As businesses wait for some semblance of economic normalcy to return, an important legal fight is brewing about who should pay for the losses caused by COVID-19. Experts anticipate insurance policyholders bringing widespread litigation over their business interruption insurance. While some business interruption policies specifically exclude pandemics, insurers are now claiming even silent policies are only intended to cover physical damage, not a virus outbreak.
For many business owners, the ability to recover COVID-19 related losses is crucial to survival and thus top-of-mind. The pandemic has left companies grappling with mandatory closures, event cancellations, the loss of use of business property, service disruptions, and a variety of other impacts. Companies of all sizes are trying to figure out how to cover payroll and expenses with reduced or no incoming revenue.
Several insurance companies have already taken the position that business interruption policies specifically exclude pandemics and are only intended for physical damage to a business. This type of thinking will lead to widespread litigation brought by policyholders against insurance companies for the denial of business interruption claims. Just as with all insurance policies, business interruption insurance coverage is determined by the language contained in the policy itself.
If you are a business owner, your existing policy may help if it contains business interruption coverage specifically insuring you for losses stemming from viruses or other widespread health events like the novel coronavirus. However, business interruption coverage is a complicated area of insurance law, and reviewing, interpreting, and understanding the language contained in your particular policy is a crucial first step in determining whether or not you have available coronavirus business interruption coverage.
Business interruption insurance is not sold as a separate policy but may be incorporated into a traditional insurance policy. Language related to business interruption coverage can be found in your property/casualty policy or as a rider in a more comprehensively packaged policy. The policy often lists specifically covered perils, such as theft, fire, and hurricanes, which will likely not help a business facing losses due to the coronavirus. When determining whether your insurance policy covers coronavirus losses, specifically look for language related to government actions, interruption by civil or military authority, and other similar language.
While most policies will not specifically include pandemics or other outbreaks, if language concerning government action is included, coronavirus losses may be covered. After the SARS epidemic, however, many insurers adopted exclusions for losses caused by or resulting from any virus or bacteria. If your policy does not actively exclude a viral pandemic, the coverage claim cannot legally be denied without an appropriate investigation. Policy extensions that cover viruses are most often found in industries with a higher risk of exposure like the healthcare industry.
Businesses around the world have been impacted by the coronavirus, and many have cut hours, laid off employees, and even closed for good as states around the country have mandated all but “essential businesses” remain closed. As the result of government-mandated business closures, the following types of business losses may be compensable under the business interruption portion of your insurance policy:
Without direct physical damage or loss to the property that results in the closure of a business, some insurance companies are denying any kind of coverage for these business continuity insurance claims. Although some policies have exclusions that can potentially eliminate coverage, the right legal team can argue policy language should be construed to provide coverage for business losses due to the coronavirus. Since the time the insured must make a claim for coronavirus business interruption is very limited, it’s important for Houston business owners to act as quickly as possible.
The experienced business lawyers of Burford Perry have successfully handled complex litigation involving insurance policies throughout their legal careers. If you are a business owner or event organizer who has been denied business interruption insurance coverage after closing due to the coronavirus pandemic, don’t take your insurer’s word as final – contact us today for more information on how we can help.