. Some policies provide that the period of recovery includes the amount of time after the completion of the repair that is necessary to get the business back to the level of operation it had prior to the event of property damage.
Business interruption coverage also can apply to expenses incurred to reduce loss, and extra expenses incurred because of the loss. “Contingent” business interruption coverage also may be available from the insurance market. This type of insurance provides coverage for losses incurred when a supplier or a customer suffers an event of property damage that results in delay to the business of a policyholder.