All of us who are in, or parallel to, the insurance and riskmanagement industry can point to the people who helped us learn andbecome experts in our chosen fields. Rena Lynn Hirsch was the firstreporter who took me under her wing while I was a college student,helping me navigate the ropes of writing for a daily newspaper.

When I moved on to the insurance industry, there were manypeople who shared in my on-the-job education—the underwriters whopatiently answered my questions, the claims adjusters who explainedwhy something was or was not covered, and others at the independentagency where I worked who schooled me in the ways of the insuranceworld.

The most influential was the owner of the agency, Rob Gleason,who used to call me into his office, telling me to bring “all thefiles” for a particular account so he could go over them with me.Later I began to think of these sessions as being grilled,especially when a claim had occurred on a major account I hadhandled. He always wanted to be sure we had provided the bestinsurance coverage possible—or had explained to the insured whenarranging the coverage what was not available.

One of the rules I learned early on was that no matter how goodthe insurance coverage is, a business never, ever, can recoup allthe losses it suffers during a period of business interruption.Business interruption losses are the most difficult to handle.Unlike a physical building value, the future earnings used tocalculate business income insurance limits are uncertain, and manyfactors can change between the time the limits are selected and aloss occurs.

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To complicate matters, insureds may not want to “bother” withcompleting a business income insurance worksheet. They often wantto pick a number seemingly out of the air (or ask their agent to doso) without investing the time necessary to fully consider all ofthe factors needed to arrange adequate business income insurance.An example of the unexpected that can impact a businessinterruption was shown when Toyota announced it was watching itsparts inventory after the earthquake and tsunami hit Japan.

I'm sure this multinational corporation's risk management teamhad considered the global nature of its business when arrangingbusiness interruption contingencies well before the earthquake.But how many small- or mid-sized companies accept the need forcontingent business income insurance when talking with their agentsor brokers? Do they understand that coverage typically is availablefor their interruption when a supplier or main distributor is shutdown as a result of a covered cause of loss?

The business also must understand that business income insuranceis triggered only by a covered cause of loss. So, for example, ifearthquake is not a covered cause of loss, business incomeinsurance will not be available to them—even if they bought thecoverage. Again, the adage is that business interruption losses arethe most difficult to plan for as well as the most difficult toadjust.

What has been your experience with business interruption losses?Are insureds unhappy when they don't have the correct businessincome coverage? Have you agents explained how difficult they areto handle?

This blog post is meant to provide insights intoinsurance coverage issues in general, and does not necessarilyaccount for the differences in law and practice in differentvenues. As such, the opinions expressed within should not beconstrued as legal advice for the unique circumstances of anyparticular claim or suit.