Business Interruption and Sales Trends

One of the more subjective areas of Business Interruption claims is trend. While Turnover, Standard Turnover and Rate of Gross Profit are defined, trend is not.

An Industrial Special Risks policy contains an Adjustments Clause. This states that "..such adjustments shall be made [to the Standard Turnover, Annual Turnover, Rate of Gross Profit and Rate of Payroll] as may be necessary to provide for the trend of the Business." This is one of the most argued claim issues and sometimes prolongs settlement. Traditional methods for measuring trend include:

• Analysis of historical turnover;
• Examination of post loss turnover;
• Analysis of divisional trading results;

These are a good starting point when considering a claim.

When reviewing historical turnover it is important to examine sales in say the 3, 6, 9 or 12 months prior to the loss, consider the business and identify the trend which most reflects the results which should have been achieved during the Indemnity Period.

Industry data or, if available, the results of similar operations can also be reviewed. Caution must be exercised as this may not directly reflect the trends which would have been experienced but for the loss. Specialist advice may be necessary.

Author

Published with permission of Claim Solutions Pty Ltd.

Insurance Policy

Country: - Australia.

Policy Description: - Mark IV Industrial Special Risks (ISR) policy and many Composite or Businesspack policies..

Insurer: - Various.

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