Should there be total conformity in how BI claims are processed ?

[MARK MARSHALL]

I have a dog Boarding kennels - and we were lucky enough to have Business Interruption (BI) cover of £40,000 and it clearly states, a 12 month Indemnity and in respect of ''GROSS PROFIT''

Didnt get an issue about the acceptance, following the Court case but have issues now over the period covered and how this 'Gross Profit' is calculated.

They, ALLAY are offering 23/3/20 to 5/11/20 and want to deduct our bank charges etc from the revenue and that means we lose about £8000

My submission is that 100% of a kennels Income is Gross Profit simply because we dont produce a product to sell. By them taking expenses off the Income - they are giving us Nett Profit instead of Gross Profit.

Have I got this wrong - hoping that this scenario might help others.....

Mark Marshall 2/4/21

 

[John Hemming]

These are always questions of law. What you need to look at are precedents relating to this which may be available on the British and Irish Legal Information website

Try this search on that site:
https://www.bailii.org/cgi-bin/lucy...ND (gross) AND (profit)&highlight=1&datehigh=

See if anything is any use.

 

[Frank the Insurance guy]

Hi @MARK MARSHALL

There will be a definition of Gross Profit in the policy wording - what does that say?

The purpose of insurance is to put you in the position you would have been, had the claim not occurred. As such, insurers will not put you in a better financial position following a claim.

 

[Newchodge]

want to deduct our bank charges etc from the revenue and that means we lose about £8000

£8.000 in bank charges for a 7 month period? Were those Covid-related?

I don't understand your comment about not producing a product to sell. Presimably you have to buy animal food, pay business rates, staff wages, property maintenance etc in the same way as someone 'producing a product' would do?

 

[MARK MARSHALL]

£8.000 in bank charges for a 7 month period? Were those Covid-related?

I don't understand your comment about not producing a product to sell. Presimably you have to buy animal food, pay business rates, staff wages, property maintenance etc in the same way as someone 'producing a product' would do?

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Gross Profit is based on INCOME and one normally pay's Tax on the Nett figure - once expenses are taken off. With BI it's still INCOME minus what it has cost you to manufacture, what you sell. So if you sell something that has cost £20k and make £10k, the Gross Profit is £10k. Kennels receive income and then allowable expenses are deducted = Nett.

 

[Frank the Insurance guy]

The definition of Gross Profit on an Insurance policy is not the same as an Accountants definition. You need to check the definition of Gross Profit in the policy - what does it say?

 

[MARK MARSHALL]

The definition of Gross Profit on an Insurance policy is not the same as an Accountants definition. You need to check the definition of Gross Profit in the policy - what does it say?

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Does not actually say - just refers to what is 'reinstated' and that is meant to be GROSS PROFIT ?

 

[MARK MARSHALL]

Hi @MARK MARSHALL

There will be a definition of Gross Profit in the policy wording - what does that say?

The purpose of insurance is to put you in the position you would have been, had the claim not occurred. As such, insurers will not put you in a better financial position following a claim.

------------------------------------------------------------I appreciate that - what one expects, is fairness and not to gain unduly. To be paid out as the policy reads.....!

 

[Frank the Insurance guy]

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Does not actually say - just refers to what is 'reinstated' and that is meant to be GROSS PROFIT ?

There is usually something in the full policy wording (not policy schedule) which details how Gross Profit is calculated. I will be happy to take a look at this for you and provide my advice, if you want to share a copy - email me at [email protected]

 

[ImranR]

Hi Mark, just spotted this thread from you but answered some of your query in the other thread. I'll copy and paste it below: -

"I haven't scrutinised your policy or accounts but would say you need to apply 98.42% as your Rate of Gross Profit (ROGP) to the loss of turnover in the period of cover. (£37,400/£38,000).

I.e. if your loss of turnover for the 12 months indemnity period is indeed £38,000, when you apply 98.42%, your Loss of GP is £37,400.

Deduct from this overheads savings like furlough receipts, utilities charges and so forth and add any additional costs you've incurred to mitigate such as extra PPE, phone calls, postage, marketing along with what your accountant is charging to compile your claim data (insurers won't pay for your accountant to prepare a calculation or negotiate settlement).

The end figure should be your claim value. Just be careful as different Loss Adjusters are using different methodologies in their approach."
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As regards the indemnity period, on the face of it, if the maximum indemnity period is stipulated at 12 months for the disease cover (this is usually but not always lower than the standard cover), then insurers should cover you for the full 12 month period. I've not yet come across an insurer limiting disease cover until the second lockdown. That's new to me but I've seen plenty of other questionable decisions so far.

I couldn't say for sure without looking at your policy which you are welcome to send me.

Best wishes

Imran