Business Interruption Insurance Claims in Texas

A fire, storm or other disaster can force a business to close even when the owner is ready to keep working. Business interruption insurance may replace some of the income lost during that shutdown, but coverage depends heavily on the policy terms and the cause of the loss. A Texas insurance claims lawyer can review the policy when an insurer denies a claim or disputes how much the business should receive.

What does business interruption insurance cover?

Business interruption coverage is generally available with commercial property insurance. It’s intended to help offset loss of income when a business can’t operate normally due to covered physical loss or damage.

Coverages may include lost business income and certain continuing operating expenses. Some policies also include extra expense coverage, which may pay additional costs you incur to keep your business going or to restore your operations.

For instance, a company may need to rent temporary space when its building is damaged by fire. Depending on the policy, some of that added cost may qualify as an extra expense.

The policy itself controls what is covered. Business owners should not assume that every event causing lost revenue will qualify for payment.

Does the business need physical property damage?

Many business interruption policies require direct physical loss of or damage to insured property from a covered cause. A business that loses customers but suffers no covered property loss may not qualify under standard business income coverage.

The cause of the damage also has to fall within the policy. Fire or certain storm damage may be covered, while flood is commonly excluded from standard commercial property policies. Some losses caused by utility failures may also be excluded unless the business purchased additional coverage.

This distinction can become important after hurricanes or severe Texas storms. A company may experience a long shutdown, but the source of the interruption can determine whether the policy pays.

What is civil authority coverage?

Some policies also have civil authority coverage, which may apply when a government order blocks access to the insured property because of covered damage to another location.

The exact requirements depend on the wording of the policy. A government order alone does not necessarily create coverage. The order may need to result from physical damage caused by a covered event.

For example, officials might close a street after a nearby building suffers major fire damage. A neighboring business that cannot open may have a potential civil authority claim even though its own building was not damaged.

How does an insurer calculate lost business income?

Business interruption claims often depend on financial records. An insurer may review past sales and expenses to estimate what the business would likely have earned if the covered loss had not happened.

That can lead to disagreements. The business may have been growing before the loss, or seasonal changes may affect expected revenue. An insurer might also challenge whether certain expenses continued during the shutdown.

Owners should keep tax returns, profit and loss statements and other records that show the company’s financial performance. A Texas insurance claims lawyer can also review the insurer’s calculation when the amount offered does not appear to reflect the actual covered loss.

How long can business interruption benefits continue?

Coverage usually does not continue simply because a business remains closed. Many policies tie payment to a defined period of restoration.

That period generally relates to the reasonable time needed to repair or replace damaged property, subject to the wording and limits of the policy. Delays that fall outside the covered restoration period can therefore become a source of disagreement.

Policies may also contain waiting periods or dollar limits. An owner should review these provisions before estimating how much insurance will replace lost income.

What if the insurance company denies the claim?

A denial does not always mean the business has no coverage. The insurer should explain the basis for its decision, and the owner can compare that explanation with the actual policy language.

Texas law also regulates how insurers process claims. Chapter 542 of the Texas Insurance Code imposes requirements for prompt handling and payment of covered claims. Chapter 541 prohibits certain unfair or deceptive insurance practices.

A dispute may involve whether the event was covered, whether physical damage occurred or how the insurer calculated the loss. Resolving the dispute often starts with a careful reading of the policy and the records supporting the claim.

How can The Law Office of Sandy McCorquodale, P.C. help?

Consider a Texas restaurant that closes after a severe storm damages its roof and dining area. The insurer pays for some repairs but disputes several weeks of lost business income because it argues that the restaurant could have reopened sooner. The owner’s financial records and repair timeline may become important in determining what the policy should pay.

The Law Office of Sandy McCorquodale, P.C. represents policyholders in insurance disputes and can review coverage, claim handling and disputed losses. To discuss a denied or underpaid business interruption claim with a Texas insurance claims lawyer, reach out online or call on (833) 712-4472.