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Property & Casualty Insurance Procurement & Litigation (10 of 10 Reoccurring Themes Every Lawyer Should Know)

Business Interruption, Income, Extra Expense and other time element coverages are unique to business entities and are seldom purchased correctly.

These coverages are extremely important in that they are practically the only insurance coverages that will cover the future earnings of a business. Businesses that fail to purchase the coverage seldom fully recover after a major loss occurs.

However, the process of purchasing the coverage is wrought with misunderstanding due to the use of what appears to be accounting terms, but are actually insurance terms. This causes confusion on the part of both insurance professionals and accounting personnel normally asked to complete the application forms.

There are very few agents, brokers, or underwriters who can accurately assist in the application process, yet the actual process of buying coverage (not necessarily the correct coverage) is easy and often handled in a very cavalier manner. Very few insurance professionals within the industry have enough experience with business interruption and time-element coverage claims to understand the claims adjusting process. This makes misunderstandings common between buyers and insurance companies, which can lead to litigation.

Lesson #10: Have your client’s accountant work directly with the underwriter on this coverage procurement, if at all possible. The accuracy of the application for this coverage is paramount. Have your client ask questions to make sure they understand how the coverage will respond in a loss scenario. Have them follow-up in writing, and document the answers.

By Risk Consulting & Expert Services
Insurance, Reinsurance & Risk Management Expert Witness
ABOUT THE AUTHOR: David L. Stegall, Principal Consultant, Risk Consulting & Expert Services
David Stegall is the Principal Consultant at Risk Consulting & Expert Services. Mr. Stegall holds a B.A. in Communication from Auburn University and is a Chartered Property and Casualty Underwriter, an Associate in Risk Management and an Associate in Reinsurance, all awarded by The Institutes in Malvern, PA. He is also a Director of the Society of Risk Management Consultants.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.For specific technical or legal advice on the information provided and related topics, please contact the author.

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