Business interruption claims in the United States: working with an independent adjuster

What business interruption cover actually pays for

In most US commercial property policies, the cover known informally as business interruption appears as Business Income and Extra Expense. It is designed to put the business back in the financial position it would have been in had the loss not occurred: net income that would have been earned, plus continuing normal operating expenses such as payroll, rent and loan payments.

The key word is usually triggered: business income cover generally applies only when there is direct physical loss or damage to covered property from a covered cause. A slowdown in the economy, a supplier problem without physical damage, or a loss excluded under the property section will not normally open the business income section. Some policies extend cover through endorsements for civil authority orders, damage to a dependent property or utility service interruption.

• Lost net income during the period of restoration
• Continuing normal operating expenses, including ordinary payroll if covered
• Extra expense to avoid or reduce the shutdown, such as temporary premises or rented equipment
• Extended business income for a limited period after reopening, if the policy provides it

Who is on the other side of the table

The insurer will typically assign a staff or independent adjuster to the property claim and, for larger losses, retain its own forensic accountants to analyse the income claim. Their work is legitimate, but they are paid by the carrier and their projections tend to be conservative.

A public adjuster is the US equivalent of an expert d'assuré: a professional licensed by the state Department of Insurance in most states, hired and paid by the policyholder, who prepares, documents and negotiates the claim. On larger business income claims, the public adjuster often brings in an independent forensic accountant to rebuild the projected revenue and expense figures.

From first notice to settlement: the usual sequence

Notify the insurer promptly and in writing, even if the full extent of the shutdown is unknown. Many policies require prompt notice and reasonable steps to protect property and resume operations as quickly as possible; failing to mitigate can reduce the payment.

The insurer will then request documentation and may ask for a sworn proof of loss, often within a set period after its request, frequently 60 days in standard forms. Check your own policy wording rather than relying on a generic figure. An examination under oath of the owners or managers is possible on larger or disputed claims.

• Report the loss and request a full certified copy of the policy
• Document the physical damage and the date operations stopped or slowed
• Agree an approach for interim payments while the claim is measured
• Submit the income calculation, supporting records and the proof of loss
• Negotiate the final figure, or invoke appraisal or other remedies if there is a dispute

Defining the period of restoration

The period of restoration usually starts after a waiting period, commonly 72 hours in standard forms, and ends when the property should be repaired or replaced with reasonable speed. It is a theoretical period, not necessarily the time the business actually took to reopen.

This is where many disputes begin. Permitting delays, contractor shortages after a regional catastrophe, long-lead equipment and code upgrades can all stretch the realistic timeline. A public adjuster will document each delay and argue that it belongs inside the period.

Evidence that makes or breaks the income calculation

The claim is a projection: what would the business have earned if nothing had happened? Insurers expect that projection to be built from historical records and adjusted for documented trends, seasonality and known contracts.

Keep records clean and consistent. Gaps between tax returns, management accounts and point of sale data are the first thing an insurer's accountant will question.

• Profit and loss statements and tax returns for at least two to three prior years
• Monthly or weekly sales data showing seasonality
• Payroll registers, leases, loan schedules and recurring contracts
• Signed orders, bookings or backlog lost because of the shutdown
• Invoices for every extra expense, with a note explaining why it was incurred

Common points of disagreement

Beyond the length of the restoration period, disputes often focus on the growth assumption used for the projection, whether certain employees counted as ordinary payroll, whether sales were simply delayed rather than lost, and whether an extra expense actually reduced the loss.

Coverage questions also arise: whether a civil authority order or a utility outage meets the policy wording, whether a supplier counts as a dependent property, and whether exclusions apply. The wave of litigation over pandemic closures showed how much turns on the phrase direct physical loss or damage.

Deadlines worth putting in the calendar

Policies typically set a contractual limit for filing suit, often expressed in years from the date of loss, and state law may modify it. Proof of loss deadlines, appraisal demand procedures and notice requirements also vary. Ask your adjuster or attorney to list every applicable date in writing at the start.

If the claim stalls: appraisal, complaints and counsel

Most commercial property forms contain an appraisal clause: each side names an appraiser, the two select an umpire, and a decision by any two of them sets the amount of loss. Appraisal resolves value disputes, not coverage disputes, and each party usually pays its own appraiser and shares the umpire's cost.

There is no federal insurance ombudsman in the United States. Policyholders can file a complaint with their state Department of Insurance, which oversees claims handling practices under state law. Where coverage is denied or a carrier acts unreasonably, a coverage attorney can assess breach of contract or bad faith remedies available in that state.

Business income claims are won on documentation and a realistic restoration timeline. The fee side of the question is covered separately on expertdassure.com.