As everyone is struggling to understand the COVID-19 situation in the United States, one group that is particularly in limbo is owners of small and medium businesses. With local, state, and federal ordinance insisting on social distancing and implementing stay-at-home orders, businesses are finding themselves with no customers and no way of knowing when income might begin to flow again. These slowdowns, and in some cases complete shutdowns, have left many business owners wondering: Could my insurance policy provide coverage for my losses related to business interruption? Read on to learn more from the Covid-19 business interruption insurance attorneys at Dolman Law Group Accident Injury Lawyers, P.A.
Does Business Interruption Insurance cover COVID19?
Business interruption insurance (also known as business income insurance) is type of insurance policy that is designed to cover commercial properties in the event that these lose income caused by a slowdown or shutdown of its operations.
In most cases, business interruption insurance also provides coverage for lost income due to a shutdown caused by a civil authority order, depending on how the business is directly affected by the government order.
What coverage is provided under property insurance policies?
Most businesses’ property insurance policies cover property damage, as one would very well expect, but they also provide coverage for lost profits that result from that damage. This lost income coverage most often covers:
- Losses resulting from damage to the business’s property.
- Losses resulting from damage to the business’s customers or suppliers.
- Losses resulting from a government order, like a hurricane evacuation.
- Losses resulting from damage to another property that attracts customers to the business, like a large grocery store in the shopping center.
In the insurance industry, a “coverage trigger” is an event that must occur in order for an insurance liability policy to be applied to a loss. In the case of property insurance losses discussed here, the event that triggers any of the above coverages is property damage.
The general purpose of this coverage is to reimburse a policyholder for any lost profits and costs that arise during the period of interruption and getting going again after the interruption.
However, without property damage, property insurance usually does not provide coverage for lost profits. And that is the fundamental question here. Does a government order to shut down your business qualify as a coverage-triggering event so that businesses can recoup lost profits? Similarly, does the mere presence (or potential presence) of COVID-19 inside a business count as property damage?
Coronavirus as “Non-structural” Property Damage
Of course, the coronavirus does not cause any permanent physical damage to a business’s property, but it could potentially be on all the surfaces of a business, like a restaurant, from customers and employees touching the surfaces or from the air. Does this qualify as non-structural property damage that has interrupted the businesses income?
In the past, some courts have found that the presence of harmful substances at or in a business does, in fact, qualify as a triggering event for property damage coverage.
In a specific case involving a packing plant, a New Jersey federal court found that the liability insurance company was required to provide property damage coverage after ammonia was accidentally released in the facility, causing the plant to shutdown.
The reason for their ruling was that a business could sustain damage without altering the property’s structure. Similar cases have been successful in other states.
This seems to provide a good argument for COVID-19 causing property damage and thus coverage for the business’s losses during the pandemic.
This situation, specifically related to coronavirus, is yet to be determined of course, since no lawsuit has fully been tried yet. But one small business wasted no time beginning the process.
First ‘Business Interruption Lawsuit’ related to COVID-19 filed in New Orleans
A New Orleans restaurant, Oceana Grill, has already filed a lawsuit to ensure insurance coverage for their business interruption losses caused by COVID-19. The plaintiffs in this case are seeking confirmation from the courts that their insurance company will provide coverage for their losses caused by the government ordinances and the costs associated with cleaning the business from the virus.
The plaintiffs claim that the policy was an “all-risks policy” and did not contain any exclusions. The courts have not yet made a determination in this case.
Will the government force insurers to pay for losses from COVID-19?
Some states have already started the process of ensuring that the businesses in their state will be covered for the lost income caused by the coronavirus.
In March 2020, members of the House of Representatives wrote a letter to four major insurance organizations asking them to cover interruption claims arising from COVID-19. The House members addressed the letters to The American Property and Casualty Insurance Association, The National Association of Mutual Insurance Companies, The Independent Insurance Agents and Brokers of America, and The Council of Insurance Agents & Brokers.
In the request, the House members made a case for business interruption insurance covering income losses resulting from the virus pandemic. They focused on the positive results that could come from insurance companies covering these losses, including keeping business open and employees paid.
As of writing this article, some of the CEOs have already responded, and their response is not surprising. They stated that business interruption insurance policies do not provide coverage against situations like COVID-19 and that the policy was never designed to due so.
Whether or not the House of Representative will pursue this further is yet to be seen. However, we have seen a few states start to take action too.
New Jersey introduced a bill that attempts to help businesses impacted by COVID-19. The bill states that insurance companies, assuming nothing else states otherwise, should cover losses related to business interruption caused by a global pandemic. Of course, the bill only covers those businesses in New Jersey but it sets an interesting precedence that we will closely monitor.
New York has not presented a similar piece of legislation, but the New York Department of Financial Services did issue a statement requiring insurance companies to provide details about business interruption coverage to them and to policyholders. It’s possible that they intend to enact something similar to New Jersey.
Neither state has had anything passed into law yet.
Can I file a lawsuit for lost income from COVID-19 shutdowns?
At Dolman Law Group, we are closely following the coronavirus pandemic and its effects on laws, courtrooms, and our communities. In the case of a business losing income as a result of the coronavirus shutdowns, it is yet to be determined if business interruption insurance or commercial property insurance will provide coverage. In the past, insurance companies have fought to prevent providing coverage for similar situations. But no situation has really been similar to this; this is clearly an unprecedented moment in history.
We will continue to follow the above cases and bills to see how they develop. We will continue to provide updates as they become available.
If you have any questions about your business regarding COVID-19, or are concerned about coronavirus negligence, feel free to contact the attorneys at Dolman Law Group.