QUESTION 1: Should the net income generated as a result of the sales of these power generators be used in the business interruption calculation? In other words, should the sale of these generators be considered as actual sales during the loss period, thus reducing its business interruption collectible amount?

2- Regarding the business interruption loss period, the beginning of such loss period would be: September 20, 2017 through the date they began operations. In this case, the insured began operating on October 7, 2017, the date on which they began the sales of the power generators. Even though the insured were still out of power through mid-December. However, the premises were open to the public, and they were selling power generators.

The insured contends that the sale of power generators should not be taken into account.

It is our contention, that if a customer wanted to buy a motorcycle, the inventory was available, and the insured was ready to sell such motorcycles. They state they could not sell them because they did not have electricity. However, due to the hurricane effects, people were not interested in buying motorcycles due to electric power failure and gasoline shortages (note that the lines to buy gasoline and diesel could last more than 4-5 hours in the gasoline stations).

Nonetheless, the insured opened its premises and sold the items that its clients were interested in, that were the power generators, since October 7, 2017.

QUESTION 2: Should the extended period of 60 days be granted even though: a) the insured opened its premises on October 7, 2017 to sell power generators? b) this insured did not sustain direct physical damages, only sustained power failure.

The business interruption loss period should end when the insured opened its premises and sold power generators, i.e., October 7, 2017 or when the electric power was back?

3- Due to the fact that the company was a start up business, we all agree that it would have a net loss during the first year of operations in its accounting records. However, the insured's accountant contends that such projected net loss should not be considered in the business interruption loss calculation.

The Policy states that the business income means the net profit or loss that would have been earned or incurred; and the continuing normal operating expenses incurred, including payroll. As a result, the expected net loss should be added to the continuing expenses.

QUESTION 3: For example, if the net loss amounts to $13,000.00 and the continuing expenses totaled $28,000.00, the collectible business interruption is $15,000.00? Or the net loss of $13,000 should be ZERO?

Puerto Rico Subscriber

QUESTION 1: Should the net income generated as a result of the sales of these power generators be used in the business interruption calculation? In other words, should the sale of these generators be considered as actual sales during the loss period, thus reducing its business interruption collectible amount?

The ISO business income form CP 00 30 states that in calculating the net income, that net income does not include net income earned as a result of favorable business conditions caused by the covered cause of loss on customers or other businesses. Selling the generators meets this qualification, as the generators provided a favorable business condition to the insured that would have not existed but for the hurricane, thus it should not be included in the net income calculation.

2- Regarding the business interruption loss period, the beginning of such loss period would be: September 20, 2017 through the date they began operations. In this case, the insured began operating on October 7, 2017, the date in which they began the sales of the power generators. Even though the insured were still out of power through mid-December. However, the premises were open to the public, and they were selling power generators.

The business income form CP 00 30 states that the "period of restoration" ends when the insured could resume business "operations". "Operations" is defined to be the insured's business operations. Even though the generator sales were not the insured's intended business operations, they became the insured's business operations and thus the insured was able to continue or resume operations on October 7, 2017.

QUESTION 2: Does the extended period of 60 days be granted even though: a) the insured opened its premises on October 7, 2017 to sell power generators? b) this insured did not sustain direct physical damages, only sustained power failure. The insured was able to resume business operations on October 7, 2017, which is the ending date for calculating the business income loss during the "period of restorations". However, the ISO form to cover business income from power failure, CP 15 45, states that the power failure must be a result of a direct physical loss or damage to the covered premises. Since the insured did not actually sustain a direct physical loss, such as spoiled meat, a fire, or melted motorcycle wiring as examples, then the business income coverage does not apply and thus no payment is due the insured.

QUESTION 3: For example, if the net loss amounts to $13,000.00 and the continuing expenses totaled $28,000.00, the collectible business interruption is $15,000.00? Or the net loss of $13,000 should be ZERO? If the business income coverage applied, then it would depend upon how the $13,000 was calculated. The calculation should not include net income earned from sale of the generators as described in the answer to Question 1 – but it should include continuing expenses required to keep the business operational.