Will my Business Interruption Coverage cover business loss due to Covid-19?
Most businesses have insurance policies to cover losses due to damaging events (e.g. fire, hurricanes, water damage, theft, etc.). Business owners pay insurance companies premiums year after year, to provide protection in case of a loss. If a business such as a restaurant has a fire and has to close while repairs are being made, the insurance policy will normally pay for both the cost of repairs, and the loss of business income while the repairs are being made.
If a business has had to close its normal operations, and lost income due to COVID19, the business may be entitled to compensation under its business interruption policy. Compensation would include lost sales minus saved expenses, or net income plus continued expenses.Compensation would also include additional expenses due to Covid-19.
Many insurance companies have pre-actively sent letters to their insured, stating that their policy will not cover losses due to Covid-19. The most common reason given is that the policy will not pay for any business interruption losses unless there is actual damage to the property.However, Courts have found coverage when a property had to be closed due to conditions such as E Coli, radioactive dust, presence of carbon monoxide or pesticides, and risk of falling rocks, none of which caused actual damage to the property. Insurance companies may also claim that a particular policy excludes coverage due to damage from a “virus”, “bacteria or “contamination”. However, most businesses have not closed due to a “virus” but rather due to an Executive Order directing their closure.
Therefore, should a business owner file a claim with their insurance company for business losses due to Covid-19, even if their insurance company has told them in advance that they will not pay?
The answer is YES. The obligation is on the insured to make a formal claim. Keep in mind that claims are supposed to be made within a reasonable period of time after loss is incurred. If the insurance company denies that claim, then the insured can sue the insurer for formally denying the claim. Within the time that the insurer denies the claim, until the deadline for filing the lawsuit, the legal landscape may change. The Courts, or the legislators, may rule that insurance policies are required to cover Covid-19 claims.
Every insurance policy is unique and thus every insurance policy must be reviewed as an individual contract between the insurance company and the insured. While the insurance company may rely on one paragraph for denying coverage, another paragraph in the insurance contract may provide coverage. One of the basic rules of insurance law is that all ambiguities in the contract should be decided in favor of the insured and against the insurer.
Before believing the insurance company’s self-interested position, it would be best to speak with someone with expertise in dealing with insurance companies and insurance policies to have them review your policy.An insurance policy expert may be able to convince the insurance company to provide coverage. In many cases, it may be necessary to bring a legal action against the insurance company to force it to pay under the policy.
Our firm will review your business interruption policy at no cost to you. If your insurance company denies your claim, we will represent you on a contingency basis, which means our fee is limited to a percentage of the recovery. If there is no recovery there is no fee.