A business may insure an asset and still face a claim that the policy does not cover. Repairing damaged equipment is one issue; a customer’s alleged lost trading income while that equipment is unavailable is another. Neither the label “consequential loss” nor the insured amount settles both questions.
Hugh Raichlin Attorneys can review the commercial contract, the loss claim and the insurance wording as separate but connected documents. That review is useful before signing a contract and when a demand first arrives.
Identify what duty was allegedly breached
Start with the parties, their roles and the obligation in issue. Was the complaint about delivery, professional services, workmanship, custody of goods or another promised performance? Preserve the scope, instructions, specifications and agreed terms that applied when the arrangement was concluded.
Different claims can involve different duties and proof. Do not assume that negligence is the sole basis of every commercial demand, or that an insurance policy defines the obligations owed to the customer.
Do not classify every profit claim by its label
Whether a particular loss is recoverable depends on the applicable legal basis, causation, the agreement and the relevant circumstances. A claim called “loss of profits” is not automatically either direct or consequential in every transaction.
Likewise, a contractual exclusion must be read as part of the complete agreement. A clause excluding certain losses may not do the work its drafter expected if its wording, incorporation or enforceability is defective. Do not promise blanket protection from a phrase copied into a quotation footer.
The policy and the customer contract are different agreements
The source article described a carrier whose insurer paid for physical damage but did not cover a separate income-loss claim. The practical lesson is to compare the liability the business may incur with the risk its insurer actually agreed to cover.
Check the insured parties, covered events, limits, exclusions, excesses and notification requirements. A policy limit does not necessarily cap the claim another contracting party may bring. Any limit in the customer agreement must be considered on its own terms, alongside applicable law.
Build a loss schedule that can be tested
For a claimant, separate physical damage, repair costs, interruption expenses and lost profit. For a responding business, ask for the basis and supporting records rather than dismissing the whole claim because one figure appears inflated.
- Identify the event, the period affected and the link between that event and each loss item.
- Separate forecast revenue from profit and account for costs that were avoided or still incurred.
- Preserve bookings, invoices, accounts, replacement quotes and evidence of alternative arrangements.
- Explain reasonable steps taken to reduce loss and any practical limits on those steps.
- Identify other causes of interruption instead of attributing every shortfall to one disputed event.
An estimate may be necessary initially, but its assumptions should be visible. Do not present a round number as proved loss without showing how it was reached.
Respond without damaging the insurance position
Notify the insurer or broker as required and preserve the claim correspondence. Obtain advice before making admissions, signing a settlement or discarding damaged items that may be relevant evidence. Necessary mitigation should be documented; do not let uncertainty become an excuse to allow avoidable loss to grow.
Keep the commercial dispute and any coverage dispute organised separately. A referral to an ombud may be available for an eligible complaint, but participation and jurisdiction must be checked. It is not an automatic substitute for every business-insurance dispute.
Align contracts and cover before the next job
Review the services actually supplied, foreseeable interruption risks and the limits the business can realistically bear. Coordinate contractual caps, exclusions, customer disclosures and insurance questions rather than assuming a policy will rescue an unsuitable contract.
A clear incident process also helps: who receives complaints, who notifies the insurer, which evidence is preserved and who can authorise a settlement? Staff should not create conflicting commitments while trying to reassure a customer.
Does an exclusion always defeat a lost-profit claim?
No. Its application requires the full wording, incorporation, legal context and facts. The claimant’s characterisation of the loss is not decisive either.
Should we offer the insurance limit as full settlement?
Not without considering both liability and coverage. The customer is not necessarily bound by a limit in a separate insurance contract.
Bring the contract, policy and demand together
Tell HRA what happened, what is claimed and any response deadline. The firm can identify the records needed to assess liability, the evidence of loss and the appropriate response without assuming that insurance or a disclaimer answers the whole dispute.