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PROPERTY & CASUALTY

Loss of Income in Business Property Insurance

When a business suffers a loss to a fixed physical asset, such as when a fire damaged a building, the insured may incur an interruption to their business which can result in the loss of income and the incurrence of expenses.

The Property insurance policy will define what a business interruption (BI) loss is and will provide guidelines regarding how a BI loss will be calculated. Business interruption is a broad category that applies to an overall loss of income. While forms will vary slightly, two sample definitions of BI are:

  1. Net income (net profit or loss before income taxes) that would have been earned or incurred plus continuing normal operating expenses incurred during the period of restoration, including payroll.
  2. Gross earnings less charges and expenses which do not necessarily continue during the interruption of business operations. Gross earnings are defined as the net sales values of production, net sales from merchandising or non-manufacturing operations, and any other earnings derived from the operations of the business less various costs associated with production of stock and merchandise.

Rental value income (RVI) is another coverage that pays for a loss of income stream. However, the coverage is a narrow category which applies to lost gross rental income from the use of property when the insured leases or rents property out for a profit.

Continuing expenses cannot be avoided and don’t change because there is an interruption in business.  Examples of continuing expenses include taxes, insurance, rent, licenses, payroll of key employees, interest, and debt. Non-continuing expenses may be saved or discontinued if there is an interruption in business.  Examples of non-continuing expenses include salaries of hourly employees, unemployment taxes, and some utilities.

This article examines how BI and RVI losses may treat depreciation after the damage or destruction of a fixed physical asset.Read More »Loss of Income in Business Property Insurance

Cyber Liability and D&O

One click is all it takes to order goods, exchange payment, and have the items shipped and delivered to a doorstep within hours.

But what happens when that one click is not used to facilitate commerce but rather used to intentionally or even accidentally disrupt a network? When one click releases a malicious code causing an assembly line to come to a screeching halt? When one click transfers millions of dollars to a fraudulent account? When one click by a rogue employee disseminates the contents of personal files to the public? In these instances, who is ultimately responsible?

In recent cases, fingers have pointed directly at the board of directors. Since 2013, several shareholder derivative suits have been filed following network security breaches. Defendants have included Home Depot, Horizon Blue Cross Blue Shield, Target, Wyndham, and Wendy’s. Technology is changing at a rapid pace, and it is clear that consumers and shareholders have high expectations for businesses and those who run them.

Allegations in these network security cases have included breach of fiduciary duty, negligence, breach of implied contract, and violation of various state and federal statutes. Interestingly, most of the aforementioned cases have been dismissed (or settled) – apart from Wendy’s, which is still in its early stages. These dismissals are showing that the plaintiffs are having difficulty: (1) proving corporate mismanagement as a direct cause of harm from a data breach, and (2) showing actual compensatory injuries as a direct result of the breach. Courts have been dismissing cases in which actual damages have not been proven.Read More »Cyber Liability and D&O

Transportation Pollution Liability

Overview

When a cement truck turns over and pollutes a stream, how is that exposure addressed on your insurance policy? If a freight hauler is unloading drums of soap and one of those drums turns over and spills into a storm drain, how are you protected? At Paperless Insurance Services we offer transportation pollution liability (“TPL”) coverage to address these exposures.

Transportation pollution liability provides protection for products or materials transported, shipped, or delivered by the insured or by a carrier on the insured’s behalf. Typically, TPL offered to risks with transportation exposure, but some carriers will also specifically include loading and unloading. While unendorsed contractor’s pollution liability (“CPL”) policies may include coverage for vehicle use at a job site, they usually offer little or no coverage for transportation exposures away from a job site. TPL would be available to address this exposure. Additionally, TPL is available for site-specific risks with transportation exposures including manufacturers, freight forwards, and distribution centers. This enhancement can be endorsed onto site pollution to address their exposure.

While capabilities vary from carrier to carrier, most insurance companies offer coverage on a blanket or scheduled basis with occurrence and claims-made triggers available. Typically, minimum premiums start around $2,500.

Claim examples

Read More »Transportation Pollution Liability