I recently had a meeting with a gent who manages large construction projects and he was surprised to learn that you can insure loss of profits before a business starts trading. This is a little known cover that works well in retail, leisure and property based businesses. Especially if there has been a huge investment or pressure to start trading is intense.
Imagine a restaurant facing this scenario, a huge opening night was planned, it was in a beautiful setting alongside the Thames and great PR had lead to huge interest, both in the press and online. Opening night was planned with a guestlist to die for. A-listers were ready to sample the finest dining and the most opulent surroundings that London had to offer.
The owners were sure the opening night would give them the start they needed. The income targets set by the investors were understandably huge and the banks had grown impatient because the opening had already been delayed due to planning concerns and snags during the development.
Come the day of the opening last minute deliveries were being made when a gust of wind caught one of the spectacularly unique glass front doors and smashed it. Quite apart from the mess, this was the last thing they needed. The glass couldn’t be made or fitted in time so there was no alternative but to cancel the opening. Fortunately, the insurance adviser had the foresight to recommend cover for this scenario after asking the owners what would most affect their income and reputation.
The claim was for profit not earned from the proposed day of opening to the eventual day of opening. The opening went ahead at a later date and the claim was settled once all the information had been gathered by the claims department.
Top Tip: This insurance is not provided by the builder, that’s a common mistake. The builder cannot be held responsible for anything that happens after the premises have been “handed over” to the owners. And it’s probably unreasonable to expect them to pay for gusts of wind. Tell your insurance advisor about scenarios that will affect your business, especially if you have one “off items” that are critical to your operation.
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