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Business Interruption Insurance During the COVID-19 Pandemic

Contact Richard G. Riccardi, at richard.riccardi@ammonslaw.com for a free consultation.

The COVID-19 pandemic caused by the novel coronavirus has crippled businesses across the country. In addition to the closure of non-essential businesses, many essential businesses face issues with supply and demand.

In this time of national economic turmoil, business interruption insurance should help business owners recover the funds they need to protect the existence of their businesses. Business owners are discovering, however, that their insurers are not coming through for them during this time when they need them most.

Below, we discuss how to handle denied business interruption insurance claims.

The Coronavirus Pandemic’s Effect on Businesses

The COVID-19 pandemic has been devastating for business owners far and wide. With the far-reaching orders for businesses deemed “non-essential” to close their doors until further notice, many business owners and employees have suddenly been left in the lurch.

For business owners, these shutdowns of non-essential businesses threaten the existence of their business and livelihood. For employees, they bring about the sudden cessation of perhaps their only source of income.

According to the United States Chamber of Commerce, one in four small businesses (approximately 24%) reports having already temporarily shut down. Among those who haven’t yet shut down, approximately 40% expect to do so in the coming weeks. 43% of business owners believe that they have less than six months to salvage their businesses before they must shut their doors—permanently. Additionally, 56% of business owners believe it will take the U.S. economy six months to a year to return to normal.

Most business owners don’t have this kind of time.

What is Business Interruption Insurance?

It is times like these—times of national crisis and economic turmoil—when business owners rely on their insurance policies to come through for them.

Business interruption insurance is meant to compensate business owners for lost income if their company has to close due to disaster-related damage. In this situation, business interruption insurance should cover the revenue the business would have earned had the disaster not occurred, in addition to the following expenses:

  • Rent or lease payments for the building in which the business is located
  • Loan payments that business owners need to make during that time
  • Relocation costs if the business has to move to a temporary location
  • Taxes
  • Payroll

Common Issues with Business Interruption Insurance Claims

Unfortunately, business owners across the country have come to the realization that getting this compensation from their insurers will be more difficult than they hoped.

In fact, insurers are arguing business closures related to the coronavirus are not covered by these policies.

Additionally, courts across the country have decided that business losses caused by a threatened loss (or an indirect loss) do not count as physical losses necessary to trigger business interruption coverage. Therefore, business owners have had a difficult time getting their claims approved unless they can prove their business was actually contaminated by COVID-19.

In addition, some business interruption insurance policies may bar coverage related to microorganisms altogether. Since the SARS outbreak in 2003, some policies explicitly exclude damages caused by bacteria or viruses.

It’s important to keep in mind, however, that these insurance policies are worded with subtle nuances that an experienced attorney may be able to overcome. With regard to the microorganism ban, for example, some policies only exclude coverage for bacteria or viruses, not both.

A Nationwide Battle

The battle between business owners and insurance companies is being waged across the country, resulting in a multibillion-dollar standoff in Washington.

The country’s leading insurers and businesses in the hardest-hit industries, including restaurants, hotels, gyms, movie theaters, and more, have battled over whether insurance companies should have to pay claims for the businesses that have closed unexpectedly as a result of the COVID-19 pandemic.

Many business executives who believe they were led astray by the country’s insurance companies are seeking federal aid or action in response. Both sides have begun a lobbying blitz in an effort to resolve the issue, and agencies in the federal government, including the National Economic Council and the Treasury Department, have taken notice.

While federal intervention may turn the tide in favor of business owners in the coming weeks or months, many business owners cannot wait that long and require a more immediate solution.

Contact Us Today to Learn About Your Options

If you are a business owner hit hard by the COVID-19 pandemic, do not lose hope. There are several avenues that may be explored with the help of an experienced attorney.

For example, our attorneys here at The Ammons Law Firm LLP may be able to determine whether civil liability coverage—that is, the coverage that pays for lost revenue when businesses are closed due to government order—applies to your situation.

We know that, during this time, insurance companies will not lend a helping hand to business owners if they see an option to protect their bottom line. That’s why our attorneys are here to help you analyze your policy with a free, no-risk review. We have found language in many policies that provides coverage for business losses due to COVID-19. We’re here to do the same for you and your business.

Contact Richard G. Riccardi, at richard.riccardi@ammonslaw.com for a free consultation.

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