How business interruption cover is structured
Business interruption insurance in Canada is usually attached to a commercial property policy and responds when an insured peril causes direct physical damage that interrupts operations. It aims to put the business in the financial position it would have been in had the loss not happened, within the limits and period of the policy.
Canadian wordings commonly use forms such as gross earnings or profits forms, and sometimes a rental income or extra expense form. Each defines the insured amount, which expenses continue to be covered and how the loss is measured, so the form named in your declarations matters.
Indemnity period and waiting period
Depending on the form, cover runs either for the time reasonably needed to repair or replace the damaged property, or for a fixed maximum indemnity period after the loss. Some policies have a waiting period or time deductible before cover starts. Disputes often turn on how long repairs should reasonably take and whether the business would have recovered sooner.
Building the financial claim
The calculation compares what the business actually earned during the interruption with what it would have earned. This projection is built from historical results, seasonality, trends, contracts in hand and market conditions. Saved costs are deducted, while continuing expenses such as rent, loan interest and key staff wages are included where the form allows.
Insurers often appoint forensic accountants. A business owner can engage their own accountant or a public adjuster with financial expertise to prepare a counter-calculation and challenge assumptions that reduce the projection.
Projections should be explained in plain language as well as in spreadsheets. An adjuster or insurer reviewing the claim needs to understand why sales would have grown, stayed flat or fallen, and which events outside the loss might have affected the business anyway.
- Financial statements for several prior years
- Monthly sales and margins, ideally for three years
- Payroll records and staff decisions after the loss
- Budgets, forecasts and signed contracts
- Invoices for extra expenses incurred to keep operating
Extra expense and mitigation
Costs incurred to reduce the interruption, such as renting temporary premises, outsourcing production or expediting equipment, may be recoverable as extra expense or as expenses to reduce loss, often up to the amount of interruption loss they avoid. Keep the reasoning for each decision in writing; the insurer will assess whether it was reasonable at the time.
Triggers beyond your own premises
Some policies extend cover to interruptions caused by damage at a supplier or customer location, denial of access by civil authority, or loss of utilities. These extensions often have specific sub-limits and conditions. The wave of pandemic-related claims showed that, in general, cover depends on physical loss or damage as defined in the policy; reading the extension wording precisely is essential.
The process from notice to settlement
Notify the insurer promptly and in writing of both the property loss and the interruption. Agree with the adjuster on what records will be needed and how often interim payments can be requested; large claims are commonly paid in stages. Proof of loss forms may be required for each stage.
Keep operating records separate for the period of interruption so actual results can be identified clearly.
Points of disagreement and how they are resolved
Typical disputes involve the projected revenue, the length of the indemnity period, the treatment of payroll, the impact of external economic conditions and the deduction of saved costs. Many can be narrowed through a meeting of the accountants on both sides.
Where the disagreement concerns the amount of loss, the appraisal mechanism in the statutory conditions of most provincial insurance acts may be available, although appraisers with accounting skills are then needed. Coverage disputes go to the insurer's complaints process and, if necessary, the courts. Commercial insureds should check whether the General Insurance OmbudService or, in Quebec, the Autorité des marchés financiers can assist with their file, and note provincial limitation periods.
Payroll and staffing decisions
Whether wages are covered depends on the form and any payroll limitation in the policy. Keeping key employees during a shutdown can be essential to restarting quickly, but the decision should be documented and, where possible, discussed with the insurer in advance. Temporary layoffs, government programs or redeployment of staff to clean-up work all affect the calculation and should be recorded clearly.
Organisations offering this service
- OmbudService for Life & Health Insurance (OLHI): Independent alternative dispute resolution service for Canadian life and health insurance consumers who are in a disagreement with their insurer.
- Autorité des marchés financiers (AMF): Quebec financial regulator that oversees claims adjuster certification and publishes the forms and competency profiles governing the profession.
- Chambre de l'assurance de dommages (ChAD): Quebec body overseeing the damage insurance profession, including claims adjusters, which publishes annual reports on its supervisory activities.
External links provided for information only; check the terms directly with each organisation.
Frequently asked questions
Does business interruption cover pay if my business never closed?
It can, if the insured damage reduced revenue or increased costs while you kept operating. The policy form determines how that partial loss is measured.
Who pays my own accountant?
Some commercial policies include a professional fees or claims preparation extension. Without it, the cost is generally yours.
Can I get interim payments?
Insurers often make interim payments on large business interruption claims, based on documented loss to date. Ask early and support requests with figures.
What if my business was growing quickly before the loss?
Growth can be reflected in the projection, but it must be supported by evidence such as recent monthly trends, new contracts or capacity investments made before the loss.
Business interruption claims are won on financial evidence and realistic projections. For the cost of independent support, see the Canadian business interruption fee guide on expertdassure.com.