Canadian business owners have filed a class action lawsuit against several major insurance companies for refusing to cover business interruption insurance claims related to the country’s government-mandated coronavirus (COVID-19) shutdown. The insurance companies are citing “force majeure,” a situation in which an unforeseeable circumstance prevents an entity from fulfilling a contract.

business closed covid 19 375x210 Canadian businesses file lawsuit against insurers over business interruption policyFor example, Canada’s restaurant industry brings in about C$60 billion annually. But the shutdown has stifled business. And while no one knows for sure how long restrictions will be in place, if the shutdown continues for two months, insurers could be facing up to C$10 billion in business insurance claims for the restaurant industry alone.

Businesses, on the other hand, are struggling to keep afloat amid the crisis, and many have been forced to lay off staff or shutter entirely.

Business interruption insurance is one element of a business owner’s policy. It provides a lifeline in the event of a disaster. For example, if a business must close temporarily while it makes repairs due to a fire, business interruption insurance will cover bills, payroll and lost income. However, insurance companies both in Canada and the United States are telling policy holders that their insurance does not cover business closures due to COVID-19, even though the businesses have no choice but to close down their operations.

Businesses are filing lawsuits both in Canada and the U.S. against their insurers. The crux of the Canadian class action is based on the claim that many business interruption insurance policies uses language that excludes airborne viruses. However, the novel coronavirus can the spread by touching handrails or countertops, which, the businesses argue, falls under the insurance property damage coverage.

Beasley Allen attorneys are actively pursuing these cases already with our clients who received a denial communication from their insurance companies. 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.

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