The insurance industry is refusing to cover business interruption claims related to financial damages caused by COVID-19-related closures, arguing that doing so would cost them $255 billion to $431 billion a month, a price tag that could shake the entire industry. Instead, hundreds if not thousands of small- to mid-sized businesses that have paid monthly on their insurance policies have to shoulder those losses.
Business interruption insurance is part of a business owner’s insurance policy. It provides coverage of payroll and other operating expenses in the event the business is forced to close or restrict its operations temporarily due to a disaster. Examples include fires that cause physical damage that require the business to shutter for a period of time. Many restaurants, bars, salons, and other businesses across the country that had to close due to government-mandated shutdowns to prevent the spread of COVID-19 have turned to their property and casualty insurers for a much-needed lifeline to keep their operations afloat. But their insurers are refusing.
Insurers claim is that the businesses didn’t suffer physical damages from the coronavirus so their losses aren’t covered either. Businesses beg to differ, saying a global pandemic is exactly the type of disaster insurance companies should cover.
The $255 billion to $431 billion cost per month was an estimate drawn up by the American Property Casualty Insurance Association (APCIA), which the industry is using to lobby against state and city lawmakers’ attempts to force insurance companies to cover business insurance claims.
However, a recent analysis conducted by Reuters says the APCIA estimate may be overblown, based on the association’s “worst case scenario” rather than reality. The estimate, Reuters reports, “assumes that between 60% and 90%” of small businesses will be impacted by COVID-19 and file a claim.”
Legal experts also point out that while some insurance policies include specific language barring claims resulting from a pandemic, many do not. Those contracts insurers should own up to and pay. But they also note that even in the case of exclusions “there is precedent for courts requiring insurers to pay for physical loss without physical damage, such as when pollution or asbestos make property uninhabitable,” according to Reuters.
Business interruption insurance claim litigation
Many small business owners across the country are fighting back and filing lawsuits against their insurance companies for denying coverage they believe they are entitled to. 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.