Businesses throughout the United States – primarily small businesses – have been appealing to their insurance providers for relief from the economic losses suffered during COVID-19 closures. Mandates from state and local governments have required many businesses to severely limit services or close their doors. In particular, industries like restaurants, entertainment venues and retail shops have been hard hit. As a result, business owners have filed claims against their business interruption insurance policies. Many have been shocked to have their claims denied.

Business interruption insurance is part of a business owner’s policy that serves as a lifeline in the event of a disaster to pay operational expenses. For example, if a business is forced to temporarily close due to a fire, tornado or other disaster, its business interruption insurance provides funds that cover payroll, bills and other similar expenses until the business can reopen.

business closed covid 19 375x210 Battle in UK courts over business interruption claimsMany insurers are claiming that closures as a result of the pandemic, and resulting government mandated shutdowns, are not covered by business interruption policies. Some insurers argue that some businesses didn’t have to fully close, or that they didn’t suffer actual physical damage as a result of the coronavirus.

Business owners are fighting back, taking their insurance companies to court. They say they have paid premiums for this coverage oftentimes for many years or even decades, and deserve to receive the help they need now.

Global implications

Since COVID-19 is a global pandemic, similar issues are being litigated in courts around the world. Some news has been encouraging to U.S. businesses. Recently in France, the French multinational insurance company AXA has agreed to pay some of its coronavirus-related business interruption insurance claims after losing a court battle with the owner of four Paris restaurants.

In London, a High Court test case brought by the Financial Conduct Authority (FCA) is currently examining the claims of eight insurance companies that they are not responsible for paying pandemic claims on business interruption insurance. According to Law360, the insurers argue that “financial losses would have occurred even without a nationwide lockdown.”

The test case will look at 17 disputed policy wordings, which involve a variety of issues surrounding extensions to business interruption policies. These include such things as non-damage extensions and denial of access to a premises due to being blocked or denied by a public authority, Law360 reports. The case also will explore issues of how far a business is located from a COVID-19 outbreak, and whether or not a business might have incurred losses without the government-mandated shutdown. Insurers say even if the businesses were not forced to close, they likely would have lost business anyway as people restricted how much they went out on their own due to fear of exposure.

If early openings in states across America are any indication, the answer to that last point might be “not much.” In any case, businesses are not interested in hearing about what might have happened. They are simply looking for help from their current reality.

The insurance companies involved in the UK test case are Hiscox, Arch Insurance UK, Argenta Syndicate Management, Ecclesiastical Insurance, MS Amlin Underwriting, QBE UK, RSA and Zurich. The FCA is giving policyholders until June 29 to respond to the defense arguments, which in turn must provide its response July 3.

The trial is set for July 20 and expected to last eight days. It will be heard by Judge Christopher Butcher in the Commercial Court and Judge Julian Flaux from the Court of Appeal. The case is The Financial Conduct Authority v. Arch Insurance and others, case number FL-2020-000018, in the High Court of Justice of England and Wales.

Bringing business interruption insurance denial claims

Beasley Allen is actively pursuing cases with clients whose insurance companies denied their business interruption claims. Dee Miles, Head of our Consumer Fraud Section, Rachel Boyd and Paul Evans are spearheading this litigation for our firm. They would like to talk to you about any potential claims. Contact us for a free consultation regarding your business interruption insurance claims.

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