Business Interruption Misunderstandings Many clients have misunderstandings about how their business interruption coverage actually works.


“Many clients will think that business interruption is simply a loss of sales. It is not a loss of sales.”


Duncan C. Ellis, Marsh


Business interruption coverage protects a company against the loss of profits and continuing expenses as a result of a covered loss. If the sales resulting from a loss are made up in subsequent months, then there is no loss of profit and no coverage. Another common misunderstanding relates to territory clauses. A global program will provide coverage regardless of where the physical loss occurs. For a property insurance program that is split between U.S. and non-U.S., the location of the physical loss vs. where the actual loss of profits manifests itself can be quite different, leaving a gap in coverage. Many clients also fail to understand that business interruption is the coverage, not the peril. The coverage sublimit for that peril that caused the loss will drive the coverage. Extensions of coverage are also poorly understood. Extensions may include coverage for a loss of profits because ingress or egress to the insured property is prohibited or interruptions due to an order of a civil or military authority.


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