Business interruption and lost income claims

Business interruption coverage does not pay for damage. It pays for the money the damage cost you. That makes it an accounting question wrapped in a legal one, and it is where most policyholders leave the largest amount on the table.

What business interruption coverage actually promises

Most commercial property policies and business owner's policies contain a business income (or business interruption) form. In its standard shape it promises to pay the actual loss of business income you sustain because of a necessary suspension of operations, where the suspension is caused by direct physical loss of or damage to property at the described premises from a covered cause of loss.

Three components do most of the work in that sentence, and each is a place where claims are lost:

• Suspension. Many forms define this to include a slowdown, not only a complete stop. Insurers do not always volunteer that.
• Direct physical loss or damage. Two things joined by “or,” which means they cannot mean the same thing. Loss of use and loss of functionality have both been argued successfully under the first limb.
• Period of restoration. The clock usually starts at the loss and runs until the property should be repaired with reasonable speed — not until it actually is. Delay caused by the insurer's own slow adjustment does not extend it, which is why early pressure matters.

The three coverages people forget to claim

Civil authority coverage responds when a government order prohibits access to your premises because of damage to other property nearby. It typically has its own waiting period and its own time limit, and its own distinct trigger — which means it can pay even where the main business income coverage does not.

Contingent business interruption covers losses caused by damage to someone else's property: a key supplier, a manufacturer, an anchor tenant whose closure emptied the mall. If your loss came from upstream, this is the section to read.

How the loss is calculated — and where insurers shave it

Business income is usually defined as net income (profit or loss before tax) that would have been earned, plus continuing normal operating expenses including payroll. That second half is where disputes live. A carrier's first calculation often:

What the insurer does	Why it understates the loss
Uses last year's revenue flat	Ignores growth trends the policy's own experience clause requires be considered
Strips out all payroll as “saved”	Key employees retained during a shutdown are a continuing expense, not a saving
Ends the period at reopening	Many forms include an extended period of indemnity for the ramp back to normal trading
Treats a partial reopening as full recovery	A slowdown remains a suspension under most definitions
Deducts government relief received	Rarely supported by the policy language unless a specific provision says so

We engage a forensic accountant early, before the insurer's number has been on the file long enough to become the reference point. A properly built loss model, with the assumptions documented, changes the conversation more reliably than argument does.

The exclusions that come up

Virus and communicable disease exclusions were added to many forms after 2003 and became near-universal after 2020 — but they are not in every policy, they are not always worded the same way, and they do not reach every fact pattern. Beyond those, expect to see arguments about wear and tear, faulty workmanship, ordinance or law, and the anti-concurrent-causation clause. Each is read narrowly, and the insurer bears the burden of establishing that one applies.

What to do while the claim is open

• Ask in writing for a complete certified copy of the policy including all endorsements.
• Preserve the accounting: P&Ls, tax returns, POS exports, payroll registers, booking systems.
• Keep a claims chronology — every call, every name, every promise, dated.
• Do not sign a sworn proof of loss with a number you have not had built properly.
• Mitigate, and keep the receipts. Reasonable mitigation costs are frequently reimbursable.