Chapter 11

Business Interruption Insurance Claims*

Daniel G. LentzRobert M. Reeves

11.1 Introduction

Insurance contracts follow the rules and principles of other commercial contracts and must comply with contract law; they are, however, unique in the substance of the agreement between the parties. An insurance contract is

  • an agreement between insurers and policyholders
  • which specifies that, for an agreed premium payment,
  • the insurer will indemnify the policyholder(s)
  • for any losses sustained that fall within the coverages granted in the insurance contract
  • subject to its terms and conditions.

Unlike the vast majority of other contracts, the need for performance under the contract by the insurer is predicated on a fortuitous event (one that cannot be foreseen at the time of contracting); as such, the insurer cannot know at the time of underwriting the contract whether and when it will be required to perform its end of the agreement, nor the cost of doing so, unless the covered loss exceeds the value of the insurance policy.

There is a diverse set of available coverage forms and insuring agreements, but the foregoing description provides a useful framework for the relations specified in an insurance contract for purposes of this chapter.

Most litigated insurance disputes arise from disagreements over coverage issues that include the following:

  • Does the contract cover the event that caused the losses (causation) or the full impact of the losses (scope of coverage)?
  • Does the contract ...

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