COVID-19 has disrupted businesses around the world. Business interruption coverage, often a part of a commercial property policy, has many people’s attention.  Communicable disease coverage, civil authority coverage, and contingent business interruption coverage are also among most visited coverages as policyholders try to assess whether their policies provide coverage during these times.

Most businesses did not foresee the impact of COVID-19.  Whether it is a decline or an increase in their operations due to the impact of the pandemic, it was not factored in their budgets and financial projections for 2020.  Businesses, consumers, and civil authorities are still adapting to the coronavirus in different ways.  For business interruption calculation purposes, financial projections made prior to the Coronavirus pandemic should be revisited to factor in the impact of the virus on the business.  Each business, or each claim, has a different scenario that needs a qualified forensic accountant to investigate and document the claim.

The amount of business income loss is generally determined based on “Net Income that would have been earned and continuing normal operating expenses incurred but for the loss event.”  For business interruption claims that were filed for the restoration period overlapping with the spread of COVID-19 and had used financial projections prior to the chaos for calculation of business interruption loss, the calculations should be revisited.   These calculations using projected numbers have not been adjusted to the “new normal” overstate the loss.

A prudent investigator should review information such as civil authorities’ emergency orders and relevant industry information to reassess the reasonableness of previously made financial projections, and further revise the financial projections to what is reasonable for the business after considering the impact of the pandemic for the period of restoration. These revisions to financial projections will impact business interruption calculations or lost profits analysis previously concluded.

A&C’s qualified and experienced professionals calculate the change in business income by comparing the level of profits before and after the damaging event.  A&C’s calculations assist businesses & insurance companies in reaching a supportable lost profit analysis.  If you have questions regarding this topic, please reach out to us at (469) 467 – 4660, or