If BP’s “Deepwater Horizon” oil rig explosion and spill has taught us nothing else, it has at least drawn attention to three facts that will permeate insurance claims for the balance of the 21st century: The first is that indirect loss can be more expensive than direct loss. The second is that our infrastructure — be it a bridge, a pipeline, or an oil rig — is wearing out and will break. The third is that we need options to fossil fuels.

Having just finished writing a detailed course and new chapter about indirect loss — now called “business income,” which was formerly called “business interruption,” just as they renamed employee dishonesty “employee theft; they being the Insurance Services Office, Inc. — I became aware that indirect loss is far more complex and costly than direct loss. It also carries serious ramifications for a larger number of people. The reason that the ISO changed the name of the coverage, I suspect, is that some entities cannot “interrupt” business. Could yours? The coverages are sold with or without extra expense coverage that helps a business or other insured entity continue operations while direct loss is being fixed.

One would anticipate that the closest most adjusters come to handling an indirect loss is by assigning a rental car for an insured or a claimant while a damaged automobile is in the shop for repairs. Another scenario might involve paying a few motel and restaurant bills while a wind- or fire-damaged home is being restored. Commercial risk adjusters may become involved in the calculation of net income loss and operating expenses when an insured business suffers a covered peril, but for hurricane wave wash effects or river overflow victims who do have flood insurance, indirect loss is uninsurable. In fact, most indirect loss is uninsurable.

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