Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-05-25
DROP IN EARNINGS
"OPENS NEW FIELD
Business interruption Insur.
I ace Protects Against -.
Loss.

The sharp curtailment of earnings by
reason Of fires in factory and mercan-
tile establishments has resulted In
banks demanding greater protection
before they will lend money to such
business projects in various sections OF
the country and this In turn has led
to the development of comparatively
new type of insurance, known as use
and occupancy or business interrupt
tion insurance.
1t is pointed out that the total
amount at risk on the books of the
insurance companies often exceeds the
amount of straight fire insurance car
ried. The rates on the new form OF
insurance, which finds its largest field
in the manufacturing districts of New
England. are moderate and the terms
easily understood.
In addition to fire. it protects against
loss from explosion, wind storm,
sprinkler leakage. water damage. or
damage from riots, any one of which
may cause a loss to the insured through
curtailment of his earnings greater
than the direct loss incurred.
Insured Against Loss.
A policy Of use and occupancy in
IDENTITIES the insured for loss of earn
ings during the period of suspension
had there been no damage or Interrupt
ton. It guarantees protection from
the date Of the loss to such time, not
limited by expiration of the policy. as
shall be required with the exercise of
due diligence to build, repair or restore
such parts of the building, stock or
equipment as were destroyed
The actual losses sustained by the In
sured which are insurable consist of net
~ Ill
ticipated for the period of suspension,
such fixed charges and expenses as must
necessarily continue during a total or
Partial suspension of business to the ex-
tent only that such fixed charges and
expenses would have been earned had
no loss occurred: such expenses as are
necessarily incurred for the purpose Of
reducing the insurance company's obli-
CATION. The primary purpose, however,
of use and occupancy insurance Is to
1nSure continuity of revenue that will
keep a business. including salaries Of
officials payment of taxes, fees, etc.
intact during a period Of reconstruc-
tiAn following some casualty that de-
prives the business of earning power.
Because 1t may be purchased to cover
only certain items of business In
vantory. such as a fixed charge that
must continue during the cessation of
business or loss on prospective, increased
earnings or made TO apply In protect
ing profits excepting such expected
p{ofts on finished goods, it Is one Of
the most elastic forms OF insurance
sid. ~
Charts Tell Of Profits.
because fires usually cause more In
tefruption than any other casualty,
this form of indemnity is generally
considered an adjunct Of fire insurance
add the fire insurance companies con.
senuently have adopted 1t as an allied
liAe to be sold by experts who have
thorough knowledge Of Its applications
and operations. The factors that en-
tsf into net profits and fixed expenses
ate; the more readily arrived at through
the. use Of charts, which are made
atailable by the insurance companies
With the aid Of these the various con-
tfAbuting financial factors Of business
may be so listed that avoidable expenses
may be eliminated, and the applicant
arrive at the net profit or expenses an
tiefpated and which cannot be discon-
ti1ued. This net result Il the use and
occupancy value, or the insurable value.
In order that correct deductions may
be used from such data, the insurance
companies consider the previous ex-
pSrience Of the business as the best
basis for their estimates Of the proper
amount Of coverage. They also give
careful consideration to the percentages
By which the earnings will be increased
during the time necessary 10 rebuild.