Business interruption insurance for a NEMT company: what it pays when the office or garage shuts down

Business interruption insurance replaces the income a NEMT company loses, and pays its continuing bills, while physical damage keeps it from working. The damage has to hit property at a location named in the policy, from a cause the policy covers. A fire in the dispatch office or a windstorm that damages the garage are the classic cases, as long as your policy covers those causes. A van crash, a lost broker contract or a shutdown order with no damage are not.

The coverage sits next to the planning in emergency preparedness for NEMT companies: the plan keeps rides moving, and this insurance pays for what the disruption costs. If you are still putting your insurance together, start with getting NEMT insurance.

What does business interruption insurance pay?

Two things: the income you lose and the extra money you spend to stay open. The standard business income form published by ISO, CP 00 30 (10 12 edition), defines business income as the net income you would have earned plus continuing normal operating expenses, including payroll. The Virginia regulator describes the same coverage as paying salaries, taxes, rents and other expenses plus the profit you would have made during the interruption, up to the policy limits.

For a ride company, continuing expenses are the bills that do not stop when trips do: van loans and leases, rent on the office and lot, insurance premiums, software subscriptions, and the dispatchers and drivers you keep on payroll so you can restart. California’s insurance department adds that key employees can be named on the policy so their salaries keep being paid until the business reopens.

Extra expense is the second part. The form pays necessary costs you would not have had without the damage, to avoid or shorten the shutdown, including moving to a temporary location and equipping it. The California guide gives office space, equipment rental and advertising as examples.

What has to happen before it pays?

Direct physical loss or damage to property at a premises described in your declarations, caused by a covered cause of loss. The form also counts damage to personal property in the open or in a vehicle within 100 feet of those premises. Your causes of loss form decides which perils count, and most property policies leave out flood from rising water, according to the Maryland Insurance Administration.

That trigger rules out many of the disruptions NEMT owners worry about most:

• A shutdown with no damage. In Mudpie v. Travelers (2021), the Ninth Circuit held that losing the use of a property under a stay-at-home order is not physical loss or damage; California law requires a distinct, physical alteration.
• Lost or paused revenue. A broker ending your agreement, a payer holding claims, or a Medicaid payment suspension damages nothing physical.
• A van in the shop. The standard property form does not cover road vehicles, so a crashed van never triggers this coverage.

The 72-hour wait and how long payments last

Lost income starts counting 72 hours after the damage; extra expense starts immediately. Both run through the period of restoration, which ends on the earlier of two dates: when the damaged property should be repaired, rebuilt or replaced with reasonable speed and similar quality, or when you resume business at a new permanent location. The policy expiring does not cut that period short. Extra time needed to comply with laws on construction or repair is not part of it.

Reopening does not end the claim on the first day. Extended business income pays the shortfall after the repairs are done and operations resume, until you could, with reasonable speed, get back to the income you would have had, or until 60 consecutive days pass, whichever comes first. That matters when a broker has handed your standing orders to other providers during the outage and it takes weeks to win them back.

The form also expects you to work your way back. If you intend to continue, you must resume all or part of your operations as quickly as possible. The insurer reduces the income loss to the extent you could have kept operating with damaged or undamaged property, at your premises or elsewhere. If you stall, it pays based on how long a quick restart would have taken.

Extra expense: keeping trips moving after a fire

A NEMT company can often keep running without its office, because the vans, drivers and riders are elsewhere. That makes extra expense the part of this coverage you are most likely to use.

Example: an electrical fire closes a seven-van company’s dispatch office on a Monday morning, and the vans are parked off site and unharmed. By Tuesday afternoon, dispatch is working from a rented suite with forwarded phone lines and rented laptops. Under the standard form:

1. The suite, equipment rental, call forwarding and overtime to rebuild the schedule are extra expense, paid from the first hour.
2. Trips lost on Monday and Tuesday fall inside the 72-hour wait, so that lost income is yours to absorb.
3. Trips you still cannot run after 72 hours are business income loss until repairs should be done.
4. Standing orders that come back slowly after the move home can be paid as extended business income, for up to 60 days.

Keep a separate expense log from the first hour. The form deducts the salvage value of anything you bought for temporary use, so note what you bought and what you rented.

