A Guide to Business Interruption Insurance During COVID-19

Guest Post by Dan Christensen, Board Certified Personal Injury Attorney

The last few months have been fraught with challenges for business owners, who carry the weight of their employees' paychecks and their clients' reliance on their products and services. For many businesses, the impact of the COVID-19 pandemic has left them with significantly reduced profits and uncertainty regarding when and at what capacity they'll be able to resume operations. Most businesses have contingency plans for the unexpected, be that a break-in or a natural disaster that causes them to shut down temporarily. Prolonged closures shrouded in uncertainty, however, are more complicated. 

A common step in preparing for potential disasters is business interruption insurance, which provides protection against lost income or extra expenses that can occur due to a disaster, such as a fire or theft, that's covered by an individual business's insurance plan. 

In the wake of country-wide closures and lockdowns, many companies that have business interruption insurance are finding that their policies, at least at face value, don't cover viruses or viral pandemics. However, since these are unprecedented times, many business owners across the United States are filing lawsuits against some of the biggest insurance companies to fight for coverage. 

To help business owners better understand their options, we're breaking down the following:

• How to find out if your business is covered by your current policy
• The steps to take if you believe you have a claim 
• What to do if your claim has been denied 

How to find out if your business is covered by your current policy

Whether you had to close your business because of mandated lockdowns or had to increase expenses to ensure your business could continue to operate given new health and safety measures, you might be eligible to recover those funds through your business interruption insurance.

The first step you'll need to take is to read through your policy from start to finish, keeping an eye on what's included, especially as it relates to viruses or viral pandemics. It is entirely possible that your policy won't mention either of those situations, but that doesn't mean your business can't be covered. 

Even if the policy doesn't mention viruses, for instance, you could potentially argue that this type of coverage was not meant to be excluded by your insurance carrier. On the other hand, if your policy does mention viruses, there are legal theories that support business insurance policies accepting claims for the novel coronavirus.

While most business interruption insurance policies cover situations in which a business experiences property damage and must end or reduce operations as a result, this does not mean the policy applies to only typical property damage. For example, a business could argue that the ability to use the property was unusable because of physical forces.  

Steps to take if you believe you have a claim 

Once you've determined that your business interruption insurance policy should cover losses you've experienced due to COVID-19, you can file a claim with your insurance compliance for damages and losses related to net profit, overhead, and labor. 

It's important that you understand which claims apply to your business to maximize your return. Your business might be entitled to coverage for losses other than those experienced because you simply weren't able to operate on your property. For example, if new damage occurred on the property while you weren't able to occupy it, you might be able to recover the cost for repairs. 

Based on your policy type, claims can include business interruption, civil authority, and dependent property coverage, all of which vary in typical length of coverage by your insurer. Business interruption insurance and dependent property coverage usually cover businesses for 12 months, whereas civil authority coverage is usually for just one month.

When taking the initial step to file your claim, you may want to consider speaking with a lawyer who can help you clearly identify the areas in which you might be eligible for coverage. 

What to do if your claim has been denied 

Since the spread of COVID-19 throughout the United States, thousands of businesses have filed business interruption insurance claims, and many have been denied, with insurers citing policy exclusions (even on policies that don't have any exclusions). These insurance companies, however, cannot reasonably argue that the novel coronavirus hasn't caused the suspension of businesses across the country, which has resulted in significant losses.  

If your business interruption insurance claim has been denied and you believe your business is entitled to it, your option is taking the claim to court. Insurance policies are typically written in generalized language that favors the insurance company, but courts often favor insurance coverage by construing policy exclusions through a more narrow lens. 

If you want to take action, it’s best to meet with an attorney to understand your rights and help navigate the complexities of making and arguing such claims. As more businesses look to file such claims during this time, more precedents will be set in the court that you can use in your favor, which a lawyer can help to discern. 

Dan Christensen is the owner and founder of DC Law, a highly rated personal injury law firm in Austin, Texas. Over the last 25 years, Christensen has been involved in nearly 200 trials and gone up against some of the largest defendants, including the U.S. Government, in numerous state and federal courts. Christensen is also board certified in personal injury trial law by the Texas Board of Legal Specialization, meaning he is listed among the small percentage (about 7 percent) of licensed attorneys in the state of Texas who have earned the right to publicly represent themselves as a specialist in a select area of the law.