March 19, 2020
Although the documentation needed to support a business interruption/extra expense claim varies by industry and business, we prepared general guidance to assist you in tracking and assembling relevant information. Whether you have insurance coverage or not it is important to document your loss in real time. When the crisis subsides and insureds are trying to gather documentation to submit a claim, those that have prepared in advance will have their claims reviewed first.
5 Considerations to Help Prepare for a Potential Business Interruption and Extra Expense Claim
1. Prepare a timeline
- Document changes to business operations
- Government/Executive/Other Authoritative Orders
2. Track and document key business metrics (varies by industry)
- Examples may include:
- Occupancy and rate statistics (e.g. room nights/room rates)
- Rent rolls and vacancy statistics
- Number of customers
- Number of procedures
- Number of events
- Production levels
3. Track and document expenses that are related to the event (these may be new expenses or increased expenses as a result of the event)
- Examples may include cleaning costs, protective equipment, addition of new/temporary employees, overtime, etc.
- Maintain purchase orders, invoices, receipts, credit card bills, expense reports, payroll support and other underlying supporting documentation
4. Track specific event related business activity, i.e. cancellations, customer complaints, returns
- Supporting documentation related to customer complaints, cancellation and/or rescheduling of events
- Copies of contracts related to cancellations and/or rescheduling
- Maintain a log that tracks verbal discussions in real time
- Identify and document lost opportunities (e.g. for event locations may be the inability to market business or book future events)
- Discounts/special promotions
- Rent abatement
- Penalties/liquidated damages
- Destruction/donation of products (inventory)
- Loss of key employees, vendors and/or customers
5. Compile a three year look back of financial data including but not limited to:
- Monthly and annual profit and loss statements
- Budgets, forecasts, projections
- General and subsidiary ledgers and trial balances
- Key financial reports, e.g. revenues, production, payroll, statistic reports related to the business
- Industry data, statistics and communications
This outline is not meant to be limiting nor all-inclusive in nature.
We recommend maintaining this data via separate ledgers and/or accounts.
At Conner Strong & Buckelew, we have prepared for unforeseen events that lead to extraordinary claims activity. This is why we have invested so heavily in claim consulting support, loss control and safety consulting, and most recently, a dedicated Forensic Accounting Practice. Our team is available to discuss any specific questions you may have.
Please visit our COVID-19 Resource Center for more information
Click here for a printable download.
NOTE: THE RESOURCES PROVIDED ON THIS PAGE SHOULD NOT BE INTERPRETED AS LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS, PLEASE CONSULT YOUR LEGAL COUNSEL