November 20, 2012
For a business to recover from a disaster like superstorm Sandy — and get the most benefit from its insurance coverage — it’s important to understand property insurance policies and the business-income coverage they provide. Companies need to know what triggers coverage, and the methods insurers use to value business-income losses. It is generally accepted that to measure the impact of an event on a business, the business income is measured with and without the impact of the event. The loss is the difference between the business income the company would have earned without the event versus what the business actually earned. While this principle may suffice for isolated events, like a fire to an individual store, what happens when the impact of the event is so widespread that its impact is felt throughout the entire economy, or the entire regional economy — as with superstorm Sandy?