If your business had to shut down temporarily during the COVID-19 pandemic, resulting in lost income, you might qualify for coverage through a business interruption insurance claim. Insurers have largely denied claims, citing virus exclusions or lack of coverage. However, state legislators, legal teams, and judges are weighing in on the validity of the insurance denials. More than 100 COVID-19 business interruption lawsuits have been filed within the first three months of coronavirus-related business disturbances.
At Showard Law Firm, we have the resources and expertise to represent the emerging COVID-19 business interruption insurance lawsuits in Arizona and beyond. We can help you initiate a new claim or appeal a decision with a bad-faith lawsuit. We offer free initial consultations and do not charge for our legal services unless we win the case. Contact us without delay to have your proposed financial relief considered sooner, rather than later.
Here we examine what exactly business interruption insurance is, what it isn’t, and what legal arguments are being explored in the rash of COVID-19 lawsuits sweeping through courts from coast to coast.
What Does Business Interruption Insurance Mean?
Most people would not consider opening a business without first purchasing property insurance to cover unexpected repair or replacement costs. These events include everything from flash floods, dust storms, monsoons, and heat-related wildfires. If a business is forced to close temporarily, business interruption insurance coverage would kick in to help with operating costs and losses in revenue during the period of restoration.
Typically, this type of insurance is not a separate policy– but, rather, sold as an addition to the main Business Owner’s Policy– such as a comprehensive package or commercial property coverage. Payment for this type of premium can be deducted as a necessary business expense. The amount of reimbursement depends upon the company’s past financial records and specific policy limits.
What Does Business Interruption Insurance Cover?
If a business interruption insurance claim is accepted, the insurer commonly pays for:
- Lost net income that you would typically make if your business were open (based on past financial records)
- Mortgage, rent, loan, and lease payments for the space where your business is located
- Employee payroll to retain workers during the closure – in some cases up to one year
- Taxes (monthly or quarterly)
- Moving costs and lease or rent payments on a new location if relocation is necessary
There may be a 48 to 72-hour wait before the “period of restoration” formally begins. The standard policy limits the business restoration period to 30 days, but this period can be extended through the rest of the year by endorsement, as necessary.
Business Interruption Insurance for COVID-19
Within the first few months of the COVID-19 crisis, hundreds of business owners – from restaurants and dental practices, to daycare centers and hair salons– have filed individual COVID-19 insurance lawsuits. They have consolidated class actions over what they allege is a clear breach of contract, breach of good faith and fair dealing, and unfair business practice. Claimants are not only seeking coverage of their business losses but punitive damages with interest.
Insurers have argued that covering the cost of pandemic-related closures would upend the entire industry. They point to policy exclusions where applicable or argue that coronavirus does not cause the type of “physical damage” that would trigger interruption insurance coverage.
In one notable case, SCGM Inc. v. Certain Underwriters at Lloyd’s (Case 4:20-cv-01199), the policy in question covers 25 diseases under a “pandemic event”– including SARS-CoV2, another type of coronavirus. The insurer has denied coverage because the policy does not specifically list COVID-19, as it is a novel coronavirus.
Some companies who have filed COVID-19 business insurance claims have paid for higher-priced all-risk policies lacking exclusionary language and designed to cover a broad range of losses. Others argue that the presence of viruses or diseases can constitute physical property damage.
Other businesses paid for business interruption coverage as recently as March 2020, in the midst of the pandemic, and found there to be no virus or pandemic exclusions in the policy literature. In theory, they “should have known” that such claims could be filed and took no steps to prevent them.
How To File A Claim
What will become of these lawsuits remains to be seen. Legislators in several states have proposed sweeping insurance policy changes, and President Donald Trump himself has said he supports claims made by policyholders who had no specific exclusions listed. Most likely, the lawsuits will proceed through the courts on a case-by-case basis, with some of the early rulings setting a precedent. Contact Showard Law Firm to file your claim.