Attorneys Representing Business Owners Who Filed a Business Interruption Insurance Claim Due to Coronavirus
With the COVID-19 pandemic sweeping across the United States, many businesses have been affected, especially those in areas where governmental authorities have issued lockdown or shelter-in-place orders. Under these orders, only “essential” businesses may remain open, and they must operate in such a manner as to avoid the likelihood of contagion. But even those businesses that are able to remain partially open have suffered and will continue to suffer financial losses. Businesses forced to close entirely are in even worse shape. Businesses should immediately review their insurance policies to determine whether business interruption insurance covers their losses. If a claim has been filed and you’ve been wrongfully denied, you can find a lawyer in your state to represent you.
More About Business Interruption Insurance
Most businesses have comprehensive insurance policies in place. Larger businesses purchase insurance as a matter of course. Smaller businesses that might not ordinarily purchase insurance often are required to purchase it under their leases. Business interruption insurance is not sold as a separate insurance policy. Instead, it can be added to an existing insurance policy as a “rider” in a package policy. Most large carriers offer business interruption insurance including: Nationwide, Hartford, Liberty Mutual, State Farm, Travelers and Farmers.
If purchased, business interruption insurance typically covers financial losses caused by a disaster of some kind. Some losses are covered by all policies, while others depend on the language and terms of the policy:
- Expenses: Business interruption insurance covers the normal expenditures that a business must make in order to operate.
- Loan payments: A policy might cover payments on loans that a closed business has taken out.
- Profits: The coverage will provide reimbursement for profits lost during the course of the disaster.
- Recovery expenses: We tend to think of a disaster as ending at a specific point in time. However, it can take months or even years for a business to recover completely. These expenses are covered by business interruption insurance.
- Replacement of machinery or equipment: A policy might cover the cost of replacing machinery or equipment.
- Taxes: Governments want taxes paid whether or not a business is open. Business interruption insurance can cover these taxes.
- Temporary relocation: Policies might, or might not, cover the costs incurred by moving to and operating from temporary business facilities.
- Wages: If valuable employees are not being paid while the business is shut down, the business may lose them. Business interruption insurance might extend to payroll.
When Can Coverage Be Available?
In the current novel coronavirus pandemic, there are two situations in which businesses insurance might provide coverage. First, when the virus initially appeared, commerce slowed down because of fear of contagion and suggestions that people employ social distancing to avoid contact with infected persons. That situation still exists in the minority of areas that have not enacted some sort of lockdown or shelter-in-place order. In the areas that have instituted such orders, the interruption in business has been caused by order of governmental authorities. Although the existence of the novel coronavirus is the reason for the governmental orders, the shutdown is actually due to a governmental order.
Legal Questions About Business Interruption Insurance Coverage
The first step to determining whether there is coverage is to read the business interruption rider. Some riders, such as ISO form CP 01 40 07 06, explicitly exclude losses due to viruses or bacteria. But even if the business interruption insurance covers losses attributable to diseases, the policies typically require “direct physical loss of or damage to” the property of the business or to the property of a supplier to the business. The legal question in this situation is whether the novel coronavirus can constitute a direct physical loss leading to business interruption.
According to the Centers for Disease Control and Prevention (CDC), one of the ways that the novel coronavirus spreads is by clinging to surfaces or objects that other, uninfected people then touch. If an employee of the business or a customer came down with the virus after touching a contaminated surface within the business, then business interruption insurance might cover the business’ loss because there had been loss of or damage to the business’ property.
The same sort of analysis applies to shutdown by governmental order. ISO form CP 00 30 10 12 covers closure by “civil authority,” but only when a business is ordered closed because of “damage to property other than property at the described premises.” Again, does contagion by the novel coronavirus of business premises amount to property damage?
Court decisions on similar conditions have suggested that there will be coverage. Rulings include a showing of physical damage by the existence of gasoline fumes, toxic cases and odors from making methamphetamine.
If your business has declined or been closed by the novel coronavirus pandemic, you should immediately consult with an attorney because business interruption insurance policies often have short deadlines within which to file a claim.