What you’ll discover:
What exactly is business interruption insurance and how does it function?
Is my policy’s business interruption coverage included?
Why are insurance companies dismissing pandemic-related business interruption insurance claims?
How have legislators reacted to these denials?
What additional financial relief alternatives do I have for my company?
Seek legal counsel.
While measures to minimize the COVID-19 pandemic—particularly social distancing—continue to have a detrimental effect on many small enterprises, you may be asking whether your insurance coverage covers your losses. Business interruption insurance, in example, is designed to cover losses caused by events beyond your control that disrupt your routine company activities, such as natural disasters or vandalism. A worldwide epidemic may seem to be a qualifying occurrence, but this is not always the case.
The particular wording in your policy, as well as numerous other considerations, determine your eligibility to make a business interruption claim. Several pandemic-related claims have been refused by insurers, leading state and federal legislative initiatives to force substantially greater compensation. For the time being, at least until the dust settles, it’s unclear how far these insurance plans may be used.
We’ll address any questions you and other company owners have concerning business interruption insurance claims for COVID-19 losses, including numerous terms that may strengthen (or weaken) your claim.
Table of Contents
What exactly is business interruption insurance and how does it function?
Business interruption insurance protects the loss of revenue caused by an unanticipated disaster that interrupts company, and it may also cover additional expenditures such as needing to function from a temporary site. Policyholders must submit such claims “promptly,” since failing to act quickly may result in your claim being denied.
Your business interruption insurance may also contain a “civil authority” provision, which covers losses incurred when access to commercial premises (such as an office, factory, or retail shop) is restricted by an order issued by a federal, state, or local governmental organization. State shelter-in-place and stay-at-home orders intended to reduce COVID-19 infection rates may apply (though this isn’t always evident).
Is my policy’s business interruption coverage included?
Although you may buy it as a stand-alone insurance, most small company owners get it as part of a bigger package known as a business owner’s policy (BOP). Your BOP will almost certainly contain general liability and property coverage as well. Your insurance provider can assist you in determining what your unique company insurance policy covers. If you are doubtful, you may also have your insurance reviewed by a lawyer.
Why are insurance companies dismissing pandemic-related business interruption insurance claims?
An insurance may decline your claim for one of two reasons:
There was no physical harm to the company. The majority of these claims are for business disruption caused by floods, fires, and other natural disasters.
Coverage for viruses and illnesses was not included. Some business interruption insurance specifically indicate that infectious illnesses are not covered occurrences for the purposes of submitting a claim.
A lawyer can advise you on how to file a claim that is unique to your case or how to appeal a claim that has been refused.
How have legislators reacted to these denials?
Eighteen members of the United States House of Representatives signed a letter to insurance industry trade groups requesting their members to recognize coronavirus-related business interruption insurance claims more widely. The insurance industry maintains that it is unable to pay all of those claims and that if compelled to do so, it would go bankrupt.
However, legislators in at least six states (including New Jersey, New York, Pennsylvania, Massachusetts, Ohio, and Louisiana) have proposed legislation requiring insurers to accept business interruption claims relating to COVID-19 and social distancing rules. A local lawyer can assist you in determining if any new laws have been enacted that may affect your firm.
What additional financial relief alternatives do I have for my company?
Although pursuing a claim for damages is a smart idea if you have business interruption insurance, you may not want to put your hopes in it. Several sorts of relief may be available depending on the size and nature of your firm, as well as your specific needs:
Paycheck Protection Program (PPP) Economic Injury Disaster Loan (EIDL) Contract provision for force majeure (releasing you from contractual obligations)
You may also be eligible for state and municipal assistance programs. Check to see whether you are eligible for any government assistance.
Seek legal counsel.
If your company is struggling, it’s in your best interest to examine your policy and figure out what your alternatives are as quickly as possible. If you need legal advice, you may visit the Coronavirus Legal Center, where you can ask legal questions and get important legal papers for free.