Business interruption insurance covers losses that prevent the insured company from conducting business and generating income. Traditionally, this kind of insurance is triggered by physical damage to insured property by an insured event. If the business location is physically damaged—for example, by fire, wind, vandalism, or lightning—business interruption insurance covers losses during the time that the physical facility is being restored and can’t be used for business. This insurance can help cover costs such as payroll and rent. After the coronavirus (COVID-19) pandemic began sweeping through the United States, state and municipal governments shuttered businesses deemed nonessential. Many small businesses don’t have the resources to continue for an indefinite period of time, with no assurance that they ever will be able to resume operations.
Because of the widespread and devastating losses associated with COVID-19, businesses began seeking business interruption insurance despite, in many cases, the lack of physical damage to their properties. As small businesses continue filing business interruption insurance claims, insurance companies are relying on exclusions to deny coverage. Standard business interruption insurance policies usually exclude coverage for losses resulting from communicable diseases and contaminants. This expanded coverage is available, but for a much higher premium.
If you are uncertain about whether your business interruption insurance will cover your losses during these unprecedented times, you should contact an insurance coverage attorney with experience in the area of business interruption insurance claims. At Slater & Zurz, we’ve been successfully handling business and commercial insurance cases for over 40 years. We’ve built a solid track record of success in assisting our clients get the coverage to which they are entitled. Call or email us to set up a free consultation with a member of our team. We’re here to serve your needs in any way we can.
Coronavirus-related costs can add up quickly.
There are many costly impacts associated with coronavirus:
- Costs associated with sanitizing an insured property.
- Costs to evacuate the insured property.
- Lost income and business interruption from the closure of the property, either by order of a government official or to permit sanitizing the property.
- Lost income and business interruption due to closure of related businesses such as suppliers and transportation.
- Lost income and business interruption due to “stay at home” orders preventing a business’
customer base from using or visiting the business (business and professional groups; sports fans; concertgoers; schools, colleges, and universities; restaurant patrons; moviegoers; bar patrons; shoppers).
Insurance policy exclusions for communicable diseases may bar business interruption coverage for losses related to COVID-19.
Most business insurance policies that contain interruption coverage typically exclude coverage for losses arising from communicable diseases and contaminants. Some exclude coverage for shutdowns ordered by a civil authority, or government official. However, one attorney who recently reviewed hundreds of business interruption policies indicated that about 20% of those policies cover coronavirus-related shutdowns because businesses were told to close by government officials and the policies contain “civil authority” coverage. The specific language in your policy controls whether you have business interruption insurance coverage for coronavirus-related losses.
A fundamental principle of American contract law is that contracts, including insurance policies and the exclusions that restrict or limit coverage, should be interpreted and enforced as the parties intended. The written policy is considered to be the best evidence of the parties’ intent. Therefore, whether an insurance policy covers a particular loss will be determined by the language of the policy.
The types of coverage that a particular insurance policy provides are generally listed near the beginning of the policy on the “Declarations” pages. Insurance policies usually contain separate sections describing each type of coverage offered, followed by exclusions itemizing specific types of losses that aren’t covered. Insurance policies define many important terms. An exclusion may appear within a definition that identifies particular acts, events, substances, and other things that fall outside the scope of coverage.
Your insurer’s denial of your claim is not determinative. If you have any doubts about whether your policy provides coronavirus-related business interruption insurance, you should consult a business insurance coverage attorney. The choice of words used—and sometimes, the placement of the words and/or punctuation marks, or a court decision interpreting a similar provision—may defeat an exclusion, entitling you to coverage.
If you and your insurance company can’t agree on whether your losses are covered, don’t simply accept the insurance company’s rejection of your claim. It’s in your interest to reach out to an insurance coverage attorney. Insurance provisions can be highly technical; some may have settled meanings within the legal community. Call or email our team at Slater & Zurz to schedule a free consultation. One of our insurance coverage attorneys will review your policy, assess the strength of your claim, answer your questions, and make a recommendation concerning whether to pursue your claim.
Small businesses are pressing for federal laws requiring payment of coronavirus-related business interruption insurance claims.
In Washington, D.C., the restaurant industry is currently locked in a battle with business interruption insurers. The restaurants support legislation requiring the payment of business interruption coverage for claims arising from COVID-19 despite the exclusions in their insurance policies, while the insurance companies insist that their policy exclusions should be enforced. The restaurants argue that the government should reimburse the insurers for amounts paid out on COVID-19 claims that are technically excluded under the language of the applicable insurance policy; the insurance companies insist that legislatively “rewriting” insurance policies to eliminate exclusions in COVID-19 cases could undermine the insurance system and may be unconstitutional. Instead, the insurance industry might support a government-backed fund to pay coronavirus-related business interruption claims.
Nationally, restaurants account for over 15 million employees and contribute about $1 trillion to the U.S. economy. The insurance industry is an equally powerful force, politically and economically. Because COVID-19 coverage is a novel issue, and because we haven’t experienced a pandemic on the scale of COVID-19, it is impossible to predict what the outcome of this conflict will be.
A bill introduced in Ohio would require insurers to pay coronavirus-related business interruption claims.
Emergency legislation addressing coronavirus-related business interruption claims, House Bill No. 589, was introduced in the Ohio General Assembly in March. This bill is similar to legislation introduced earlier in New Jersey.
- The bill requires that most existing business insurance policies that insure a business against loss or damage to property, including the loss of use and occupancy and business interruption, be interpreted to cover business interruption as a result of the coronavirus pandemic, notwithstanding any law or rule to the contrary. This coverage would continue until a state of emergency that was declared on March 9, 2020 is terminated.
- The proposed law would apply to small business insurance policies that are in force on the date that the legislation becomes effective.
- The proposed law would cover only businesses located in Ohio.
- To be covered, the insured business can’t have more than one hundred full-time employees, defined as employees who work at least 25 hours per week.
- This coverage is subject to the same policy limits that apply to other coverages.
An insurance company may apply for reimbursement of these coronavirus-related business interruption claims. The state will then reimburse the insurer from a fund established by the Superintendent of Insurance, created by assessments against insurance companies. If passed, the legislation will become effective immediately.
If you were wrongfully denied coverage under the business interruption provisions in your policy, trust an experienced, full-service law firm to handle your coverage claim.
Small and even mid-sized businesses typically can’t wait for an extended period of time before receiving the business interruption benefits to which they are entitled. If your claim satisfied the terms that apply to business interruption coverage under your policy (or the new law if H.B. 589 is adopted), and if the insurance company failed to identify a legitimate and reasonable basis for denying the claim, the company may have acted in bad faith, entitling you to additional damages. Conduct that might entitle you to additional damages could include the failure to reasonably investigate the claim, failure to promptly pay a covered claim, failure to comply with state insurance law, and the use of unfair settlement practices.
At Slater & Zurz, we thoroughly analyze all pertinent policy language and fully investigate every claim that we handle. Our primary goal is to obtain the full amount of coverage that our clients deserve. We recognize that for some businesses facing the devastating losses that coronavirus claims are likely to entail, the ultimate success of a business depends on a successful insurance claim. Call or email us to schedule a free consultation and give us the opportunity to win for you. We’ll be on your side every step of the way.