Being a business owner right now is difficult. Most businesses have shut down because of coronavirus damage and orders from state and local governments. Yet even while business is closed, most business owners feel a deep sense of responsibility to their employees, who depend on their jobs to support their families.
Many business owners were diligent, purchased insurance, and paid premiums for years in order to have coverage for business losses. Often, insurance agents and brokers promoted the insurance by describing the policy as a “safety net” in case there was a business interruption. But now when the coverage is needed the most, insurance companies are categorically denying claims, and agents are telling businesses that their losses are not covered. One thing is certain: when it comes to protecting policyholders against business losses associated with the COVID-19 pandemic, business owners are finding out that the insurance industry is not on their side.
It has become clear that the insurance industry has declared war against businesses on these claims. Regardless of the insurance policy language or the specific insurance company who sold the policy, business loss claims are being denied across the board. Without even reviewing the specific policy language, some insurance agents and brokers are telling business owners, “Sorry, there’s no coverage.” Don’t believe them.
Is My Business Covered for Coronavirus Losses?
Business owners may be covered for their business losses by their insurers. Whether a business is covered for the current interruption in its activities is a question that requires an analysis of the specific language of the insurance policy including all exclusions, a review of the government order closing local businesses, and knowledge of the legal precedent interpreting insurance policies. While some policies have formidable exclusions that arguably eliminate coverage, there are actually many variations in the policy language. When it comes to insurance coverage, the specific language of the policy makes a difference.
In connection with most business loss claims associated with the coronavirus pandemic, there are three things to look for in a commercial property insurance policy:
- business interruption coverage
- civil authority coverage, and
- microorganism coverage or exclusion.
Business Interruption Coverage
Business interruption coverage insures a business for losses caused when its normal business operations are disrupted. This coverage is usually contained as a part of a broader insurance policy, but some businesses may have separate policies that cover business-interruption losses.
The main feature of business interruption coverage you will want to be aware of is standard policy language limiting coverage to losses caused by “direct physical loss of or damage to property.” On this issue, the language of Harris County Judge Lino Hidalgo that ordered business closed should be helpful to businesses when they seek to have their claims paid.
Judge Hidalgo’s order states that:
“Whereas, the COVID-19 virus is contagious and spreads through person-to-person contact, especially in group settings; and
Whereas, the COVID-19 virus causes property loss or damage due to its ability to attach to surfaces for prolonged periods of time;”
Based on this declaration, it can be argued that all businesses that are normally open to the public have suffered the type of property loss or damage necessary to trigger coverage under standard business interruption policy language.
Civil Authority Coverage
Many businesses have insurance policies that include “civil authority” coverage—a type of coverage for lost business income that should be available when your business is closed by order of a government entity. Seems clear enough. However, when it comes to insurance coverage issues, very little is black and white.
Insurance companies and their armies of lawyers are very creative when it comes to finding ways to deny coverage to businesses and policyholders. For example, after September 11, 2001, airspace was closed by the government. Airlines, hotels, restaurants, and other hospitality businesses were devastated by the loss of business they suffered due to the lack of airline travelers. Even though these businesses had civil authority coverage, insurers denied their claims, arguing that the government orders did not order that those businesses close. The same thing happened to businesses in Louisiana after hurricane Katrina. In those cases, the Courts sided with the insurance company claiming that the businesses were never actually ordered to close.
But the novel coronavirus is different. The position that the insurance companies took in the wake of these past disasters can be used against them now. The same court decisions that favored insurance carriers in these past disasters can be used to make a strong case that civil authority coverage directly applies for business losses caused by government-ordered business closures due to the coronavirus.
Although some insurance policies do not include damages caused by microorganisms – and may even explicitly exclude this type of damage – it’s important to perform a careful reading of your policy first. After the 2003 SARS epidemic, many insurance providers changed their policies to exclude payment for all viruses, bacteria, and other microorganisms that can cause illness in human beings. However, others only exclude coverage for bacteria, leaving damage caused by viruses like COVID-19 covered.
Insurers will likely also argue that standard policy language that bars coverage for damages caused by “pollution” or other exclusionary language applies to business losses caused by COVID-19, and different courts have interpreted these provisions differently. So it is important that the specific policy language be reviewed by a lawyer familiar with the court decisions interpreting these provisions of the business insurance policy.
Finally, at least some policies that target the restaurant, gym, movie, healthcare, and similar industries industry explicitly provide coverage for losses caused by “communicable or infectious diseases,” without the need to show that the loss was the result of actual physical damage to property.
Committed Advocates for Your Business
Business owners have the right to expect that they will receive insurance protection when normal operations are disrupted – particularly by an unstoppable global pandemic. So far, widespread business losses have already presented one of the greatest threats to the American economy since the Great Depression.
Business owners should not rely on an insurance company or its agents to interpret the policy language or to tell them whether coverage for their business losses exists. Likewise, it makes little sense for struggling business owners to incur more expense by paying lawyers exorbitant hourly fees to review their insurance policy language.
To help our clients deal with this issue, our attorneys at The Ammons Law Firm LLP are offering to review of the insurance policy language on a “risk free” basis that provides for payment solely on the amount that the lawyers are able to recover for the business. Given the hefty premiums that business owners have paid for business loss insurance, having a good lawyer review the policy language to determine whether payment may be owed for coronavirus-related losses makes good business sense.
Patrick Luff is an attorney with The Ammons Law Firm LLP and a former law professor. He has taught courses and lectured on business loss insurance coverage. Rob Ammons is a business owner and the Founder of The Ammons Law Firm LLP. He has been representing insurance policyholders in claims against insurance companies for over thirty years.
Do you need assistance with filing a claim for coronavirus-related losses? Contact us at (281) 801-5617 today to speak with Attorney Patrick Luff or another experienced insurance law attorney. We are offering free policy reviews for business owners.