COVID-19 & BUSINESS INTERRUPTION INSURANCE
As COVID-19 grinds global and local economies to a halt, businesses of all shapes and sizes and their employees are taking a massive hit. Many are wondering how they are going to survive and recover once the pandemic and federal shutdown end. Congress is still working on passing a federal COVID-19 rescue bill, and the details of that aid package will determine who receives what. However, what companies really want to know is if they will have the option to bring claims under their commercial insurance policies for business interruption. Unfortunately, there is no straightforward answer as it all depends on what each individual insurance policy holds. Further, the unprecedented federal shutdown in face of the COVID-19 pandemic may influence or dramatically change the way current policies are read in terms of coverage, giving leeway to potential COVID-19 interruption claims and making such language vulnerable to future change as a result.
Since an insurance policy is a contract, coverage is going to be determined by the specific terms and language in place in each individual policy, which will vary by the insured and provider. Accordingly, the first place businesses will want to look to determine if they have potential interruption coverage are their commercial insurance policies. Each policy will likely have different terminology for “Business Interruption,” and depending on the policy such coverage may come standard in the insurance package, may be additional pursuant to an endorsement, or may not exist at all.
Once business interruptions coverage is determined, it is important to understand the terms of the coverage that is in place and what it protects against. Many policies only account for interruptions where physical damage to business property itself has caused the loss of business or income. As such, physical damage will often be the threshold necessary to trigger this sort of business interruption coverage. How such policy language is worded could affect the context of coverage, as arguably insureds may claim their property was effectively “lost” or “damaged” due to the pandemic or the federal shutdown as employees, clients, or consumers were ordered to shelter in place or social distance.
Policies for hospitality or events industries may provide coverage in situations of public shutdown by the appropriate governmental authorities. Such provisions may also be in place if they were bargained for via extension or endorsement to include such “civil authority” provisions or other specific business-critical disruptions. Other policies may outright exclude viruses, epidemics, and pandemics from any sort of coverage. Such exclusions may be general terms or contained under a policy’s “Act of God” provisions. As “Act of God” or “Force Majeure” provisions will become the battleground of contractual obligations in the time of COVID-19, this subject will be discussed further in a separate piece.
In essence, the language of each individual policy is crucial to understand what sort of coverage each business carries, and if there may be potential to make claims for business interruption due to COVID-19. Whether the language is vague, difficult to decipher in context of its own terms or within totality of the contract, or if such language is lacking altogether, could all be potential arguments in support of claims for business interruption coverage. As such, these arguments are worth pursuing.
Recommendations for Businesses:
1. Review your Commercial Insurance Policy or have it reviewed by an attorney. This is important to assess whether there is potential coverage for business interruption from COVID-19 and if there are necessary steps, process, or notice requirements attached to the claims handling procedure.
2. Make a Claim. Even if there may not be coverage or if coverage is uncertain, it is worth it to make a claim with your insurance company to find out. Further, it may be beneficial to consult or retain an attorney with experience in insurance coverage and litigation. An attorney may be able to assist with the claims handling process, any ensuing coverage decisions issued by the insurance company, and in determining if there are grounds to challenge or pursue any such claims further.
3. Contact the Small Business Administration. Small businesses are eligible for low-interest loans as a result of the COVID-19 pandemic.
4. Stay up-to-date on all COVID-19 news. The Centers for Disease Control (“CDC”), the World Health Organization (“WHO”), and local and national news are all providing rolling updates on COVID-19 and its effect on local and national mandates or orders.