Why a crashed or flooded van is a different claim

A van is not covered property under the standard commercial property form. CP 00 10 lists vehicles licensed for use on public roads, or operated mainly away from the premises, as property not covered. Physical damage to a van belongs to your auto policy: collision for a crash, comprehensive for fire, theft, storm and flood. What your own coverage pays when a van is damaged beyond repair is explained in wheelchair van physical damage insurance.

The income a van stops earning has its own route as well. If the crash was another driver’s fault, you claim loss of use from that driver’s insurer; the loss of use guide shows how to price it from your trip history.

Flood is the trap for companies in hurricane and river country. FEMA’s flood insurance site lists financial losses caused by business interruption, and cars and most self-propelled vehicles, among the things a National Flood Insurance Program policy does not pay for. A commercial flood policy pays at most $500,000 for the building and $500,000 for contents, and most new policies have a 30-day wait. Vans parked in a flooded lot are a comprehensive claim on the auto policy; the lost income from a flooded office needs coverage that names flood as a covered cause.

When the damage is at someone else’s building

Only one part of the standard form responds to damage at a property you do not occupy. Civil authority coverage applies when a covered cause damages property somewhere else, and a government order then prohibits access to the area around it. Your premises must be inside that area and no more than one mile from the damaged property. Lost income is covered starting 72 hours after the first order, for up to four consecutive weeks. Extra expense starts right away and ends four weeks after the order or when the income coverage ends, whichever is later.

The places a NEMT company depends on most, such as dialysis centers, hospitals and day programs, are usually not that close. If a flooded clinic cancels your standing orders for a month, the standard form pays nothing, because nothing at your described premises was damaged. Ask your agent whether the insurer offers coverage for a location you depend on but do not occupy, and which locations it can name.

Software and data outages

The business income form limits computer losses sharply. When a suspension is caused by destroyed or corrupted electronic data, the form pays only under its Interruption of Computer Operations additional coverage: $2,500 for the whole policy year unless your declarations show more. A virus or other harmful code counts as a cause for that coverage, but manipulation of your system by an employee or a contractor you hired to maintain it does not. A dispatch system outage or ransomware attack is a cyber insurance question, and the guide to running a day without dispatch software covers the paper fallback.

Setting the limit without a coinsurance penalty

Pick a limit from your own numbers, not a round figure. The Maryland Insurance Administration suggests weighing the size of the business, whether you could operate off site, and monthly expenses, including payroll, benefits, overhead and supplies.

If your declarations show a coinsurance percentage, the limit has to meet it. The form multiplies the net income and operating expenses you would have had over the 12 months after the policy starts or renews by that percentage. A limit below the result reduces every business income claim in proportion.

Example: a company expects $900,000 in net income and operating expenses for the policy year, and the coinsurance percentage is 50. The minimum limit is $450,000. With a $300,000 limit, the insurer pays two thirds of any business income loss, so a $60,000 loss pays $40,000.

If you open a second garage or office mid-term, a policy with coinsurance of 50 percent or more extends business income and extra expense to the new location for up to $100,000. Coverage for the new site stops at the first of three events: the policy expires, 30 days pass from the date you acquired it, or you report its values to the insurer. Tell your agent within the month.

Proving the loss

The insurer works out the income loss from your net income before the damage, the net income you likely would have earned, and the operating expenses needed to resume service at the same quality. The form names your financial records, bills, invoices and contracts as evidence. It also lets the insurer examine your books, and it requires a signed, sworn proof of loss within 60 days after the insurer asks. The insurer then has 30 days from receiving that sworn proof to pay, provided you have met the policy terms and either agreed on the amount or received an appraisal award.

Records that make a NEMT claim provable:

• Trip history by day and payer for the 12 months before the damage, including cancellations and turnbacks.
• Remittance or payment statements from each broker and facility, to tie trips to dollars.
• Payroll and timecards showing who was kept on during the shutdown.
• Lease, loan and subscription invoices for the bills that kept coming.
• The expense log for everything spent to keep trips running.

FEMA’s business impact analysis guidance is a good way to see the shape of a loss before it happens: lost and delayed income, extra expenses, contractual penalties and customers who leave.

Trip history ready for the adjuster

A business income claim stands on how many trips you ran before the damage and how many you could not run after it. HealthRide keeps each trip’s timestamps and GPS-recorded miles, and its reports include a payers report, on-time performance and driver timecards, and the trip log can be downloaded as a CSV or PDF file. See what each report contains on the reports page.