Will Your Business Interruption Insurance Cover Your COVID-19 Losses?
As businesses continue to shut down across Louisiana and the nation in response to city and state “stay at home” orders, business owners are worried about whether this public health disaster is covered under their business interruption insurance protection plans. If they listen to their insurance agents or the many media articles on the topic, they probably think they are out of luck. However, business owners have nothing to lose by filing a claim to test the waters, and if that claim is denied they always have the option to file a lawsuit to enforce their insurance plan.
Whether your claim is covered or not is likely dependent on the type of policy and the specific language in it. If you have a business that has been affected by closures, check your business policies to see what losses may be covered. Even if your insurance policy contains a specific exclusion related to viruses or pandemics, there are several angles to possibly overcome the exclusions.
It’s possible you have a coverage extension or endorsement that covers losses from actions taken by order of the government or civil authority. Generally, when government shuts down businesses because of a natural disaster such as a hurricane or flood, the requirement for a business interruption claim is physical damage to the premises. The argument that the presence or the potential existence of the coronavirus as constituting physical damage is already being tested in courts throughout the country.
Important questions raised by this argument include how long the virus can live on surfaces, and what sort of cleanup and testing is required before your business can reopen. New studies are coming out everyday evidencing that COVID-19 can live several days or more on various surfaces.
One only needs to look at the aftermath of 9/11 to understand the dynamic relationship between Congress and the insurance industry. Prior to 9/11, business interruption policies often excluded acts of war. It didn’t take long for the insurance sector to waive the exclusions and begin paying out claims though.
Insurance companies are already facing political pressure to pick up coronavirus-related claims. On March 18, a bipartisan group of eighteen House members signed onto a letter to four insurance groups urging them “to work with [their] member companies and brokers to recognize financial loss due to COVID-19 as part of policyholders’ business interruption coverage.”
The insurance industry responded a week later saying that they’re working to provide relief to policyholders but not through the coverage in question. The insurance groups are weighing whether to propose a federal program that would direct funds to businesses disrupted by the pandemic, using the victims compensation fund set up after 9/11 as an example. They continued that forcing insurance companies to pay the massive number of business interruption claims would threaten the solvency of the insurance sector.
File Your Claim Now, Rather Than Later
Businesses who maintain business interruption insurance should file their claims even if it is likely they get denied. First, there is nothing to lose by filing a claim. Next, a denied claim opens up the possibility to sue the insurer and litigate your claim in court. Finally, if there is some sort of governmental action down the line either forcing insurance companies to pay full or partial benefits under these policies, or creating a business compensation fund, businesses who filed claims will have a leg up as they will have already gathered the necessary paperwork documenting their economic and property losses. Any business that files a claim now will be ahead of the game.
Yesterday, Congress passed and the President signed the CARES Act, a $2.2 trillion stimulus package that includes low-interest small business loans that may be at least partially forgivable. Businesses should certainly explore whether a loan is the right fit for them and carefully weigh just how much they wish to borrow, as they will be responsible for repaying any amount borrowed in excess of eight weeks of their operating expenses which includes payroll, rent, and mortgage payments. While this is a great first step, it will likely not be enough to keep many businesses afloat. That’s why it’s important to keep the pressure on your lawmakers, so that they in turn will keep the pressure on your insurers.
Do not let your insurance company or the media bully you into not filing a claim. If your business has lost income due to COVID-19, file your claim today. If your business interruption claim is denied, or if you have questions or need help filing your claim, contact an experienced insurance lawyer today.