A property payout does not necessarily cover the income lost while your business is closed. ARG helps establish the interruption trigger, calculate the insured loss and challenge unsupported deductions.
Clients often ask ARG whether insurance must replace the income lost after a fire closes their shop or production site. The answer depends on whether interruption was insured, which event triggered the closure and how the policy measures the financial loss. A repair payment alone does not resolve those questions.
ARG can assist when the following problems arise.
Property damage cover does not automatically insure the resulting loss of earnings.
Turnover, accounting profit and insured gross profit may describe different figures.
The chronology of repairs and reopening must be compared with the contractual indemnity period.
Accounts, trading data and each adjustment should explain how the claimed figure was reached.
Business interruption cover pays the financial consequence of an agreed insured event, rather than every loss suffered while a business is closed. Lost profit must be expressly insured under Article 405(2) of the Bulgarian Insurance Code (Кодекс за застраховането, КЗ). The closest comparison in England and Wales is commercial interruption insurance defined by its wording, within the framework that includes the Insurance Act 2015. Neither system supplies a universal promise to replace turnover. A Bulgarian policy covering a building against fire can therefore pay for repairs without covering the shopkeeper's lost trading unless the interruption extension is included.
The usual property-linked extension requires damage of an insured kind to identified property, followed by an interruption that causes the financial loss claimed. Each link matters. A fire in a warehouse may destroy stock but leave online sales operating from another location. The financial claim then concerns the actual reduction attributable to the warehouse damage, not the company's entire revenue. The insured business must also be the entity whose economic interest is covered. A landlord's building policy does not automatically insure a tenant's restaurant income, and a policy issued to one group company does not necessarily protect another company's sales.
The policy's definition of gross profit is a contractual calculation and may differ from the figure bearing that name in management accounts. Some definitions subtract specified variable expenses from turnover, while retaining insured continuing charges. Others identify particular costs or use a different earnings measure. The starting point is the actual definition, its schedule and the period used to set the sum insured. Claiming lost turnover as though it were lost profit usually overstates the loss because purchases, commissions or other expenditure may have been avoided when sales stopped.
For example, suppose supported sales would have been 100,000, actual retained sales were 35,000, and the resulting reduction avoided 20,000 of expenses deductible under the policy. The corresponding loss is 45,000 before applying the remaining contractual adjustments, not 65,000 and not 100,000. This is an illustration of that assumed wording, not a statutory formula. Rent or salaries already retained within the calculation cannot be added again as separate losses. Refunds, credit notes and business transferred to another insured location must be reconciled so that the same missing sale is neither counted twice nor wrongly treated as recovered.
A closure may be commercially devastating and still fall outside the agreed trigger. A supplier's insolvency, a general fall in demand or a precautionary closure without insured damage does not become covered merely because the business bought property insurance. The question is whether the policy contains an applicable extension and whether its conditions are met. An exclusion must also be distinguished from the absence of initial cover. An insurer saying that no insured physical damage occurred is making a different argument from one admitting the trigger but relying on a stated exclusion.
The same distinction explains why evidence of revenue loss cannot establish coverage by itself. The insured must identify the operative event, the affected activity and the causal interruption. Where the insurer alleges inaccurate disclosure, the express written questions and answers matter under Article 362 КЗ. A deliberate misstatement affecting occurrence can have the consequences specified in Article 363(4), whereas a circumstance merely increasing damage engages the separate premium-ratio rule. An objection that the business's operations differed from the proposal therefore requires its own statutory and factual analysis, rather than an automatic rejection of all financial loss.
They can be covered where the agreement provides a relevant extension. Examples may include insured damage at a named supplier, denial of access following a defined event or an interruption of specified utilities. These are possible contractual designs, not benefits automatically supplied by Bulgarian law. The extension may define the supplier, territory, physical cause, distance or minimum interruption required. A claim should identify those conditions precisely. A fire at any business somewhere in the supply chain does not necessarily satisfy cover restricted to a named direct supplier or a particular insured peril.
A waiting period and an indemnity period perform different functions. The first leaves an initial interval or corresponding loss outside payment on the terms agreed; the second limits the duration for which qualifying financial consequences are indemnified. Neither is necessarily identical to the policy's calendar term. A covered event occurring shortly before expiry may produce subsequent covered loss if the wording allows it. Conversely, continued commercial difficulty after the maximum indemnity period does not extend that period. The contract must also establish whether a waiting period operates as an excess, a threshold or another mechanism, rather than treating these alternatives as interchangeable.
