If Your Business Is Online, You May Face Different Challenges for Business Interruption Claims

When you work in a brick-and-mortar shop – a retail outlet, a trading company, a restaurant – and catastrophe hits, you can put a claim in for business interruption. (In case you’re new to the insurance claim game, “business interruption” claims are claims for the money you lost while your business could not proceed, more or less.) If there is a fire or a flood in your building, for example, and you lose some of your goods, your supplies or even your building because of the damage, you can make a claim for compensation for your lost revenue and products as a result of the stoppage of your normal business operation.

But what happens when your business exists solely online? Cyber companies face a different set of legal challenges for business interruptions claims because most general liability policies require some proof that you lost property. In cases where your loss was the result of a data breach or hack, there is no physical property loss: there is only lost data, despite how that data affects your business.

Your next steps

There are some courts which may interpret your policy outside of what constitutes “physical loss:” after all, Amazon.com posted a loss of around $66,000 per minute when its site went down in 2013, and no one questioned whether or not a downed site would harm their business. One smart option that any business – on-line or on the street – should take is to purchase additional cyber insurance, which protects you in cases of a breach or a hack (and which Amazon.com certainly had). This type of insurance could cover business interruption caused by:

• System failures, whether they are a result of human error or an outage
• Third-party failures, such as when the company which hosts your website goes offline
• Security failures
• Security breaches, specifically Distributed Denial of Service or “DDoS” attacks

The policy may also cover the same losses you could expect under a more general policy: the cost of wages paid out while no income was coming in, the cost of your operating expenses (such as any supplies or goods your purchase, or the cost of the rent of your building), and the cost of outside, applicable insurance policies (workers’ compensation, for example). All of these expenses must continue to be paid even if your company is not currently bringing in any revenue. You may also incur additional expenses determining how to best get your business back up and running, or through marketing efforts to ensure your client base that they are safe, and to explain what happened.

The insurance dispute lawyers of McWherter Scott & Bobbitt represent policyholders throughout the state of Tennessee. To reserve a consultation time with Brandon McWherter, Clint Scott or Jonathan Bobbitt, please contact us. We maintain offices in Nashville, Chattanooga, Memphis and Jackson to better serve our clients throughout the state.