Two prevailing lines of authority exist for measuring a policyholder’s business interruption loss following a wide-impact catastrophe such as the COVID 19 Economic Damages:
the “Economy Ignored” approach and the “Economy Considered” approach.
The Economy Ignored approach looks backward and measures the policyholder’s loss only against pre-catastrophe business levels and does not take into consideration the impact of actual post-catastrophe conditions on the economy, market or demand. Courts that apply the Economy Ignored approach typically apply this methodology to preclude a policyholder from getting a “windfall” as a result of a catastrophe.
The Economy Considered approach, on the other hand, seeks to place the policyholder in the position that it would have occupied post-catastrophe, had it been able to continue its operations, which avoids giving an insurer a “windfall.”