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Commercial property and business interruption claims
Business interruption coverage pays for income a business loses while it recovers from covered physical damage, along with extra expense to keep operating. When an insurer denies or underpays a commercial property or business income claim, Fernald & Zaffos represents the business in California and Nevada.
Leads this practice
Brandon C. Fernald · Founding Partner
Founded the firm in 2009 after seven years at Norton Rose Fulbright. Admitted in California, Nevada, North Carolina and Illinois.
What these policies cover
A commercial property policy pays to repair or replace damaged buildings, equipment and inventory. Business income coverage, often called business interruption coverage, pays the income a business loses during the time it takes to restore the property, along with continuing expenses such as payroll. Extra expense coverage pays reasonable costs to keep operating, such as a temporary location.
Most business income coverage depends on direct physical loss of or damage to property from a covered cause. California’s Supreme Court held that the presence of a virus does not meet that requirement (Another Planet Entertainment v. Vigilant Insurance Co. (2024) 15 Cal.5th 1106), so these claims usually follow fire, water, wind, smoke or similar damage.
Where these claims break down
- Period of restoration. The insurer cuts off payments before the business could reasonably reopen.
- Lost income calculations. The insurer’s accountant uses a baseline that understates what the business would have earned.
- Exclusions. The insurer relies on an exclusion for wear and tear, mold, flood or earth movement without a careful look at what caused the loss.
- Underinsurance. Coinsurance clauses or low limits leave a gap, which can also raise questions about the broker who placed the coverage.
- Delay. Requests for more documents drag on while the business runs out of cash.
How we help
We review the policy and the insurer’s position, work with your accountant and any public adjuster on the numbers, and press the claim through negotiation, appraisal or suit. If a broker failed to get the coverage you asked for, we look at that claim too.
Deadline
Watch the suit-limitation clause
Commercial property policies often require suit within one year of the loss. In California that period is paused while the insurer considers the claim (Prudential-LMI v. Superior Court (1990) 51 Cal.3d 674), but the pause ends with a denial.
Common questions
Don’t see yours? Call (323) 410-0300.
What does business interruption insurance cover?
Usually the income a business loses while it restores property damaged by a covered cause, plus continuing expenses like payroll. Extra expense coverage pays reasonable costs to keep operating.
Does business interruption coverage require physical damage?
Most policies require direct physical loss of or damage to property. Some policies add coverage for civil authority orders or damage at a key supplier. Read the policy’s exact wording.
The insurer stopped paying before we reopened. Can it do that?
Payments usually run through the period of restoration, the time it should reasonably take to repair or replace the property. Disputes over that period are common and can be challenged.
Should we hire a forensic accountant?
Often, yes. Lost income claims turn on numbers. We work with your accountant or a forensic accountant to support the claim.
Can we sue our broker if we were underinsured?
Possibly. If you asked for coverage the broker did not get, or the broker misstated what the policy covered, the broker may be liable for the gap.
Related
The information on this page is general and is not legal advice. Contacting the firm does not create an attorney-client relationship. Prior results do not guarantee a similar outcome.