A Policyholder's Common-Sense Approach to Business Interruption Claims

One reason that business interruption insurance claims have flown largely below the legal radar is that they have historically been an adjunct to a form of insurance where prompt and amicable adjustment has generally been the rule: property insurance. Business interruption claims tend to be resolved in the ordinary course, as part of a more-or-less predictable book of business. The first-party nature of business interruption insurance claims has also contributed to their less litigious character. Unlike many of the other forms of insurance coverage, business interruption insurance rarely involves underlying claims that are themselves the subject of litigation. The numerous coverage exclusions associated with alleged insurer misconduct are thus rarely implicated. In contrast to liability insurance claims, business interruption claims rarely involve a “tail.” As a consequence, they do not involve thorny problems concerning trigger of coverage and how losses should be allocated among multiple policy periods.

Unlike liability insurance and, to an increasing degree, directors' and officers' coverage, business interruption insurance rarely involves large categories of claims that are driven by outside legislative, political or social influences. In contrast to asbestos litigation, mold claims or even the recent explosion of accounting and financial scandals, nobody thinks of the “business interruption” problem ' although the events of 9/11 are arguably once again a notable exception. Business interruption claims are almost never characterized by the sort of coverage issues that cut across numerous policyholders and industries like mass torts; nor do they involve any emerging change in the underlying rules like the wave of litigation that has followed in the wake of the Enron collapse.