When a business suffers property damage, business interruption insurance can offer aid to commercial property owners by reducing the costs associated with running the company while it isn’t in use. While this specific type of coverage can be an immense help for business owners, there are certain time constraints in place that can affect just how long the claim may take. Knowing what these limitations may entail can help property owners be better prepared for what to expect should they need to temporarily close their doors.

Business Interruption Insurance and Time Constraints

Typically a part of a business owner’s policy (BOP), business interruption insurance helps to pay for the replacement of lost business income in the event a business is unable to operate due to covered physical property damage. This coverage is especially important, as business expenses will continue to accrue even while the physical property is inoperable. 

For business interruption coverage to be triggered, there must be physical damage present at the primary location or a neighboring leader property. A leader property refers to other operations that may bring in additional funds to the insured’s property. These leader properties can be added to a business interruption policy through an endorsement and typically include entities such as amusement parks, casinos, malls, or retailers, among others. The physical damage present at the property must be caused by a covered event detailed within a commercial property insurance policy. These generally include natural weather events, fires, water damage, and/or other types of unexpected events that result in significant physical damage to the location of the business. 

Once coverage has been triggered, business interruption insurance can cover certain costs associated with revenue, monthly rent payments, loan payments, taxes, payroll, and other expenses.  

While this coverage can be particularly beneficial to commercial property owners, there are specific time constraints that they should be aware of ahead of time, including:

The Period of Restoration

Business interruption coverage often includes a “period of restoration.” This refers to the length of time the policy will help pay for lost income and additional expenses while the business is being repaired after a covered claim. In most cases, there is a 48 to 72-hour waiting period before the period of restoration kicks in; however, depending on the terms of the policy this waiting period can last for up to 30 days. In certain circumstances, it can be extended through the purchase of policy endorsements. 

Typically, the period of restoration ends when the property necessary to resume operations should have been repaired and not when operations actually resume. Therefore, it’s important to note that insurance companies will not cover extra expenses or loss for any unexpected delays that may lead to a longer recovery time. For instance, if a property was damaged due to a covered loss and the period of restoration was 20 days and the work needed to make the necessary repairs was anticipated to take up to two weeks, there would be no additional coverage if the repairs were unexpectedly delayed. This means there would be no additional coverage for the loss of income or extra expenses incurred because the repairs took longer than anticipated.

State Laws on Insurance Claims

Certain states have laws and regulations in place to encourage the prompt investigation and payment of insurance claims. The Texas Prompt Payment of Claims Act (TPPCA), for instance, imposes a duty on insurance providers to promptly pay claims as soon as it is reasonably clear they are required to under the insured’s policy. 

Under the TPPCA, insurers are required to pay claims within 60 days of receiving all necessary items, forms, and statements needed to make a claim determination. In the event the insurer acts contrary to its legal obligations, it must pay interest and attorney’s fees, in addition to the amount of the claim. To recover these fees, a policyholder must prove they have a valid claim under their policy, that the insurer is liable for the claim, and that the insurer has failed to comply with the Act’s requirements. 

Once the claim has been filed, the policyholder needs to give written notice for the TPPCA deadlines to be triggered. Once the insurance company receives the notice, it must then acknowledge receipt of the claim, begin an investigation of the claim, and request all items, statements, and forms it reasonably believes it will require.

After the insurer receives all necessary items, it has an additional 15-day period to notify the policyholder whether the claim has been accepted or denied. If the claim is denied, the insurer must provide valid reasoning for the denial. If the insurer is unable to accept or reject the claim within 15 days, it must notify the policyholder and give a reason why it needs more time. The insurer can receive 45 additional days to meet the deadline and must pay the claim within five business days if it is accepted. If the payment is conditional based on an action by the policyholder, the insurer will have five more business days to submit the payment once the necessary action has been performed. The insurance company must pay the claim within 60 days after receiving the items requested from the policyholder. If the insurer fails to do so, the insured is entitled to payment of the claim, statutory damages of up to 18 percent interest per year, and attorney’s fees.

Insurance Coverage Attorneys

Despite the many ways business interruption coverage can help business owners recoup the costs associated with maintaining operations while the property is unusable, insurance providers continue to choose to take advantage of policyholders by denying, delaying, or grossly underpaying valid claims. If you need assistance with a commercial property damage insurance claim, we can help. Contact us today for more information.

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