The flames are gone, but the big blaze has left catastrophic damage, and local businesses will spend the next several months trying to sort out what to do next.
Insurance companies will pay millions in direct damage claims to repair charred structures, but many businesses will unfortunately learn they do not have insurance to cover the income lost due to the damage.
Diligent businesses may have purchased business income/interruption insurance to help make up for lost income and pay expenses during recovery. However, such coverage often has limitations that may prevent full coverage. For example, it may be triggered only if the business suffers direct harm or if a neighboring property is directly damaged.
Consider this scenario: a restaurant closes due to a wildfire evacuation, but suffers no direct damage from the fire. Upon reopening, the business finds that many customers have evacuated and will not return for the foreseeable future. After filing a claim with the business income/interruption insurance company, the restaurant learns it has no coverage because it didn’t suffer direct damage from the fire. Also, “evacuation” is not listed in the policy as a covered cause of loss, so the reduction in income from the evacuation would not trigger coverage.
It may be possible to expand the protection offered by a business income/ interruption insurance policy. For example, some insurance companies can expand the radius of direct damage that would trigger a covered loss; some may offer coverage for losses in the business’s supply chain, such as a fire damaging the warehouse of a supplier that provides essential goods.
Take a hard look at your business income/interruption policy to see if there are gaps you wish to see covered.
