Government-mandated closures to prevent the spread of COVID-19 have hit a lot of companies hard and many face closing permanently if they cannot collect on business interruption claims with their insurers. The global pandemic is, as one insurance industry executive told Axios, “the biggest insured loss event in history.”
But insurers are refusing to pay up.
Business interruption insurance is part of a business owner’s policy. It provides coverage of operating expenses like payroll and bills in the event a business has to temporarily close due to a disaster. These are usually described as fires or hurricanes, where damage to the business forces them to close for repairs.
The COVID-19-related closures and restrictions across the country were mandated by cities, counties, and states. Businesses had no choice but to temporarily shutter. But insurance companies are refusing to cover the businesses’ losses. As a result, hundreds of companies like In-N-Out Burger and the Houston Rockets have filed lawsuits against their insurers over breach of contract.
COVID-19 has been devastating to many companies, and the cost to insurance companies to cover those claims could climb as high as $40 billion to $80 billion in the U.S. alone. By comparison, insurance payouts following the 9/11 terrorist attacks reached $47 billion, and payouts following Hurricane Katrina were $54 billion.
“When the end of the world is coming and we’re being asked to pay for it, clearly that’s not something you can responsibly do,” Robert Gordon, SVP of policy, research and international at the American Property Casualty Insurance Association, told Axios.
But, that’s not the deal the businesses signed up for when they paid their insurance company premiums month after month, year after year.
Beasley Allen lawyers are actively investigating and filing similar claims against various insurance companies for denial of business interruption coverage during the COVID-19 pandemic, and are involved in advocating for consolidation of these actions in an MDL. Dee Miles, head of our Consumer Fraud & Commercial Litigation Section, Rachel Boyd, and Paul Evans, lawyers in the Section, are spearheading this litigation for our firm and are monitoring all MDL developments as they arise.