If your business has been scaled back or closed down due to the COVID-19 pandemic, you may think of looking to your insurance covering losses for interruptions in your business. However, it is not a sure thing that such coverage is triggered in these circumstances. As the pandemic continues to evolve, so have court interpretations of policy language restricting coverage to certain types of business interruptions. To determine whether your business insurance contains a limitation or exclusion that may deny you coverage for losses caused by COVID-19, it’s important to have a business lawyer review your policy and analyze your options.
In many commercial policies, business interruption insurance coverage is limited to losses brought about by direct physical damage to property. This does not necessarily require full or partial destruction of the business premises, however. It may mean a condition that makes it impossible to use the property safely, such as a toxic contamination. A proven case of coronavirus infection among the company’s workforce, necessitating a shutdown, could possibly meet this standard.
Some policies have clauses that exclude insurance coverage for losses caused by bacteria, viruses or microorganisms or by disease in general. However, the language in these policies can sometimes be unclear or confusing, which places the burden on the insurer to show they apply.
If your business was forced to close due to a stay-at-home order or other restriction issued by state or a local government, you may be able to file a claim if your policy includes “civil authority” coverage. This type of insurance started becoming prevalent after September 11, 2001, when the airline, travel and hotel industries were widely impacted by mandatory closures. Unlike other business-interruption coverage, it does not necessarily require a showing of physical damage. However, you do need to show that the business losses resulted directly from the government action.
Despite the possibility of having a battle on your hands to get your COVID-19-related losses reimbursed by insurance, it is important to make a prompt claim to preserve your rights. This is especially true if your policy sets deadlines for claims. In some cases, you may only have 30 or 60 days.
However, it’s important to make sure your claim is properly expressed and documented in accordance with the applicable coverage terms. An experienced business lawyer can analyze the fine print of your insurance policy and research state law and court interpretations in order to help you make a persuasive claim. Even if your claim is denied, you may be able to win coverage through a court-issued declaratory judgment that coverage applies.
Salas Law Firm advises Fort Lauderdale business owners on multiple issues, including insurance. If you have questions about making a claim under your business-interruption coverage, contact us online to schedule a consultation.