Business Interuption Losses

Business interruption claims can become more difficult and even contentious when differences of interpretation emerge about the reliability of projections or the meaning of policy provisions. A successful claim entails maneuvering through the gray areas inherent in business interruption, including financial projections, consumer demand and policy interpretation, to reach a number that’s reasonable, credible, defensible and well-supported.

The following is a common example of a worksheet that can be used to calculate your business-interruption loss:

1. Gross Sales $______________________

2. Adjustments to gross sales (includes discounts given, returns $______________________ andallowances, bad debts, freight)
3. Net Sales (1 minus 2) $______________________

4. Other income that would be lost if operations were interrupted $ _____________________

(includes rent, interest, service fees)
5. Total revenues (3 minus 4) $______________________

6. Merchandise or materials consumed
a. Purchases during the year $______________________
b. Changes in inventory
Beginning inventory $______________________
Ending inventory $______________________
Change (beginning minus ending) $______________________
c. Total (a plus b) $______________________

7. Gross earnings (5 minus 6c) $______________________

8. Discontinuing expenses (includes
payroll that would not continue, rent, $ _____________________
heat, light, delivery, advertising,
maintenance cost, etc.)

9. Gross Earnings Discontinued
Expenses (7 minus 8) $ ____________________

Adjust Gross Earnings After Discontinued Expenses for period or Interruption Expected

Insurance Needed
1 year: Line 9* 1.00 = $______________
9 months: Line 9*0.75= $______________
6 months: Line 9*0.5 = $______________