Your Business Interruption Claim Questions Answered

When disaster strikes—whether in the form of a fire, hurricane, flood, or even a pandemic—the impact on a business can be swift and devastating. Revenue stops. Expenses don’t. And in the face of mounting losses, business owners often turn to their insurance policies to file a business interruption claim. But navigating the claims process is rarely straightforward.

At Morgan & Morgan, we understand how critical it is for your business to get back on its feet. Our attorneys have helped business owners across the country pursue full and fair compensation after their operations were interrupted by unforeseen events. Below, we answer seven of the most common questions we hear from business owners trying to make sense of their business interruption coverage.

What Is Business Interruption Insurance?

Business interruption insurance is a type of coverage typically included as part of a commercial property insurance policy or purchased as an endorsement. It’s designed to cover lost income and operating expenses when a business is forced to close temporarily due to a covered peril, such as fire, theft, or natural disaster.

What it usually covers:

• Lost revenue
• Fixed operating costs (e.g., rent, utilities, salaries)
• Temporary relocation expenses
• Loan payments
• Taxes
• Extra expenses incurred to minimize downtime
   

Importantly, business interruption insurance only applies when there is direct physical damage to your property caused by a covered peril. If your business was closed by government order, supply chain disruption, or fear of potential damage, not actual damage, your claim may be denied unless your policy has specific language allowing it.

What Events Are Typically Covered by a Business Interruption Policy?

Most standard business interruption policies cover interruptions caused by physical damage from specific perils listed in the policy. These might include:

• Fires
• Hurricanes
• Tornadoes
• Vandalism
• Windstorms
• Equipment damage
• Water damage (from burst pipes, not floods)
• Certain civil authority orders, if tied to property damage

Some policies may also offer contingent business interruption coverage, which kicks in when damage to a supplier or customer’s property interrupts your operations. Other policies may include extra expense coverage, which pays for the additional costs of keeping the business afloat during the period of restoration.

What is often not covered:

• Floods (unless you have a separate flood insurance policy)
• Earthquakes (typically require a separate policy)
• Pandemics or virus-related closures (unless specifically stated)
• Losses due to market downturns or general economic trends

Every policy is different. That’s why it’s vital to have an attorney review your coverage and determine what you’re entitled to under your specific policy.

How Do I File a Business Interruption Claim?

Filing a business interruption claim involves multiple steps and documentation requirements. Here's a general roadmap to get started:

Step 1: Review Your Policy

Understand what your policy covers, including the “covered perils,” definitions of “business income,” and exclusions.

Step 2: Notify Your Insurer Promptly

Most policies require you to notify your insurer of a potential claim within a specific time window. Failing to act quickly could give the insurer reason to deny your claim.

Step 3: Document Your Losses

Keep detailed records, including:

• Profit and loss statements
• Tax returns
• Payroll records
• Utility bills
• Receipts for temporary expenses or repairs
• Photographs of property damage
  
   

Step 4: Work With Professionals

Consider hiring a forensic accountant to help calculate your lost profits, and consult a business interruption attorney to ensure your claim is strong and properly filed.

What If My Insurance Company Denies My Claim?

It’s unfortunately common for insurers to deny or severely undervalue business interruption claims. 

They may argue any of the following:

• There was no physical damage
• The loss wasn’t caused by a covered peril
• The damages are less than what you claimed
• The period of restoration was shorter than you say
  
   

If your claim is denied, don’t give up. You have options:

• Request a detailed explanation from the insurer.
• Dispute the denial by submitting additional documentation or requesting reconsideration.
• Consult an attorney experienced in business interruption claims to evaluate your denial and fight for your rights.
   

At Morgan & Morgan, we know how to challenge unfair claim denials and hold insurers accountable when they don’t uphold their end of the contract. You paid for this coverage—don’t let them dodge their obligation when you need it most.

How Is My Business Interruption Loss Calculated?

Calculating business interruption losses is complex. Insurers and claimants often disagree on how much revenue was lost and for how long the loss lasted. Here’s what goes into the calculation:

Lost Business Income

This is the net income you would have earned if the business had not been interrupted. Insurers typically look at:

• Historical financial statements
• Industry trends
• Projected sales growth or decline
• Seasonality and special events
  
   

Operating Expenses

Many ongoing expenses are still covered even if business operations are paused, such as:

• Rent
• Payroll (if not laid off)
• Utilities
• Insurance premiums
  
   

Extra Expenses

These are necessary costs to minimize the interruption or keep the business running, such as:

• Renting temporary office space
• Expedited shipping costs
• IT services or equipment rental

The “period of restoration” is also key. It’s the timeframe during which lost income and expenses are covered, starting from the date of loss until the property is reasonably repaired or restored. Policies may also include a “waiting period,” typically 48–72 hours, before benefits begin.

Are there exclusions that apply to my business interruption claim?

Yes, exclusions commonly apply to business interruption claims, and they’re one of the primary reasons insurance companies deny or limit coverage. 

It is important to note that insurance companies can often stretch these policy exclusions, claiming they apply to a situation when they in fact do not. It’s important to review your policy and consult an attorney.

These exclusions vary by policy but generally fall into a few categories:

Lack of Physical Damage

Most business interruption policies require direct physical loss or damage to your property. If your business shut down due to fear of damage, a government order, or supply chain issues without actual physical damage, your claim might be excluded.

