Last Updated on September 16, 2020 by Anda Malescu
What is business interruption insurance and how can you use it in the context of COVID-19 pandemic? Our business attorneys in Miami, Florida are here to help you understand your business interruption coverage during COVID-19 and assist you filing business interruption claims with your insurance carrier.
In Florida and elsewhere in the United States, businesses are generally required by their landlord to maintain a business insurance coverage when they lease commercial real estate. So, whether you are a retail store, a restaurant, a café or a mortgage broker company or provide professional services as an accountant or lawyer, you likely hold a business insurance policy if you lease commercial real estate to conduct business. However, if even if you do not lease but you own commercial real estate you likely are business insurance policyholder. Now, you probably do not recall having a business insurance policy or in many cases you have filed business insurance claims for disaster relief, but in today’s reality with COVID-19 you can use the business insurance policy to file a claim for loss of business revenue due to the pandemic.
While insurance carriers have been reluctant to recognize financial loss due to COVID-19 as part of policyholders’ business interruption coverage, it is still worthwhile for companies to file claims for loss of business revenue due to the COVID-19. Moreover, on April 10, 2020, President Trump has addressed the issue of business interruption coverage saying he “would like to see the insurance companies pay if they need to pay.”
Here are the key points you need to know about your business interruption policy:
- Check your business insurance policy for section on business interruption coverage or check if you have a stand-alone business interruption policy. In Florida and throughout the United States, business insurance policies typically include coverage for decreased or lost business income due to a covered event that necessitated suspending business operations. In other words, if you have to shut down your business because of a covered event, such as a fire, your business insurance company will cover your fixed costs and profit loss during the time it takes to repair or restore the insured property. Now, the question becomes is COVID-19 a covered event under your business insurance? To answer this question, you need to check what covered events does you insurance cover. It is not easy to answer this, but likely you will not see any discussion about pandemic and definitely COVID-19. However, even if you see any exclusion for loss arising out of “any virus, bacterium or other microorganism,” it does not mean automatically that COVID-19-related loss is excluded from coverage. Further, in order to recover for loss of business income, insurance companies also require that there is a direct physical damage or physical loss to the property covered by the insurance. However, similar to the covered event above, there is no clear-cut as to what constitutes “direct physical damage or physical loss” and lawsuits have been filed claiming that COVID-19 caused direct physical loss to the property.
- Understand your business insurance coverage in the context of COVID-19. Business Income Coverage often provides financial compensation for the actual loss of business income you sustain due to the necessary “suspension” of your “operations” during the “period of restoration. As discussed above, the suspension of your business operations must be caused by direct physical loss or damage at your business premises covered by the insurance and must be the result of a covered event. Insurance carriers can be expected to deny such coverage as most businesses cannot prove the actual presence of the virus on the premises. Because of this you should consult an attorney and request that they review your policy to determine whether you may be entitled to compensation for your loss prior to filing your claim.
The Civil Authority Coverage applies when there is an order or action issued or taken as a result of (a) physical loss or damage or (b) perils insured against to property adjacent to the insured premises or within a certain distance thereof, which prevents, prohibits, or impairs access to the insured premises. Courts have interpreted the civil authority provision as not requiring physical damage to property in order to trigger coverage. However, insurance companies often insist that the civil authority coverage requires physical damage or loss to the property. But such coverage may instead be triggered when such an order or action, such as a “stay at home” or “safer at home” or a curfew, causes a business interruption, which in turn, resulted in financial loss.
Extra Expense Coverage allows you to recover expenses that you incur and that you would not normally have incurred if it was not for the physical loss or damage to the covered property due to COVID-19. In other words, with this coverage you can recover the funds spent to restart the business or stabilize it. Generally, insurance companies pay cover (a) expenses paid to avoid or minimize the suspension of the business and continue operation at the covered premises or replacement premises or in other temporary location and costs paid to obtain the equipment necessary to operate at the temporary or replacement premises and (b) minimize the suspension of the business if you cannot continue operations. For example, some expenses related to COVID-19 that may be covered under the extra expense coverage include marketing and advertising costs to resume business, costs involved in protecting the business property in case of social unrest, costs involved in protecting customer data and providing equipment and training to employees to work from home.
Insurance policies generally come in a variety of flavors and that the discussion above is based on general policy language that may or may not exist in your policy. Therefore, to determine what coverage may be available to you and your business, it is important that you consult an attorney to review your policy, even if your policy contains an exclusion for pandemic-related losses. The COVID-19 crisis is fluid and rapidly changing, putting pressure on the current law to be fluid and ever evolving. This means that there is a chance that your policy covers loss of business revenue due to the pandemic.
How can our business attorneys help you?
Our business attorneys have already received from insurance companies’ letters for intention to approve claims for business interruption coverage due to COVID-19. It is important to understand that the statements you make when filing a claim can determine the success of your application. Therefore, prior to filing a business insurance claim, contact us, your business attorney in Florida, to assist you with your business interruption insurance coverage.
Malescu Law P.A. – Business Lawyers
