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March 1, 2014

The chapter written by John Garaffa was originally published in, The Comprehensive Guide to Lost Profits and Other Commercial Damages, Third Edition. Copyright © 2014 Business Valuation Resources, LLC. 

Business interruption insurance is a class of coverage that is intended to protect the business owner from potential income loss that can flow from damage to insured property. Such property can be directly insured or, in the case of “dependent property,” can be the property of others that have a direct connection to the business of the insured. In addition, business interruption coverage can protect against damage to the property of key suppliers or customers that, in turn, has a detrimental effect on the insured’s business. “Extra expense” coverage is a subset of business interruption coverage. It protects the insured against increased expenses that can arise out of the insured’s efforts to return to business after an interruption in operations caused by a covered property loss. These expenses can include costs that are incurred to retain personnel who might otherwise be lost during an interruption, speed the recovery of the business, or maintain operations in a different way, while critical property is repaired or replaced.

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