Insurance carriers are quick to deny payment for services rendered by accountants or consultants in connection with the presentation of a business income claim. The number one reason given not to pay is that there is no specific language in the policy obligating an insurer to pay for such expenses. In a previous post, Passing the Accounting Bill – Understanding Business Interruption Claims, Part 19, I explained that a careful reading of the applicable coverage forms may support payment for these expenses.
Dan Torpey, CPA, CFF, CITP, a leading authority in business income theories, also agrees that some coverage forms allow recovery of consulting fees in connection with the presentation of a business income claim.
In the new 2nd edition of Business Interruption, Coverage, Claims and Recovery, Torpey explains,
There is nothing in the wording of the ISO business income form that obligates the insurance company to pay the insured’s accounting costs to determine the extent of the business income loss. However, the form (CP 00 30) also provides extra expense coverage. Extra expense is defined as “necessary expenses you incur during the period of restoration that you would not have incurred if there had been no direct physical loss”
The policy also requires that the extra expense be incurred to “avoid or minimize the suspension of business and to continue operations.” A case may be made for extra expense payments for the accounting costs. A policyholder could argue that the assistance of outside experts decreased the length of suspension and allowed the company to restore operations more quickly by freeing key management to focus of loss recover rather than data gathering and loss development activities.
Every policy and factual scenario is different and careful consideration should be given to the policy language in question to determine if accounting/consulting fees should be reimbursed.
