What is Extra Expense Coverage in Business Interruption Insurance?

Many businesses are seeking ways to recoup their losses caused by the coronavirus pandemic and obligatory shutdowns. For many, that means turning to their Business Interruption insurance, which may include coverage for extra expenses.

What is Extra Expense Coverage?

Extra expense coverage is a type of insurance that can be added to your commercial property policy for business interruption. This rider is designed to cover additional costs and non-ordinary expenses that a policy holder’s company incurs after being damaged by a covered peril or disruptive event.

This coverage can be essential for businesses devastated by the COVID 19 crisis. Whereas business interruption insurance covers “normal” expenses after temporary closures– such as employee wages, leases, and loan payments– extra expense insurance covers items beyond the routine operating expenses that are crucial to remaining solvent.

Extra expense coverage can be purchased in conjunction with your business interruption insurance, as a rider to your commercial policy, as part of your business owner policy, or by itself. Business owners whose livelihoods depend on having a brick and mortar physical location from which to operate often benefit from extra expense coverage. This includes restaurants, hotels, auto-repair shops, and other businesses in the service industry.

Cash for Non-Ordinary Costs to Stay Solvent

When a covered loss or peril threatens your business with permanent closure, extra expense coverage should kick in. While this insurance does not pay for repair costs or restoration of damaged property or equipment, it does cover extraordinary expenses incurred by businesses to continue operations and mitigate further losses.

What constitutes expenses that are beyond standard operating costs? In most scenarios, these occur when the policyholder cannot operate out of their usual physical location because of an insured peril or event. 

This coverage should help alleviate the damages during the company’s restoration and address costs outside of those for repairing the physical property. The period of restoration typically begins on the date of the covered loss and ends when your business is up and running as usual.

Examples of extra expenses can include, but are not limited to:

  • Renting a temporary office space or place of business
  • Moving expenses to a temporary location
  • Replacement of furniture and infrastructure 
  • Hiring additional employees during the transition period
  • Leasing or renting needed equipment to continue normal business operations
  • Overtime wages for employees

Reduce the Impact of a State-Ordered Shutdown

Extra expense coverage can lessen the financial blow of government-ordered closures resulting from the global pandemic. However, insurance companies argue that these expenses must be incurred because of physical damage by a covered disruption or event under your policy.

Legal Support for Business Interruption Losses in NYC

Business owners can get a head-start on recovering their COVID 19 pandemic losses by consulting with the legal team of Douglas & London.  A New York City business interruption insurance lawyer can review the language of your commercial property policy and extra expense endorsements, assist with filing a claim, and advise you on legal action where appropriate. Reach out today to arrange a confidential case review, free of charge.  Our legal support staff is available 24/7.

Our attorneys work strictly on contingency, so there are no barriers to getting high-caliber legal representation.