www.pwc.com/ca/ics
Calgary Business Recovery Expo Business Interruption Insurance July 31, 2013
Presenters
Paul Sharp CA, CBV
Tim Zimmerman Bcomm CBV, CFE
Partner
Manager
Valuations, Modelling and Disputes
Insurance Claims Advisory
(403)-509-7550
(416) – 869-2366
[email protected]
[email protected]
What is Business Interruption Insurance? Insurance that covers a business in the event of a loss which renders the business unable to operate or be hindered by an event such as a fire, flood or a breakdown of machinery. It pays for: • Loss of Profits/Earnings
• Increased costs incurred to continue running the business
Paul Sharp (403) 509-7550 / Tim Zimmerman (416) 869-2366 PwC
July 31, 2013 Slide 3
What is the Objective?
In the event of an insured peril, it is the underlying intention of all business interruption insurance policies to put the policyholder back in the same position they would have been in had the loss not occurred by reimbursing them for: • Any loss of net profit
• Any necessary continuing operating expenses Common policy forms: • Gross earnings - pays until physical damage is repaired with due diligence • Gross profit - pays until business operations return to normal
Paul Sharp (403) 509-7550 / Tim Zimmerman (416) 869-2366 PwC
July 31, 2013 Slide 4
Basic Example – Tania’s Tasty Treats • Tania’s Tasty Treats (“Tania’s”) was flooded as a result of a burst water pipe in their basement • The store was closed for one month for repairs to the damaged property • When Tania’s re-opened management spent $1,000 on flyers to let the residents of the area know of the reopening • Sales at Tania’s were back to pre-flood levels 5 months after they reopened • Tania’s had coverage for business interruption in its insurance policy for this type of flood
Paul Sharp (403) 509-7550 / Tim Zimmerman (416) 869-2366 PwC
July 31, 2013 Slide 5
Basic Example – Tania’s Tasty Treats Analysis •
The store was closed for one month for repairs to the damaged property - During the one month period Tania’s was closed they earned no sales - On this basis, Tania’s would be entitled to the loss of net profit during this one month period
•
When Tania’s re-opened management spent $1,000 on flyers to let the residents of the area know of the reopening - Tania’s made an effort to mitigate its loss of net profit by advertising. This cost would be an additional cost and appears to be reasonable considering the closure - May not be covered under gross earnings form
Paul Sharp (403) 509-7550 / Tim Zimmerman (416) 869-2366 PwC
July 31, 2013 Slide 6
Basic Example – Tania’s Tasty Treats Analysis • Sales at Tania’s were back to pre-flood levels 5 months after reopening - By reviewing Tania’s monthly sales after the reopening, sales grew from 50% of pre-flood levels up to 100% after 5 months. - Tania’s is entitled to the difference in net profit it would have earned prior to the flood less the actual net profit earned each month until operations returned to normal levels.
Paul Sharp (403) 509-7550 / Tim Zimmerman (416) 869-2366 PwC
July 31, 2013 Slide 7
What should I do if I think I have a claim? • Review your insurance policy • Inform your insurance broker or your insurer directly - Discuss your coverage and policy limits • Documentation, documentation, documentation
• Take reasonable steps to mitigate your losses • Prepare your claim/consult with an expert
Paul Sharp (403) 509-7550 / Tim Zimmerman (416) 869-2366 PwC
July 31, 2013 Slide 8
What documentation do I need? •
Description of the business operations and industry
•
Details of how the business was affected by the incident including timeline of events
•
Any business loss estimates as a result of incident
•
Financial statements prior to and after the incident
•
Monthly sales prior to and after the incident
•
Sales forecast information (if available)
•
Supporting documentation relating to additional costs
•
Details of any costs that you saved as a result of the incident
Paul Sharp (403) 509-7550 / Tim Zimmerman (416) 869-2366 PwC
July 31, 2013 Slide 9
What Questions Should I Ask? •
What level of coverage do you have? -
Any sub-limits?
-
Is there a co-insurance requirement?
-
Ordinary payroll (non-key employees)?
-
Professional fees to prepare your claim?
•
What is the indemnity period in your policy?
•
Is there a deductible if you make a claim?
Paul Sharp (403) 509-7550 / Tim Zimmerman (416) 869-2366 PwC
July 31, 2013 Slide 10
Questions
Paul Sharp CA, CBV
Tim Zimmerman Bcomm CBV, CFE
Partner
Manager
Valuations, Modelling and Disputes
Insurance Claims Advisory
(403)-509-7550
(416) – 869-2366
[email protected]
[email protected]
Paul Sharp (403) 509-7550 / Tim Zimmerman (416) 869-2366 PwC
July 31, 2013 Slide 11
Thank You!
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