1.2 Gross Profit – Uninsured Standing Charges Clause
1.3 Material Damage/Business Interruption Overlap
1.6 Declaration-Linked Policies – No Proportionate Reduction
1.7 Declaration-Linked Policies – Overall Impact
2.2 Wide Area Damage
2.3 Premises
2.4 Denial, Prevention and Hindrance of Access
2.5 Suppliers and Customers Extension
3.1 Increase in Cost of Working – Apportionment
3.2 Outsourcing and Blundell Spence
3.3 Increase in Cost of Working (Only) Covers
3.4 Fines and Penalties
4.1 Auditors’ and Accountants’ Charges
4.2 Time Deductibles
4.3 Definition of Maximum Indemnity Period
4.4 Depreciation Savings
4.5 Alteration Condition
5.1 Declaration-Linked Policies – Fundamentals
5.2 Declaration-Linked Policies – Two Declarations
5.3 Declaration-Linked Policies – Basis Periods
5.4 Declaration-Linked Policies – Periods Other Than 12 Months
5.5 Increase in Cost of Working – Applying the Economic Limit
5.6 Payments on Account
5.7 Notification of BI Claims
5.8 Information Disclosure
6.1 Should Gross Profit be Replaced by Gross Revenue?
6.2 Notification is a Minefield
6.3 Review of UK and US Wordings
Key Differences Between UK and US Approaches to Business Interruption Insurance
| 1 | Gross Profit |
Reference is made to the following illustrative profit and loss account in some of the sections.
XYZ Ltd, accounts for the year ended 31 December 2010
| £m | £m | |
| Turnover | 125 | |
| Opening stock | 20 | |
| Raw materials | 45 | |
| Subcontracting | 10 | |
| Direct labour | 23 | |
| Closing stock | (18) | |
| Cost of sales | (80) | |
| Gross profit | 45 | |
| Administrative costs | 15 | |
| Distribution expenses | 10 | |
| Interest | 5 | |
| Profit before tax | 15 |
1.1 Gross Profit – Definition
1.1.1Current position
Many business interruption (BI) policies are written on a Gross Profit basis, whether these are declaration-linked or not. The policy usually allows the insured to select the costs (variously described as Specified Working Expenses, Variable Costs, or Uninsured Working Expenses) to be deducted from turnover (or Revenue, Takings, or Sales) in defining Gross Profit. This is intended as a benefit rather than a complication, because it means that the purchaser of the insurance (who has the best understanding of their own business) can decide on what will make the cover most meaningful to them.
The majority of general
