What business interruption coverage do law firms need?

Business interruption coverage is a critical but often undervalued component of a law firm's insurance program. When a covered peril prevents your firm from operating, whether it is a fire that destroys your office, a hurricane that makes your building inaccessible, or a cyberattack that disables your systems, business interruption coverage replaces the revenue you would have earned and pays for continuing fixed expenses such as rent, utilities, loan payments, and employee salaries during the restoration period.

In a business owners policy, business interruption coverage responds to physical perils like fire, windstorm, vandalism, and water damage. The coverage typically includes a waiting period of 24 to 72 hours before benefits begin and continues for the time reasonably required to restore operations, up to the policy's limit. For a law firm, calculate your business interruption limit based on 12 months of revenue and fixed operating expenses, as even a moderate property loss can take several months to fully restore.

Cyber-related business interruption is covered separately under your cyber liability policy. If a ransomware attack takes your systems offline for two weeks, your cyber policy's business interruption coverage reimburses the lost revenue during that downtime. This coverage is increasingly important as law firms depend on technology for every aspect of practice, from document management to court filing to client communication.

Extra expense coverage, which is closely related to business interruption, pays for the additional costs of operating from a temporary location while your primary office is being repaired. This includes the cost of renting temporary office space, redirecting mail and phone systems, replacing equipment on an expedited basis, and other expenses above your normal operating costs. Both business interruption and extra expense coverage should be reviewed annually to ensure the limits keep pace with your firm's growth.