Can my local business make an insurance claim for business interruption due to COVID-19?
We sat down with Joe Pastore, a longtime Ridgefield resident, and residential and national commercial litigator, to ask him some questions about insurance that may be available for local businesses impacted by the COVID - 19 pandemic.
What is business interruption insurance?
Business interruption insurance, also known as business income insurance, is commercial property insurance designed to cover loss of income incurred by an organization due to a slowdown or suspension of its operations at its premises, under certain circumstances. Business interruption insurance may include coverage for a suspension of operations due to a civil authority or order.
Business interruption coverage is generally triggered when the policyholder sustains physical loss or damage to insured property by a covered loss as defined in the policy. In the event of a claim for a business interruption related to COVID-19, insurance carriers and policyholders will dispute whether the physical loss requirement has been satisfied. In the aftermath of previous viral outbreaks early this century (e.g., SARS, rotavirus, etc.), the insurance industry responded by adding exclusions designed to preclude coverage for such losses. The insurance coverage arguments are varied, and those arguments will be the subject of litigation over the coming years.
Is this insurance available to local businesses?
Yes of course. But the policy would have to be acquired prior to the loss or the shutdown.
How do I file a claim for losses to my business?
Most policies are sold by an insurance broker. They should be able to direct you to the correct claim procedure. The policy itself should have provisions for filing a claim.
Will insurance companies cover the claims?
The answer is maybe. In part, it depends upon the language of the individual policy. Further, it depends upon how you frame the claim. Now, the insurance industry has staked out a position that business interruption policies do not, and were not designed to, provide coverage against communicable diseases such as COVID-19. However, the first case has been filed by a restaurant in New Orleans, and New Jersey has taken preliminary steps to alter the terms of insurance contracts.
Thus, the manner in which the claim is pursued could very much influence whether it is honored. Certainly, for larger claims, there could be a legal fight brewing.
When do I have to file a claim?
Claims are governed by the applicable statute of limitations. That stated, the courts and the insurance companies may become inundated with issues. Making it to the top of the pile never hurts.
Questions? You can contact Joe Pastore at Jpastore@psdlaw.net, 203.658.8454, or visit their website at psdlaw.net.