Business Interuption Insurance

Nature

Business interruption insurance covers loss of business profits, arising from the occurrence of an insured risk.  The policy will specify the basis of calculation of performance, typically by reference to historical accounts.

The cover is designed to cover a period until the business assets are restored. The business interruption may be total or partial.  It may constitute a reduction in profits.

The insured party is obliged in good faith to take all steps to minimise the loss and avoid it.  He must act diligently and judiciously.  The terms in which the duty is cast will depend on the policy. The insured will be obliged to do all that is reasonably practicable to minimise the interference and interruption to the business.

This insured must act in good faith.  He should act as if he is not insured.  The obligation to mitigate is significant.  The insurance policy of its nature obliges the insured to minimise and mitigate loss. The insured may be obliged to trade as necessary in order to minimise and mitigate loss.  He may be obliged to trade elsewhere.

Policies

The policy will define the risks covered.  The risk will typically be similar to those covered by material damage risks. Business interruption insurance is usually supplemental to a material damage loss policy.

Material damage policies commonly exclude liability in respect of consequential property loss, which is not separately insured.  The cover is intended to last until the business returns to the level of trading which would have applied, but for the occurrence of the insured risk.  Periodic payments may be made.

Standard insurance terms and conditions apply to claims.  Extensive obligations arise in relation to the particulars of the claim in order to substantiate the loss.  Evidence must be given of the trading history