Costs should be classified by their actual behaviour and by the contractual definition. A purchase not made because production stopped may be a saving. Wages paid to retain necessary staff may continue. Additional overtime at an unaffected site may be increased expenditure incurred to preserve sales. The commercial reason for a payment is relevant, but it does not determine coverage on its own. The calculation must show where the item belongs and whether a condition, sublimit or economic restriction applies. Internal group invoices require particular care because a recharge does not itself prove an additional loss for the insured company.
The period of loss also requires a causal explanation. Repairing the damaged machine might reasonably take four weeks, while installing a larger replacement chosen by management takes seven. The policy does not necessarily pay the extra three weeks. Equally, an insurer cannot assume an immediate replacement was available merely because a catalogue lists one. Repair quotations, delivery dates and technical compatibility determine what restoration was realistically possible. Revenue preserved through subcontracting must be credited consistently with the extra cost of achieving it. A calculation that deducts the retained revenue but ignores a qualifying associated expense may be as misleading as one that omits the revenue altogether.
Property repair compensation restores the insured physical interest within the applicable valuation rules. Interruption cover addresses a separately agreed financial consequence, with its own measure, period and often sublimit. Payment of the building repair claim therefore does not decide the interruption amount, while a refusal of interruption cover does not necessarily defeat covered repair costs. The general indemnity ceiling under Article 386(1) КЗ and the insured contribution permitted by Article 374 require attention. Proportional reduction for underinsurance is not automatic under Article 389, which distinguishes the default payment up to the sum insured from proportional treatment where agreed.
Proof of expected trading must nevertheless be more than an optimistic budget. In Interpretative Decision No 3 of 12 December 2012, interpretative case No 3/2012, the Bulgarian Supreme Court of Cassation's joint civil and commercial assembly required a proven basis for the asset increase allegedly prevented by delayed construction. That decision does not interpret every interruption endorsement. Its evidential distinction helps explain why confirmed orders, capacity and trading history are stronger than an unsupported forecast. If a separate tort claim is pursued against the party causing the fire, Interpretative Decision No 3 of 13 January 2023, interpretative case No 3/2021, similarly requires certainty of proof of lost profit. Insurance entitlement and third-party liability must still be established separately.
Tell us where you live, how your business works and what you want to change. We will help you identify the questions to resolve and the next steps to consider.
Start with the relevant interruption extension and the business relationship it protects. Cover for damage at a named supplier is not established merely by showing that purchases fell. The file should connect that supplier's qualifying incident to missing deliveries, unavailable substitutes and the insured business's lost sales. The Bulgarian Insurance Code (Кодекс за застраховането, КЗ) requires agreement on lost-profit cover under Article 405(2). The comparable position in England and Wales is a commercial policy defining the insured interruption, within the framework including the Insurance Act 2015. Neither comparison dispenses with proving the particular contractual trigger in Bulgaria.
A useful calculation connects each important figure to an underlying record. Customer orders, delivery schedules, production capacity, reservations and cancellation messages establish expected trading more convincingly than a director's estimate alone. Actual invoices, refunds, transferred bookings and payment records establish what happened instead. A hotel reservation moved to another insured property may preserve revenue, whereas a cancelled reservation with a refund may not. Export the relevant booking or accounting data before routine deletion, preserving transaction histories. A bank account statement proves payment or repayment, but the linked invoice or reservation normally explains why that movement affects the claimed loss.
The comparison period must represent the business that would probably have operated without the insured event. Last year's corresponding month may be useful, but an established seasonal pattern, newly opened site, lost major customer or documented expansion can make a simple year-on-year comparison misleading. Adjustments should be supported by facts known independently of the claim. A signed supply contract and demonstrable spare capacity support an increase more strongly than a budget drafted after the fire. Conversely, an insurer should explain why an alleged market downturn would have affected these particular sales instead of applying an unexplained percentage reduction.
The Supreme Court of Cassation's Interpretative Decision No 3 of 12 December 2012, interpretative case No 3/2012, rejected presumed lost profit in the context of delayed construction performance. It does not supply an insurance formula, but illustrates the distinction between a demonstrable expected gain and a possible commercial opportunity. Present alternative calculations if one assumption remains genuinely disputed, such as the achievable production rate. Explain how changing that assumption changes the result without adding the alternatives together. This allows the insurer or court to decide a defined disagreement rather than choosing between two unexplained totals.
