BUSINESS INTERRUPTION

Transcription

1 Robert M. Swift cpcu cipa cbcp ccm Business Interruption Consultants, inc. Michael Gardner, CPA The Claro Group, LLP Forrest Artz Director of Finance Memphis Shelby County Airport

2 BUSINESS CONTINUITY PLANNING Robert M. Swift cpcu cipa cbcp ccm Business Interruption Consultants, inc.

3 BUSINESS CONTINUITY PLANNING Survival document Basis of risk management plans Identifies period of restoration Quantifies business income probable loss and extra expense need

4 BUSINESS CONTINUITY PLANNING Strategy Business impact analysis Back ups and alternatives Return time objective Return point objective

5 PROPERTY INSURANCE Financing (insurance) Buildings Equipment Contents Income loss and expenses

6 PROPERTY INSURANCE Replacement cost Deductible regular and special Waiting period Machinery breakdown electrical arcing, HVAC, etc.

7 BUSINESS INCOME COVERAGE Actual loss of income due to suspension of operations from a covered peril at described premises. Contingent business income will pay actual loss sustained due to suspension of operations for a covered peril at a third party s premises.

8 BUSINESS INCOME INSURANCE Business income worksheet Revenue lost or deferred Extra expenses Payroll Period of restoration Extended period

9 Revenues landing fees, rental, concessionaires, other $25,000,000 Minus Discontinuing expenses direct, other $6,000,000 Plus Extra expenses temp facilities, transportation, incentives, other $5,000,000 Minus Payroll to be excluded- n/a total $24,000,000 Period of restoration 3 months (25%) 6,00,0000 Extended period of restoration 3 months (25%) 6,000,000 $12,000,000

10 CLAIMS Hire a bi specialist not CPA generalist Increase your professional fees coverage limit Implement your plan, don t wait for the adjuster

11 CLAIMS Calculate and present your claim Have enough cash flow for six months claim adjustment.

12 BE PREPARED AND BE PROTECTED.

13 Preparing Your Claim Michael Gardner, CPA

14 Documenting Your Claim Where Do You Start? Read your policy Review deductibles and reported values Make sure you understand the cause of your losses Most policies require that losses be calculated on an Actual Loss Sustained basis Establish a claim team to help compile and document the claim This will require resources from throughout the organization Establish a project code(s) to accurately capture your costs incurred in responding to the loss Consider how best to use technology to document your claim Open a dialog with your adjuster 14

15 What Triggers Business Interruption Coverage? Insured Property BI CHAIN 15

16 How long can a policyholder claim business interruption losses? Property Repair & Replacement P O I Time Element Period of Indemnity 16

17 What are the major drivers of business interruption losses? Length of Compensable Interruption Possible Extended Period of Indemnity Projection of But For Revenues Extra Expense Expenses to Mitigate Loss Possible Saved Expenses 17

18 What should a policyholder consider when calculating Actual Loss Sustained? Basis of Projection of But For Revenues Delayed Sales (e.g. concessions) Make-up of Lost Sales No Coverage for Unabsorbed Fixed Costs Idle Periods / Seasonality of Revenue Construction in Progress 18

19 Documenting Your Loss Financial results for last 2 years Latest Pre-Loss Projections Historic Budget to Actual results for last 2 years Business Plan For Next Year (LTO estimates, etc.) Correspondence with Customers (Air Carriers) Saved Expenses (Variable v. Fixed Expenses) 19

20 Common Claim & Coverage Issues Possible Property Damage Claim Issues Replacement Cost v. Actual Cash Value Advances in Technology Changes in Building Codes Post-loss What if you do not go Back with the Same Design? Use of Internal Resources on Rebuild Are they Covered? Possible Salvage Issues related to Temporary Production Other Potentially Available Coverages Contingent Business Interruption Ingress/Egress Civil Authority Utility Service Interruption Claim Preparation Expense 20