COVID-19 and Business Interruption Insurance
by Jonathon Douglas on May 15th, 2020 in Business & Corporate Law, Insurance Dispute
Every day the media has us thinking about COVID-19, stay-at-home orders, shelter-in-place orders, infection rates and death rates. A topic and, quite frankly, a very important topic which is gaining traction relates to COVID-19 Insurance Claims. Local, state and national governments all seem to have a say in how we go about our day to day lives, but these governmental orders have also decimated huge sections of our economy. Restaurants, bars, and tourism have all but come to a screeching halt as a result of the government’s lockdown orders related to the COVID-19 pandemic. If your business has been impacted by the COVID-19 pandemic, your business may have a COVID-19 Insurance Claim. This article will assess whether business owners potentially have a viable COVID-19 insurance claim, and if so, what steps to take in order to position your business for a successful COVID-19 insurance claim.
The COVID-19 outbreak had an epicenter in Wuhan, Hubei Province, China which rapidly spread across Asia, Europe and the world. According to the Center for Disease Control, COVID-19 is a pandemic which is defined as, “a global outbreak of disease. Pandemics happen when a new virus emerges to infect people and can spread between people sustainably. Because there is little to no pre-existing immunity against the new virus, it spreads worldwide.”1 In our current situation, the pandemic is related to COVID-19 or the “Coronavirus”. The COVID-19 abbreviation was coined because it is “coronavirus disease 2019”. While the public and the media have also addressed this virus as “corona” or the “coronavirus”, understand that coronaviruses are a family of viruses that can impact humans and animals (including cattle, cats, and bats). Due to COVID-19 being declared a pandemic across the globe, this can trigger COVID-19 insurance coverages and claims for certain losses
When to File a COVID-19 Insurance Claim
Business owners may not know when to file a COVID-19 Insurance Claim. A COVID-19 Insurance Claim is filed with an insurance company related to losses caused by COVID-19. No insurance will specifically cover COVID-19 due to its novel nature. However, insurance policies can address losses caused by pandemics, viruses and civil authority. Many commercial insurance policies actually exclude losses caused by viruses or pandemics. Therefore, the first step a business owner needs to take is to determine whether the business has suffered an indefinable and quantifiable loss which correlates with COVID-19.
The World Health Organization declared COVID-19 a pandemic on March 11, 2020. In the United States, state and local governments began to take action to protect citizens against the pandemic. On Friday, March 20, 2020 New York Governor Andrew Cuomo announced a statewide lockdown of all nonessential business operations. On March 25, 2020, the Pinellas County Commission issued a “safer-at-home” order. This order requires businesses to practice strict compliance with CDC social distancing guidelines and ceased operations of nonessential business. These types of orders were implemented almost statewide. On April 1, 2020, Florida Governor, Ron DeSantis, issued a stay-at-home order which by and large mimicked various local governments’ stay-at-home orders. One of the most impactful requirements was the required closure of nonessential businesses.
Correlating Loss of Business Income to the COVID-19
Correlating loss of business income to the COVID-19 related closures is fairly easy. Once this correlation has been made, the next step for a business owner to take action is to examine the applicable policy of insurance. The vast majority of COVID-19 insurance claims will be related to a business’s loss of income related to interruption of business caused by the various governmental authority shutdowns. When examining the insurance policy, determine if there is coverage provided in the policy for losses caused by pandemic or virus. Also, be aware that there may be specific exclusionary language related to viruses and pandemics. If there appears to be coverage provided COVID-19, business owners are encouraged to submit a claim for loss to their insurance company. Unfortunately, insurance companies have been attempting to find ways to deny COVID-19 Insurance Claims, even when there is coverage. If your claim has been denied and there is specific coverage afforded, contact a law firm who specializes in pandemic claims immediately to address this wrongful denial.
Various outlets have estimated that approximately 60-70% of commercial insurance policies offered by insurance companies specifically exclude coverage for lost revenue due to pandemic or virus. The 30-40% of commercial policies left, do not have this exclusion. For those policies, the next inquiry is whether the policy is an “all risks” policy or if the policy provides coverage for losses caused by actions by a “Civil Authority” – this is sometimes referred to as “Civil Authority” coverage. Generally speaking, an “all risks” insurance policy provides businesses coverage for losses stemming from “all risks” or “all perils” but then limits the coverages by stating exclusions or excluded perils. If a peril is not excluded then the argument is that the peril must be included because the insurance policy insurers “all risks” and the damaging risk, in this case, pandemic or virus, was not specifically excluded.
What Does Civil Authority Coverage?
Generally, Civil Authority coverage protects businesses in the event of loss caused by the actions of a civil authority. Applying this concept to COVID-19 insurance claims, when any “civil authority” whether it be local, state or national government, issues orders which in turn cause business interruption, and loss of income, this would trigger “Civil Authority” coverage. Some local authorities were urged during the passage of stay-at-home orders to include language that COVID-19 causes property damage due to the virus’s ability to attach to surfaces for long periods of time. Some local executive orders in Florida have included this suggested language. This type of property damage language would also trigger Civil Authority coverage and potentially other policy coverages for business owners triggering additional grounds for a business’s COVID-19 insurance claim.
Florida businesses that have undoubtedly been impacted by COVID-19 are restaurants and bars (and pretty much anything to do with tourism). Florida’s restaurants and bars have been financially decimated by the closures mandated by local, state, and national governments. Many of these businesses have submitted COVID-19 Insurance Claims already only to be coldly denied and left without any help from the insurance company which provides businesses a valuable financial lifeline. So why are COVID-19 Insurance Claims being denied? Some of the industry’s commentators believe that if insurance companies began to cover COVID-19 insurance claims, this would be a catastrophic loss for the property and casualty companies, some of which would not be able to survive.
The commercial insurance industry will likely be forced to take a uniform stance related to COVID-19 Insurance Claims to avoid opening the floodgates. Denied COVID-19 Insurance Claims have already led to lawsuits being filed and these lawsuits will continue to accrue as business owners decide to take a stand against their own insurance companies for wrongfully denying coverage related to COVID-19 Insurance Claim. With hundreds of millions of dollars on the line, these COVID-19 lawsuits will be heavily litigated and eventually will drive policy decisions on how to resolve these issues. In order to preserve your business’s ability to pursue a COVID-19 Insurance Claim, I recommend having a property damage attorney review the subject policy of insurance or your already denied claim to advise whether your COVID-19 Insurance Claim is able to be pursued in court.
If you believe your insurance company has underpaid, denied, or delayed your COVID-19 Insurance Claim, contact my office immediately for a FREE CONSULTATION AND FREE INSURANCE POLICY REVIEW.