Disclaimer This estimate uses a simplified lost-profits model. Actual insurance recovery depends on the policy wording (gross earnings vs. profits form), the indemnity period, co-insurance clauses, deductibles/waiting periods, and proof of loss. Litigated lost-profits claims require forensic accounting evidence. Not legal, insurance, or accounting advice.
When a fire, flood, supply failure, or another party's negligence shuts a business down, the physical damage is usually the smaller loss — the profits that never materialize are the larger one. Quantifying that loss correctly, and early, shapes everything from the insurance reserve set on your file to the settlement value of a lawsuit.
A business interruption loss is measured as the gross profit the business would have earned during the interruption, minus anything actually earned through mitigation, plus the fixed expenses that continued while revenue stopped. That formula — lost revenue × gross margin + continuing expenses − mitigation — is the backbone of both insurance claims and lost-profits damages in litigation across United States, and it is exactly what this calculator applies.
Two inputs drive most disputes. First, projected revenue: insurers and defendants argue for the historical average; claimants argue for trend-adjusted figures (a growing business would have kept growing). Courts and adjusters generally accept 12–36 months of pre-loss records adjusted for demonstrated trends and seasonality. Second, the gross margin: only profit is recoverable, because variable costs you never incurred (inventory you never bought, hourly wages you never paid) are not losses. US commercial policies define recovery around the “period of restoration” and usually impose a 48–72 hour waiting period. Extended business income coverage — commonly 30–60 days after reopening unless endorsed higher — matters because revenue rarely snaps back the day the doors reopen.
A restaurant doing $80,000/month at a 45% gross margin suffers a fire and closes for 4 months, earning $10,000/month from a temporary takeout operation. Lost revenue is ($80,000 − $10,000) × 4 = $280,000; lost gross profit is 45% of that, or $126,000. Rent, insurance, and retained kitchen staff continue at $15,000/month ($60,000 total). Estimated claim: $186,000, or $46,500 per month of interruption — before deductibles, waiting periods, and policy sublimits.
The same arithmetic serves two different processes. In an insurance claim, recovery is bounded by the policy: a waiting-period deductible (commonly 48–72 hours), the indemnity period, co-insurance penalties if the business was underinsured, and sublimits for extra expense all trim the formula's output, and the insurer's adjuster will scrutinize the revenue projection line by line. In litigation — against a negligent contractor, a breaching supplier, or a tortfeasor who burned the building down — the ceiling is instead reasonable certainty and causation: courts award lost profits where pre-loss records make the projection reliable, discount speculative growth assumptions, and add prejudgment interest that can meaningfully increase older claims. Many businesses pursue both tracks at once, recovering from their insurer first while the insurer subrogates against the wrongdoer; coordination between the two matters because settlements on one track can compromise the other.
Use this calculator to frame the order of magnitude before meetings with your broker, adjuster, or lawyer. For any claim beyond nuisance value, retain a forensic accountant to build the loss model and an insurance or commercial litigation lawyer to manage the policy or claim — insurers routinely retain their own accountants, and unrepresented claims settle for materially less. Check your gross margin input with our gross profit margin calculator and your fixed-cost base with the break-even calculator. Insurance and litigation firms: LexScale.ai builds client-facing claim tools that capture claimants at exactly this research stage.
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