Result Driven Impact

831 (b) Plan- Third Party Business Interruption

Company Profile

Rocky Mountain Healthcare Services, a sole proprietorship healthcare provider based in the Intermountain West region, specializes in general medical practice services and generates approximately $6 million in annual revenue. The business employs a dedicated team of 20individuals, prioritizing exceptional patient care. Understanding the critical importance of maintaining uninterrupted access to operational systems and patient data, the company proactively implemented an 831(b) Plan to safeguard against disruptions from third-party service providers.

  • INDUSTRY- Healthcare
  • SPECIFIC- Medical Practice
  • ANNUAL GROSS REVENUE- Approx. $6 Million
  • EMPLOYEES- 20
  • OWNER STRUCTURE- Sole Proprietorship

Risk Description

Rocky Mountain Healthcare Services faced considerable operational and financial risk stemming from their reliance on third-party providers for critical IT systems. Traditional business interruption coverage often fails to address downtime caused by third-party service provider failures, leaving businesses vulnerable to significant financial strain during prolonged outages.

Incident

The company experienced a severe disruption when their third-party provider failed to renew critical services, resulting in an extensive system outage. Rocky Mountain Healthcare Services was unable to access essential patient records and operational systems for approximately three weeks. The interruption severely impacted their ability to deliver patient care and maintain standard operations.Despite the outage, the company incurred ongoing payroll obligations, adding substantial financial pressure. Initially estimated at around $470,000, detailed financial analysis later determined the actual loss to be approximately $210,000

Resolution

Rocky Mountain Healthcare Services promptly filed a claim through their 831(b) Plan’s Third PartyBusiness Interruption policy. The direct writer quickly reviewed the situation and confirmed the applicability of the coverage, specifically tailored to address operational downtime, ongoing payroll expenses, data recovery, and system restoration costs. The policy had a coverage limit of $260,000, fully covering the actual loss incurred.

The rapid claims processing and payout provided critical financial support, enabling the company to swiftly resume operations and regain stability. Additionally, remaining coverage capacity from the plan continues to offer financial protection against future third-party service disruption

Key Takeaways

Implementing an 831(b) Plan allowed Rocky Mountain Healthcare Services to effectively mitigate significant financial and operational disruption caused by third-party provider failures, emphasizing the importance of specialized coverage to address gaps left by traditional business interruption insurance

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