The evidence should explain both why operations stopped and why they remained restricted. Emergency reports, dated photographs, machinery inspections and repair schedules establish the physical sequence. Staff rosters, room-status reports or production logs show the resulting operational limits. A business can have a valid partial interruption claim while continuing to trade, so describing the whole operation as closed is unnecessary and may contradict the accounts. Separate delays caused by insured damage from a voluntary upgrade, an unrelated supply problem or a management decision. Technical evidence should address whether earlier restoration was actually feasible, rather than theoretically imaginable after the event.
Temporary premises, subcontracting and expedited delivery can reduce financial loss, but the relevant extension determines whether and how those expenses are paid. Record the alternatives considered, quotations obtained and sales preserved. Reasonable mitigation expenses within the statutory conditions are addressed by Article 396 КЗ, whereas the cost of establishing the cause or amount of damage falls under the prior-approval rule in Article 397(1). These are not interchangeable entitlements. Do not assume that every accountant's fee, private expert invoice or useful business expense is reimbursable. Obtain written agreement where required, while documenting why necessary emergency action could not safely await an answer.
Present a reconciliation from the policy definition to the amount requested. Identify the turnover shortfall, deductible saved expenses, retained insured charges, qualifying increased costs, applicable period and payments already received. Show the documentary source for each disputed adjustment. If the insurer treats all payroll as saved, payroll and employment records can show which payments continued and why. If it treats transferred orders as new unrelated revenue, order identifiers and customer correspondence can demonstrate the connection. The purpose is to resolve the actual disagreement, not to send a larger bundle that leaves the contested assumption unexplained.
In court, the allocation of proof follows Article 154(1) of the Bulgarian Civil Procedure Code (Граждански процесуален кодекс, ГПК). The nearest general procedural comparison for England and Wales is evidence management under the Civil Procedure Rules, including Part 32; Bulgarian procedural requirements govern the case. A court-appointed expert may examine specialised questions under Article 195(1) ГПК, but the court evaluates the opinion with other evidence under Article 202. Ask the accountant to calculate contractual alternatives and the engineer to explain restoration feasibility. Neither should determine the legal validity of an exclusion. A private report can support preparation without automatically becoming equivalent to court-appointed expert evidence.
A dispute over amount can be put to the insurer with a request for the factual and legal explanation required within seven days by Article 108(6) КЗ. Identify the disputed calculation and the evidence contradicting it. The payment timetable is a separate issue. Ordinary claims within Article 108(1) are generally determined within fifteen working days after all required evidence, while incomplete-file and large-risk rules differ. A business policy is not automatically a large risk. Payment under Article 405(1) and interest under Article 409 require the correct contractual and statutory dates, including the effect of missing payment-account information under Article 380(3).
The Financial Supervision Commission can address compliance with claims-handling duties, but a supervisory complaint does not itself award the business its disputed indemnity. An enforceable payment award requires the competent civil court, with international jurisdiction and domestic competence assessed from the parties, contract and claim. The correct claimant is the person entitled under the policy, which may differ from the property owner or another group company. The claim should distinguish unpaid principal and supported interest, deduct prior recovery for the same loss and identify the period sought. ARG can arrange that assessment and representation through appropriately authorised Bulgarian attorneys.
A foreign parent company's accounts do not replace evidence of the insured Bulgarian company's loss. Consolidated figures should be reconciled to the relevant entity, site and insured activity. Foreign invoices or technical reports may need a reliable Bulgarian translation for proceedings, and the professional providing a report should identify the underlying data and assumptions. Authority to instruct counsel or conclude a settlement must come from the correct entity. A director signing abroad should obtain advice on the actual form and authentication required for the particular document, rather than assume every foreign signature needs the same formalities.
Insurance limitation is distinct from the insurer's decision period. The ordinary indemnity rule in Article 378(1) КЗ is three years from the insured event, subject to applicable exceptions. Claim submission suspends time under Article 378(9) until receipt of the decision or expiry of the applicable maximum decision period, whichever is earlier. Continuing negotiations do not indefinitely protect the claim. Before accepting money, establish whether it is an interim payment or a final release of interruption, interest and other losses. Preserve claims against responsible third parties consistently with the insurer's subrogation under Article 410. A quick payment can be commercially sensible, but its scope must match the rights the business intends to settle.
Compare the related procedures in this category, including their requirements and the stage at which you need them.
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