COVID -19 Business Interruption claims
COVID-19 is impacting small and large businesses across the Country and some of the hardest hit businesses are right here on the Gulf Coast. Whether insurance will cover financial losses due to an interruption in business will depend on the policy language in the businesses insurance coverage and the circumstances of the claimed loss. First, the policy must include business interruption coverage. Then we must look at the nature of that coverage and any stated exclusions within it and the facts associated with your claim. That will help is advise you as to whether your business may have coverage for financial loss.
Business interruption coverage generally indemnifies a business after a financial loss due to damage to property that is insured under the policy, provided the damage is caused by a covered type of loss such as hurricane, tornado or fire. This coverage is usually for losses caused directly or indirectly by physical damage to the insured property. The claim would be for lost profits from the closure of the business until it re-opens. The terms of the policy determines how the amount of the loss is calculated and the time frame for when the lost income can be reimbursed.
Another type of coverage is for contingent business interruption. This is a more refined type of coverage that extends further for financial losses caused by interruption of a customer’s or supplier’s business. This coverage can be added to a policy by endorsement and must be specifically requested and purchased. The cause of the damage to the customer or supplier must be covered under the underlying business policy. Like above, the language of the contingent business interruption endorsement will determine if your policy creates any obligation to pay on the claim.
These coverages are typically offered or already included with your business’s commercial property policy. As indicated above, physical damage to the insured’s building, whether it be rented or owned, is often a requirement for there to be business interruption coverage. A mere interruption in business is often not enough.
Sometimes policies include coverage for monetary losses caused by a Civil Authority forcing the closure of the business or the land it is on. This most often applies when the staff or customers are unable to access the business because of a government mandate issued arising from physical damage to that property or one near it. The insured has to usually show causal relationship between the government’s order and the physical damage.
Please note many policies have language defining what is an actual loss and which are excluded from coverage.In some cases, losses caused by virus, bacterium or other communicable disease may be excluded coverage. Sometimes there is express coverage for these kinds of losses in a policy endorsement. It is important to note, however, that the law in many States is that if a loss is not specifically excluded from coverage, it must be included in coverage.
Based on all the above, a threshold question for addressing coverage may be whether the businesses building is rendered uninhabitable due to virus or disease and whether such constitutes “physical damage.” The insured may have to show they had to close to disinfect the business. Frankly, the law may be unsettled in many jurisdictions as to whether such triggers coverage.
The bottom line is that the policy language, including all terms, conditions and exclusions will determine if a financial loss related to COVID-19 may be covered.
Maloney-Lyons, LLC is here to help. Give us a call. We will review your policy and advise if we feel you have a potentially viable claim help without you even having to come into our office, and there is no fee unless we collect for you.