Restaurants, retail stores, and other companies filing business interruption claims to recover economic losses amid the coronavirus pandemic are being told that their policies don’t cover losses caused by viral outbreaks, only physical damage to their property.
Some insurers are attempting to head off an expected flood of business interruption claims by notifying their business clients that claims for economic losses due to the pandemic won’t be covered.
The theory that pandemic claims don’t fit the criteria for business interruption coverage generated a national outcry that has reverberated on Capitol Hill. Last week, a bipartisan group of 18 legislators led by Rep. Nydia Velazquez (D-NY) sent a letter to insurance trade groups telling them that insurers should cover losses caused by the COVID-19 outbreak and government-mandated shutdowns.
The mounting pressure on insurers has prompted them to draft plans for a federally administered program that would provide insurance and government funds to businesses affected by the crisis. One potential plan in the works would set up a centralized fund modeled after the September 11th Victim Compensation Fund, which propped up businesses in the wake of the terrorist attacks. Such a plan could provide more direct, faster access to relief for policyholders, some advocates say, according to Politico.
One Washington-based restauranteur told Politico that his company paid $100,000 annually to cover its four restaurants, only to have his business interruption claims denied. He is one of several business owners across the country considering legal action against his insurers.
“Business owners everywhere — not just restaurants — are flabbergasted that they’ve been paying on a timely basis thinking they’re covered if something bad happens only to find out it’s not the case,” the business owner told Politico.
Other groups are also taking action to address the crisis. The National Restaurant Association currently is calling for the establishment of a $100 billion federally backed business interruption insurance program that could expedite relief to restaurants.
Whatever solutions the insurance industry and legislators develop, a blanket denial of COVID-19 business interruption claims isn’t one that business owners and their allies in Congress can accept. If the insurance companies don’t put their clients and the economic good of the country ahead of their own profits, everyone could suffer for it.
“I’m glad my letter to the insurance industry drew their attention to this mammoth problem,” Rep. Velazquez told Politico. “I’m hopeful it motivates them to work constructively with Congress so all businesses harmed by the virus can receive badly needed assistance.”
Beasley Allen lawyers 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.