Delayed Business-Income Claim, EUO, and Appraisal
A restaurant suffers a kitchen fire. The policy has a $1,000,000 building limit, $300,000 business personal property, $250,000 business-income and extra-expense coverage with a 72-hour waiting period, and a $5,000 deductible. The insurer pays $220,000 for building damage and $60,000 for personal property, but delays the business-income claim for seven months. It has requested three examinations under oath, a sworn proof of loss, and five years of tax returns. The public adjuster has receipts, payroll records, and daily sales reports showing a monthly income loss of $55,000 for four months while repairs were underway. The insurer says the policy's appraisal clause cannot be used until the examination under oath is complete. The insured wants to sue for bad faith immediately. The adjuster must decide whether to demand appraisal, compel payment, or litigate, and how to present the business-income loss.
1. Should the adjuster demand appraisal now, and how should the EUO and proof-of-loss requests be handled?
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Appraisal decides the amount of loss, not coverage. The insurer can require a proof of loss and an examination under oath as policy conditions, but it cannot use those conditions to stall indefinitely or to refuse appraisal of an amount dispute. The adjuster should submit a sworn proof of loss with the $220,000 building and $60,000 property payments credited, comply with a reasonable EUO on relevant records, and simultaneously demand appraisal in writing. The tax-return request should be limited to what is relevant to income loss. If the insurer refuses appraisal, the insured may seek declaratory relief or file a Department of Insurance complaint.
2. Calculate and support the business-income loss.
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Business income is measured by the actual loss during the period of restoration, beginning after the 72-hour waiting period. At $55,000 per month for four months, the gross income loss is $220,000. The 72-hour waiting period removes about three days: $55,000 / 30 = $1,833 per day x 3 = about $5,500. If the $5,000 deductible applies to the business-income coverage, the net is about $209,500. The adjuster should support the monthly figure with daily sales reports, payroll, receipts, and accountant analysis, and separate continuing expenses from noncontinuing expenses. Extra expense should be claimed separately if incurred.
3. Is immediate bad-faith litigation appropriate? What steps should the adjuster take?
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Immediate bad-faith litigation is probably premature. Idaho law requires unreasonable claim handling, and the insurer may have legitimate requests for proof of loss and EUO. The adjuster should build a documented timeline: dates of the claim, payments, requests, and delays; submit the proof of loss and business-income calculation; demand appraisal; and file a complaint with the Idaho Department of Insurance. If the insurer still refuses to pay an undisputed amount or delays without reasonable basis, the insured should consult an attorney about breach of contract and bad faith. The public adjuster cannot give legal advice.