Storm damage to a storage warehouse: property damage swiftly recognised, business interruption initially refused

The situation

A family business in the Zeeland region, active as a supplier to arable farmers, was severely affected by a spring storm. The heavy gusts ripped a large part of the corrugated-sheet roof from the main storage warehouse. At the time of the damage, the warehouse held stocks of seed, crop protection products and packaged fertilisers ready for the imminent spring campaign, which accounts for a substantial share of the business’s annual turnover.

Part of the stock was damaged by rain and wind. More importantly: for the first few weeks after the storm, the warehouse was unusable as a storage and distribution point, precisely during the period in which sales to customers should have been at their peak.

The business had a comprehensive buildings and goods insurance policy, with a separate business interruption module that was meant to cover loss of operating profit and ongoing fixed costs.

The insurer’s initial response

The property damage was handled by the insurer relatively swiftly. A building surveyor valued the repair of the roof and associated masonry, and the damaged stock was also reimbursed following valuation. For those items together, a payout of approximately EUR 185,000 was agreed.

The business interruption claim, however, was rejected. The insurer took the view that the business had “in effect remained operational”, because part of the stock had been moved to a temporary rented location and because customers had, in principle, been supplied. According to the expert, there was no demonstrable drop in turnover directly attributable to the storm.

The entrepreneur experienced it differently. A number of customers had switched to competitors in the first weeks after the storm because order processing had been delayed. For a seasonal product, a two-week delay is not easily made up: the sowing window has passed.

Our role

Krantz & Polak Resolve was engaged to substantiate the business interruption claim after all. We analysed the accounts of the previous three years and placed monthly turnover alongside the turnover actually realised during the loss period. In addition, we examined per customer the volumes taken before and after the storm.

On that basis we were able to quantify three effects: the direct loss of turnover in the week after the storm, the structural loss of customers among four regular clients who definitively switched to another supplier, and the additional costs of the temporary rented location and additional hiring of transport.

We then placed the business interruption section of the policy carefully alongside these figures. The policy provided for an indemnity period of 52 weeks and cover for both gross profit and ongoing fixed costs. The insurer’s argument that “remaining operational” would preclude a payout had no basis in the conditions: what was relevant was not whether the business was running, but whether there was a demonstrable loss of operating profit. And there was.

The outcome

After submission of the report, with figure-by-figure substantiation per customer category, the insurer accepted business interruption compensation of approximately EUR 112,000. Of this, around EUR 78,000 related to direct loss of turnover and ongoing fixed costs, and EUR 34,000 to the structural customer loss, calculated over the agreed indemnity period.

In total the payout came in at almost EUR 300,000: property damage and business interruption combined. For the business this meant the possibility of starting the following year’s spring campaign at full strength, without financing becoming a bottleneck.