The basics of business interruption insurance coverage, including the effective adjustment, calculation and presentation of BI claims.

1. B usiness I nterruption Insurance Coverage

2. Topics 1. Basics of business interruption coverage 2. How to calculate the loss 3. How to present your claim effectively and achieve resolution with the insurance company

3. Basics of Business Interruption Coverage Section I

5. “ Extended to cover the Actual Loss Sustained by the Insured during a Period of Interruption directly resulting from physical damage of the type insured against by this Policy, to property not otherwise excluded by this Policy, utilized by the Insured and located as described elsewhere in this Policy” Business Interruption Insurance typically provides that it is: Section I

6. Business Interruption “Chain Rule” Section I IN THE EVENT OF 1. A Discrete Event of Physical Loss or Damage 3. From a Risk of Loss 4. Where No Exclusion Applies 5. Which Causes an Interruption of Business Operations THE POLICY COVERS 6. The Defined Loss 7. For The Defined Indemnity Period 2. To Described Property

13. Actual Loss Sustained “ This policy is intended to cover the Actual Loss Sustained during a Period of Interruption directly resulting from physical loss or damage of the type insured against by this Policy...” Basics of business interruption coverage Section I

14. Gross Earnings “ Gross Earnings shall be defined as the net sales value of production less the cost of all raw stock, materials and supplies utilized in such production and any other non-continuing expenses.” Basics of business interruption coverage Section I

15. Basics of business interruption coverage Section II A typical period of interruption clause provides, in pertinent part, as follows: “ The period from the time of the physical damage of the type insured against by the Policy to the time when with due diligence and dispatch damaged buildings and equipment could be repaired or replaced and made ready for operations under the same or equivalent physical and operating conditions that exist prior to the damage, not to be limited by the day of expiration named in this Policy”

16. Extended Period of Indemnity - Additional period which typically covers an insured for loss of market share Contingent Business Interruption - Covered loss that occurs to a company’s suppliers or customers Basics of business interruption coverage Section I

17. How to Calculate the Loss Section II

18. Section II In determining the indemnity payable… “ Consideration shall be given to the experience of the business before the probable experience thereafter” How to calculate the loss

23. Extra Expense Endorsement “ This policy is extended to cover 1. The reasonable and necessary extra expenses incurred to temporarily continue as nearly normal as practicable the conduct of the Insured’s business. 2. The reasonable and necessary extra costs of temporarily using property or facilities of the Insured or others.” How to calculate the loss Section II

25. Extra Expense Basic Purpose Section II . . . Then the Company Has Incurred Extra Expenses If a Company . . . Has an Insured Physical Damage Loss Which Causes an Insured Interruption of Business LO$$ Which Requires Additional Expenses to Operate the Business LO$$ And Those Expenses INCREASE the Loss . . . LO$$

27. Types of Expenses Section II Additional Manpower Additional Utilities Overtime Non-Operating Loss-Related Expenses Resale Price Purchase Price Purchase of Finished Product for Resale Above Sales Price Temporary Facilities Notice Cost to Retain Customers

28. Expense to Reduce the Loss “ This policy also covers such expenses as are necessarily incurred for the purpose of reducing any loss under this policy, but in no event shall this company be liable for an amount greater than that for which it would have been liable had the Insured been unable to make up any lost production or to continue any business operations or services. How to calculate the loss Section II

29. Expediting Expenses Basic Purpose Section II If a Company . . . Has an Insured Physical Damage Loss Then the Company Has Incurred Expediting Expenses Which Can Be Reduced by Incurring Additional Expenses . . . LO$$ Which Causes an Insured Interruption of Business LO$$

34. Business Interruption losses are typically adjusted by following these five steps: 1. Pinpoint the length of time during which production or business operations were interrupted because of an insured event 2. Determine the quantity of lost production. This is done by reviewing: inventory records, production records and sales records. Compute what the plant what have normally produced, had there been no loss. The see how many units were actually produced. The difference is the Gross Lost Production. Section II

35. 3. Deduct any sales or production that can be continued or made up through the use of existing inventories, other plants, working overtimes, etc. The difference is the Net Lost Production. 4. Multiply the lost production by the unit B.I. Value (net profit and fixed expenses). 5. Add back the extra costs associated with the above make up including the extra costs to replenish inventory used to maintain sales during the interruption, overtime premiums, etc. Continued... Section II

36. How to Present Your Claim Effectively and Achieve Resolution with the Insurance Company Section III

39. Believe in your claim Go for 100% recovery on a defensible claim - - Not for 50% on an inflated claim How to present your claim effectively and achieve resolution with the insurance company Section III

44. Summary

46. B usiness I nterruption Insurance Coverage