1. Christopher A. Welde Director – ParenteBeard Chris.Welde@ParenteBeard.com 215 972-2364 Chris.Welde@ParenteBeard.com Preparing, Supporting, and Settling a Business Interruption Claim March 21, 2013

2. 1 Types of Insurance Claims Fidelity Bond Surety Professional Malpractice (Errors & Omission) Directors & Officers Property & Casualty (*Today’s Focus*)

3. 2 Our Example - Claim Categories Property (Buildings) Furniture, Fixtures & Equipment Inventory Business Interruption (*Today’s Focus*)

4. 3 Preparing a Claim Business Interruption Claim Categories Lost Profits Ordinary Payroll Extra Expenses

5. 4 Preparing a Claim Business Interruption - Covered Loss Five Basic Elements - BI: –Covered Event Occurs (e.g., fire) –Results in loss/damage to covered property (e.g., manuf. / storage facility) –Results in interruption of business operations –Results in a covered loss (i.e., covered by policy) –During the Period of Restoration (i.e., damage period)

6. 5 Preparing a Claim Business Interruption – Covered Loss When Insured’s Property is not Damaged (extension of coverage): –Service Interruption –Contingent Business Interruption –Ingress/Egress –Civil Authority

7. 6 Preparing a Claim Business Interruption - Coverage Issues Covered Loss Covered Property Damage Period –Period of Restoration –Extended Period of Restoration Deductibles / Waiting Period Coverage Limits Professional Fees

8. 7 Supporting a Claim Business Interruption – Loss Formulas Compare what “Should Have Happened” to what “Actually Happened” Lost Revenues – Saved Expenses = Lost Profits (Top Down Approach) Lost Income + Continuing Expenses = Lost Profits (Bottom Up Approach)

9. 8 Supporting a Claim Actual Results – Existing Facility

10. 9 Should Have Been Results v. Actual Results – Existing Facility

11. 10 Supporting a Claim Actual Results – New Facility

12. 11 Should Have Been Results v. Actual Results – New Facility

13. 12 Supporting a Claim Saved Expenses v. Continuing Expenses Saved Expenses (i.e., Variable): –COS (materials, labor, shipping, storage) –Operations (commissions, payroll taxes, utilities) Continuing Expenses (i.e., Fixed): –Operations (advertising, insurance, accounting fees, legal fees)

14. 13 Supporting a Claim Business Interruption – Loss Formulas Compare what “Should Have Happened” to what “Actually Happened” Lost Revenues – Saved Expenses = Lost Profits (Top Down Approach) Lost Income + Continuing Expenses = Lost Profits (Bottom Up Approach)

15. 14 Supporting a Claim Ordinary Payroll Non-Officers, Executives, Managers, etc. Covered Period (60 days) To extent payroll would have been paid/earned had no Covered Event occurred

16. 15 Supporting a Claim Extra Expenses In excess of normal expenses: –Security Costs –Clean-up Costs –Temporary Offices –Rental of Equipment

17. 16 Supporting a Claim Business Interruption Claim Lost Revenue Less Saved Expenses = Lost Profits Plus Ordinary Payroll (continuing expense) Plus Extra Expenses

18. 17 Settling a Claim Interaction with Insurance Carrier Submit Proof of Loss (Claim) –Present Claim to Insurer –Provide Support Insurer’s Analysis of Claim –Insurer’s Accountant Interaction with Insurer’s Accountant –Respond to Document Requests –Answer Questions

19. 18 Settling a Claim Interaction with Insurance Carrier Review and Respond to Rebuttal Report Meet with Insurer –Discuss Claim and Rebuttal –Settlement Discussions/Negotiations Settle Claim; or proceed to Litigation Subrogation –Insurer v. Culpable Party

20. 19 Business Interruption – Preparing Planning and Preparing –Insurance Policy – Coverage / Notice –Insurance Broker / Accountant / Attorney –Plan the Recovery of your Business / Changes? –Proof of Loss (Claim)

21. 20 Business Interruption - Supporting Loss Categories - Supporting –Replace / Remediate Damaged Property –Support Losses Historic Trends, Budgets Saved v. Continuing Expenses Ordinary Payroll Extra Expenses

22. 21 Business Interruption - Settling Submit and Present Proof of Loss Assist Insurer in its Analysis Process –Supporting Documents –Questions Meetings and Settlement Negotiations Subrogation

23. Christopher A. Welde Director – ParenteBeard Chris.Welde@ParenteBeard.com 215 972-2364 Chris.Welde@ParenteBeard.com Preparing, Supporting, and Settling a Business Interruption Claim March 21, 2013