Managing a multifamily Business Interruption (BI) claim can be complex, especially when multiple units, tenants, and revenue streams are affected. The key to maximizing recovery and avoiding delays in claim resolution is clear documentation, accurate revenue modeling, and a deep understanding of the actual loss sustained. Below are best practices to help optimize your multifamily BI claims process.  Keep in mind the individual policy may drastically affect what can be claimed / allowed or not.

Document Impacted Units on Day One

As soon as a loss occurs, create a detailed log of all affected units and common areas.

This becomes the foundation for your revenue-loss model and helps validate every subsequent claim item.

Analyze Rent Loss at the Tenant Level

Evaluate lost income day-by-day, tenant-by-tenant, month-by-month, all the way until each unit is re-leased. This level of granularity strengthens your claim and can reduce pushback.

Avoid “Double” and “Triple Dipping”

If you provide tenants with concessions, rent abatements, or hotel stays at the property’s expense, keep in mind:

Insurance restores the property to “whole,” but not more than whole.

Giving a tenant a concession and hotel reimbursement and claiming lost rent when they later vacate on top of that, typically will be an uphill battle.

Be strategic up front to avoid disallowed charges.

Transfer Fees & Lease Cancellation Fees

These fees are usually not recoverable, as they represent revenue that would not have been collected had the loss never occurred.

Consider Reputational Impact for Large or Complex Claims

Major events can depress occupancy and revenue over time. These claims often require month-over-month and year-over-year income statement analysis to substantiate the broader financial impact.

Understand Saved Expenses

“Saved expenses” are operating costs avoided during a downtime period. They are typically deducted from top-line lost rent at 3–5%, determined through income statement evaluation. Plan for this reduction in your calculations.

Transfers to Better Units Can Sometimes Be Claimable

If you must transfer a loss-affected tenant into a superior (non-like-kind) unit at a financial disadvantage:

This loss is usually recoverable through the new lease term.

Keep transfer leases short, one year or less, to avoid extended, unclaimable residual loss.

Property Occupancy Levels Matter

Occupancy at the time of loss affects claim potential:

• Fully occupied properties (~94–97%) have more flexibility. A transfer uses up a unit that could have been rented to a new tenant, so the lost rent is supportable.

• Lower-occupied properties (~≤94%) may have “unit availability,” meaning the transferred tenant did not create a true income loss, revenue was retained, not lost.

Claiming Loss on Vacant Units

Vacant units at the time of loss are typically only claimable when:

• The property was fully occupied (unit would have leased), or

• You can demonstrate that the unit would have generated revenue during the recovery period.

Down / Out-of-Service Units

Units already offline pre-loss are not typically claimable unless you can show they were scheduled to return to service and be leased during the recovery period.

The Fastest Way to Optimize a BI Claim? Lease Units Quickly

The best BI claim is no BI claim. The second best is to re-lease impacted units as fast as possible. The quicker you restore revenue, the smaller your loss—and the stronger your claim.

Concessions for New Tenants Are Usually Recoverable

Insurance typically allows one-time, upfront concessions offered to accelerate leasing.

These are treated as reasonable expenses incurred to minimize the loss.

Demonstrate Actual Lost Revenue, Not Theoretical Loss

Claims require proof of actual lost revenue. Hypothetical, projected, or “could have been” income models rarely succeed. Strong BI claims rely on hard data, not assumptions.  Revenue Loss to overall market trends can be difficult, but not impossible.

Period of Restoration vs. Period of Indemnity

Many property managers don’t understand the difference, but insurance carriers rely on it.

• Period of Restoration: Time needed to repair or replace damaged property.

• Period of Indemnity: Time you can claim lost income (can depend on the policy).

Clarifying these terms helps set realistic expectations.

Importance of a Pre-Loss Rent Roll & Historical Financials

Adjusters or their consultants often ask:

• What was the unit’s actual rent?

• What was collected vs. billed?

• Was the tenant current?

• What was the previous 12–24 months of occupancy?

Preserve and export rent rolls and income statements monthly to avoid gaps when a loss occurs.

Loss of Use / Additional Living Expenses (ALE) Handling

If the policy includes ALE for tenants:

How is ALE tracked?

• Who pays upfront, tenant or property?

• How to avoid misclassifying ALE as lost rent.

• This is an area where "double dipping" mistakes often happen.

Common Carrier Pushbacks & How to Prepare for Them

• Disputes about market rent vs. actual rent

• Arguments that a unit “would not have been rented” during recovery

• Questioning lease-up velocity or historical concession trends

• Requesting evidence that repairs, not leasing conditions, caused delays

Additional Expenses (AE) vs. Extra Expenses (EE)

Some policies allow reimbursement for:

• Overtime labor

• Temporary repairs to shorten downtime

• Marketing spend to accelerate lease-up

• Temporary office space onsite

Consider what’s reimbursable as Extra Expense to optimize recovery.

Conclusion

We always say in lost rents analyses, there is no lost revenue if no revenue was lost.  Working with a firm like Valiont on day 1 of the loss can help you both demonstrate and optimize BI loss. But remember, the best way to reduce your BI is to retain tenants and re-lease units quickly. Sometimes, however, complex or severe losses cannot be avoided and so keep these experiential-based tips in mind!

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This blog is for informational purposes only and does not constitute legal, financial, or insurance advice. Cara Solutions DBA VALIONT makes no representations or warranties as to the completeness or accuracy of the information provided. Always consult your legal, insurance, or financial experts before making decisions.