Virus or Pandemic Exclusions

After the COVID-19 pandemic, many insurers added explicit virus or communicable disease exclusions to their policies. If your business closed due to COVID-19 (or a similar outbreak), your policy may exclude any related losses.

Flood and Earthquake Exclusions

Standard commercial property insurance often excludes:

• Flood damage: usually requires a separate flood insurance policy
• Earthquakes: typically covered only if you’ve purchased a specific earthquake endorsement
  
   

Utility Failures

Losses due to off-premises utility failures (like a citywide power outage) are often excluded unless your policy has an endorsement specifically covering this.

War, Terrorism, and Civil Unrest

Policies usually exclude losses caused by:

• Acts of war
• Terrorism (unless you opted for a terrorism rider)
• Civil unrest or riots (unless physical damage occurs and is explicitly covered)
  
   

Delay or Poor Maintenance

Your loss may be excluded under general “neglect” or “gradual deterioration” clauses if it was caused by:

• Poor maintenance
• Wear and tear
• Employee negligence not tied to a covered peril
  
   

Government Action (Civil Authority)

Some policies limit coverage for business closures caused by government actions, like road closures or curfews, unless the government order was in response to physical damage to nearby property.

There are many, many business interruption policies that have no exclusions at all.

Then, there are some policies with exclusions, and an insurance company may say it applies when it actually has nothing to do with your situation. 

And then, there are other policies that do have exclusions that will have to be considered in court, and the court will decide whether or not those exclusions apply. 

Your insurance company may act like this has all been decided. However, that may not be the case. Morgan & Morgan can review your policy and determine if a policy exclusion truly applies to your situation or not.

My business interruption insurance claim was denied because there was no physical damage to my place of business. Is my fight over?

The answer is no. The fight is not over.

Here’s why: These insurance policies that contain business interruption coverage usually have two different triggers. 

The policy may say that your suspension of operations has to be caused by the “direct physical loss of or damage to property.” 

Those are two different things. There’s an “or” between them. 

However, many denial letters from insurance companies combine the two. They say you have no coverage because there is no “direct physical damage.” Those words are not in the policy. The policy says: “direct physical loss of OR damage to property.” “Direct physical loss of” is very different from “damage.”

An easy example of direct physical loss would be if somebody steals your car. Your car’s gone; it’s not damaged. You have, under the law, suffered direct physical loss of your car, because you can no longer use it for its intended purpose. It’s not damaged. It might get damaged, in which case both of those triggers would apply.

The same situation applies when you’ve lost the intended use of your building. You can no longer use it for its intended purpose. That is a direct physical loss of the insured property. Coverage is triggered.

Can I Still File a Claim If I’m Just Now Realizing the Extent of My Loss?

Yes, but time is of the essence. Business interruption claims are subject to strict deadlines, both for notifying the insurer and for filing a legal claim if necessary. If you wait too long, the insurer may deny your claim for being untimely, even if it would have been valid otherwise.

However, the discovery of losses may not occur immediately. You may realize months later that the revenue loss was greater than expected or that repairs are taking longer.

If you’re filing late, act now to stop further delay and document why the delay occurred (for example, you only recently received invoices or accounting help). Then, consult an attorney immediately. Morgan & Morgan can review your policy and help you determine whether a late claim is still viable.

I received an SBA loan. Does that mean I can't file my business interruption insurance claim? 

You can file it, and you can still get compensated for it. 

Sometimes the SBA is going to be entitled to be reimbursed if you get “double compensated.” 

However, insurance companies will sometimes try to trick you and tell you that they don’t have to pay because you got an SBA loan. This is not true. 

What If My Business Closed Permanently Due to the Interruption?

Even if your business was unable to reopen, you may still be entitled to compensation for the income you lost during the period of restoration, up until the time your business ceased operations.

In cases of total loss, it becomes even more critical to work with a legal team and a forensic accountant to determine the actual duration of the insurable loss and calculate the full financial impact.

Be sure to preserve any evidence that supports your claim.

 

Do I Need a Lawyer to Handle My Business Interruption Claim?

Business interruption insurance is supposed to be a safety net. But too often, insurers delay, deny, or underpay valid claims, leaving business owners struggling when they’re already at their most vulnerable.

While not legally required, hiring a lawyer can significantly increase your chances of success, especially when dealing with a complex claim or a denial. Insurance companies have teams of adjusters, accountants, and lawyers working to minimize payouts. Without experienced legal help, you may be leaving money on the table.

An attorney from Morgan & Morgan can review and interpret your policy, ensure your claim is filed properly and on time, and help quantify your damages accurately. Our experienced legal team can negotiate with the insurer on your behalf and even take legal action if the insurer acts in bad faith.

Our firm has recovered billions of dollars for clients and doesn’t shy away from holding powerful insurance companies accountable. Plus, we work on a contingency fee basis, meaning you pay nothing unless we win your case.

At Morgan & Morgan, we believe insurance companies should be held accountable for the promises they make. Our experienced commercial litigation attorneys fight every day to protect the rights of small business owners, franchisees, and entrepreneurs across the U.S. With more than 1,000 attorneys and a national reputation for results, we have the strength and resources to take on even the largest insurance companies.

If your business has suffered due to a disaster or covered event and your business interruption claim has been denied, delayed, or undervalued, our attorneys are here to help you recover what you’re owed and get your business back on solid footing.

Contact Morgan & Morgan today for a free, no-obligation case evaluation.