The Supreme Court’s ruling on business interruption insurance in light of Covid-19 has provided some clarity for both policy holders and insurers. In short, where the wording of a policy was vague and perhaps unintentionally covered Covid-19 losses, the ruling has meant that insurers must pay those claims. Many valid claims may now be settled quickly, but many cases may now begin the settlement process.
However, the settlement processes may still involve disputes over what the profitability of the business would have been if not for Covid-19. This is known as the counterfactual scenario. The actual scenario is the business’ performance with the effects of Covid-19, and this is deducted from the counterfactual scenario to arrive at the loss that should be paid under the policy.
Historical financial information will be needed to establish robust estimates of loss. Targeted ratio analysis will usually be helpful to support probability trends for most businesses and techniques such as the Z score may even come into play depending on the sector/industry. Griffins have the expertise in the techniques needed to assist affected parties quantify such losses so that a settlement can be agreed as quickly and reliably as possible.