Business Interruption Coverage
Authored by Gary Brough
I find myself in the unusual position of communicating to you on an issue that I hope ultimately proves to be an irrelevance.
We are now entering the busiest part of the hurricane season for our region, and it is best to be proactive rather than reactive when preparing for potential major weather events, which are unfortunately proving more likely to occur than in the past.
Following Hurricane Irma, we were very successful in securing substantial business interruption claims for several local resorts. We learnt many valuable lessons along the way some of which I would like to share with you so that you may consider these as part of your planning for a disruptive business event like a major hurricane:
- Make sure your PACE records are up to date. If there was one source of information that was particularly useful in settling claims post Irma it was PACE records. They established a trajectory for resorts up to the date of the hurricane and we were then able to compare that trajectory to prior years and show how it typically developed in the following months in the absence of a hurricane so as to show the revenue you could reasonably have been expected to generate had your business not been impacted by a hurricane. As a consequence of COVID any business interruption claim will likely be more complex than it was following Irma because recent years (post 2020) do not reflect typical operating years, but this renders your PACE records all the more important.
- Ensure your insurance policy is paid and up to date. Hardly earth-shattering advice and no doubt if you want business interruption coverage you already have it in place. However, are you comfortable with the amount of coverage you have, the deductible and exemptions you have agreed to and have you provided your insurers with the most up to date financial information you have available on which they have based your premium? We have been fortunate to enjoy a better recovery from COVID than other countries in the region. Have these improved results been fully communicated to your insurer? Post Irma we found that the wording of many policies was quite vague. It is probably too late this hurricane season to change the detailed wording of your policy but not too late to change “macro” issues like coverage, deductible etc.
- Do you have a back-up copy of your financial data? Off-site is good. A back up in another jurisdiction is even better. Using the Cloud is obviously a good option in this regard.
- Have a contingency plan for converting any cancellations to future bookings. This will actually reduce your claim but is good business sense in any event.
- Keep track of all expenditures you incur so as to recover as quickly as possible following any hurricane. Payments such as assistance to staff to keep your workforce together etc. may be recoverable. Obviously, nothing you can do about this ahead of time other than be alert to it.
Hope some of the above resonates with you.
Happy to assist in any way we can. In the unfortunate, and hopefully unlikely, event of a hurricane impacting TCI our local team will be able to provide you with immediate assistance. Based on our prior experience it is critically important to act as quickly as possible, for example notifying your insurers in the immediate aftermath of a hurricane and being amongst the first to establish communication with their decision makers can significantly help the progress and success of your claims.
However, as I stated at the outset of this communication, I hope this all proves to be moot.
We encourage you to connect with your Baker Tilly advisor regarding how any of the above may affect your situation.