Our insured is a law firm  insured under an older Business Income Form, CP 00 30 10 90, which does not contain the seventy-two-hour period of restoration waiting period. However, the policy is endorsed with the Off-Premises Overhead Transmission Lines Direct Damage and Time Element endorsement, CP 04 19 07 88, which pays for loss the insured sustains after the first twelve hours following the direct physical loss.

During the passing of a tropical storm, the winds caused direct damages to off-premises overhead transmission lines that supply electricity to the insured premises. The insured premises was without electricity for two days. The insured was closed for two and a half days. Windstorm is a covered peril. The insured suffered a covered cause of loss.

The insured is claiming two days of unbilled hours—they could not work so they could not bill their clients—and for payroll they had to pay to their employees during the two days that the firm was closed.

We believe that the claim for unbilled hours should not be taken into consideration in the payment of this business income loss. The lost hours of work can be recovered. The work, such as legal research, preparing motions, and depositions, still has to be done. Maybe the firm was unable to work for two days, but this does not mean that the work could not have been done the days after the electricity came back and then billing those hours of work to the clients. If we pay the alleged unbilled hours of work, the law firm could be paid twice—by the insurer and by their clients— and be in a better position than before the loss. What is your opinion?

Puerto Rico Subscriber

The CP 00 30 10 90 form states that it covers the actual loss of business income sustained due to the necessary suspension of operations due to direct physical loss or damage to property at the premises described in the Declarations. Business income is the net income that would have been earned or incurred. While the unbilled hours can be made up subsequently and the clients will pay for the work done, there were still two and half days during which the operations were suspended. If the insured can show that this suspension did indeed result in a loss of business income, it should be covered. But, there has to be an actual loss of income, and the insured must show what that actual loss is, otherwise there is nothing to reimburse.

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