Employee's Salary a Continuing Operating Expense

Who decides which employees and their payroll remain during the period of restoration?

The insured owns a ski lodge in the mountains. A water line broke, flooding the place for days. This was just about the time the insured's employee was going to open the lodge for the season. The building is snowed in and no work can begin on the damage. The employee has no home, he moves from place to place the insured owns (B&Bs). She really has no need for him until the ski lodge can be opened. She wants his salary paid, as well as his lodging and food.

We will be able to repair three rooms for this employee to occupy when the contractor can reach the building. If the employee cannot do anything to minimize the loss or shorten the down time, do we owe him his salary? It would seem the insured would pay him out of the loss of income we calculate for the insured, not pay the salary in addition.

California Subscriber

The insured would decide whose payroll remains during the period of restoration, but it would be included in the calculation of business income loss and not in addition to the business income loss. The definition of “business income” includes continuing normal operating expenses, including payroll.

 

This premium content is locked for FC&S Coverage Interpretation Subscribers

Enjoy unlimited access to the trusted solution for successful interpretation and analyses of complex insurance policies.

  • Quality content from industry experts with over 60 years insurance experience, combined
  • Customizable alerts of changes in relevant policies and trends
  • Search and navigate Q&As to find answers to your specific questions
  • Filter by article, discussion, analysis and more to find the exact information you’re looking for
  • Continually updated to bring you the latest reports, trending topics, and coverage analysis