Business interruption insurance claims loom after Sandy

• It can be tough to prove how much income you would have made if the storm hadn't hit
• Documentation is paramount: Take pictures, keep a notebook
• In New York, 90% of businesses were found to have business interruption coverage post-911

The business losses from superstorm Sandy will ripple out from Long Island to Los Angeles, and even though insurance will cover some of it, business owners will have to work hard to get their claims covered.

Most businesses have insurance to cover loss of business because of physical damage, says Robert Hartwig of the Insurance Information Institute.

And many may file claims for lost sales if they have business interruption coverage. Such protection is likely high in Lower Manhattan, where 90% of businesses were found to have it after the 9/11 terrorist attacks, Hartwig says. Companies outside the hurricane area may try to seek compensation, too, if sales suffer because suppliers or customers were shut down by Sandy.

In order for businesses to tap that insurance, the disruption typically must go on for longer than 72 hours. Ultimately, the insured business losses will partly be determined by how long it takes damaged businesses to resume normal operations.

The biggest risks are to small businesses. They often lack insurance and can't weather days or months of lost income.

Martin Norris is in that boat. His motorcycle repair shop, located 5 miles off the coast of New Jersey, wasn't damaged by the storm but "the phone hasn't rang in three days," he says and many appointments will be lost.

"Financially, it'll be a hit," says the 40-year-old business owner.

Some businesses have insurance, but they don't know whether they should file claims.

"The challenge is you file a claim and your rates go up," says David Bolotsky, CEO of retailer Uncommon Goods. It operates out of a waterfront warehouse in Brooklyn.

The retailer has resumed shipping orders but, because of lost phone service, it didn't take any by phone for three days. They typically account for 30% of orders, Bolotsky says.

While many businesses have insurance against direct losses, fewer have policies to cover loss of income when their operations are disrupted by a supplier's bad fortune, says Fitch Ratings. To prove those claims, you'll have to show that you made efforts to get supplies elsewhere, says David Killalea, partner at Manatt's Insurance Recovery Practice Group in Washington, D.C. "Keep notes on every communication, every phone call, every step you take."

Hartwig says the economic impact on companies far from the hurricane's path won't be anywhere near as large as what was sustained after the Japanese earthquake and tsunami last year.

With those disasters, factories were obliterated in areas that were global manufacturing hotspots. New York and New Jersey no longer hold that position and, instead, are more service oriented.

For companies that do file claims, proving how much business they lost can be difficult. "Documenting what you would have made means re-creating a world that never existed," Killalea says.

How to do it:

-- Give notice. Contact your insurance company as soon as possible.

-- Document the damage. Take pictures of the premises and get all the angles. And if you have pre-storm pictures, gather those together, too.

If your business had to stop operating because of something down the street — a collapsed building or downed power lines — document that, too.

-- Recover economic data. If you have a restaurant and have records of canceled reservations, document that. Otherwise, get records of your income over the past month and the same time last year, if possible.

-- Make haste. Some of the time limits for filing a claim are "pretty Draconian," Killalea says. If you think you're going to need more time to file a claim, do so as soon as you can.