phillips & hunt COVID-19 Coronavirus Pandemic Legal Advice: Business Interruption Insurance Coverage
Every businesses is facing tough decisions. Some are closing their doors to protect their employees, customers, vendors, and other people with whom they come into contact. Our office has switched to only taking meetings by phone, videoconference or messaging, unless extremely necessary.
Many business owners will soon face closure or collapse. Some may wonder whether there is coverage for their business losses during this time.
Most businesses purchase a policy to cover the business in case of floods, lawsuits and other liabilities. Business interruption or business income coverage is sometimes included in the commercial property policies.
For example, many property policies provide insurance for “direct physical loss of or damage” to covered property for certain causes of loss. In some instances, business interruption coverage insures losses to the business for having to suspend its operations. This usually involves property losses, for instance if a tree falls on the business, the losses to the operation of the business may be reimbursed.
As we discussed, in, “Civil Legal Liability for Spreading or Infecting Others, many such insurance policies have exclusions, which specifically state that the insurance does not apply to claims which arise, “out of the transmission of a communicable disease by an ‘insured.’” Others have limited virus coverage subject to certain requirements. However, the issue may not be that the insured is sick, but he’d closed by lawful Order or to secure against infection of staff or customers.
It all depends on the policy and situation. If no such exclusion applies, businesses should consider document all losses as best as possible and examine looking into potential avenues for insurance coverage.
- Under business interruption coverage, “physical” loss or damage does not necessarily require that a physical alteration to the property occur. Instead, it has been interpreted by courts to mean property that has been rendered uninhabitable or businesses that have been rendered incapacitated by, for example, asbestos, toxic gases, or bacteria. Insurers, however, should be expected to take the position that the threat of coronavirus is distinguishable from these other causes.
- Policies may provide coverage for business income loss due to interruptions in the supply chain through contingent business interruption coverage (i.e., customers, suppliers) or dependent property coverage (i.e., manufacturers, locations that accept products). The reason for this interruption must be due to a covered cause of loss.
- Under the “civil authority” coverage, if a government agency prohibits access to the business’s premises, the resulting business losses may be covered. This clause usually requires that a covered cause of loss cause damage to another property within a certain distance from the insured business.
In fact, some states are specifically forcing coverage. A proposed New Jersey Bill, A-3844, provides guidance for businesses experiencing business interruption losses due to the COVID-19 pandemic to recover those losses from their insurer. If enacted, it will be retroactive for any insured with a business interruption policy in place from March 9, 2020, when New Jersey Governor Phil Murphy first declared a public health emergency and a state of emergency due to the virus. The bill would apply to New Jersey businesses with less than 100 eligible employees, meaning full-time employees working a normal week of 25 hours or more.
The bottom line is that business owners must have their policies reviewed by an attorney prior to making any claims. Any insufficient claim made by the insured without the counsel of an attorney may limit or restrict any later claims made.
Phillips and Hunt is offering this initial policy review free of charge. Now more than ever everyone must do their part to combat this virus and the effects caused by the insurance company’s unwillingness to honor their policy agreements.
Due to the difficulty of navigating the aforementioned issues that will or may arise, combined with the ever changing rules relating the Courts, the necessity to hire expert legal counsel to navigate you through these waters and the necessity to stay calm and attempt to be as reasonable and rational as possible is important.
- COVID-19 Coronavirus Pandemic Legal Advice Home Page
- Arrest and Prosecution Under State and Federal Law
- Required Quarantine Under State and Federal Law
- Civil Legal Liability for Spreading or Infecting Others
- Business Interruption Insurance Coverage May Help
- Business Interruption versus Civil Authority Insurance Claims
- Family Law and Co-parenting amidst Uncertain Times with the Courts
- Authority of the Governor of Florida
- Speedy Trial, Release and the Coronavirus
- John Phillips Gives Live Legal Advice on Lex & Terry
- Florida’s 4th Judicial Circuit COVID-19 / Coronavirus Court Closure & Limitation Orders
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