Government-mandated closures to stop the spread of the coronavirus have cost a chain of barber shops owned by Shayne Brown a combined $1 million. But when Brown turned to his insurance agency for help, he was rejected.

“We’re just dead in the water,” Brown told the San Antonio Express-News, adding that due to the loss of revenue, he also had to furlough 120 employees.

Business interruption insurance is part of a business owner’s insurance policy. It provides coverage for operating expenses like payroll and bills in the event a business has to temporarily close due to a disaster. For example, if a fire breaks out in a business and it has to temporarily close for repairs, the business interruption portion of the insurance policy will cover operating expenses until the company is able to make necessary repairs to reopen.

Brown had no control over the closing of his barber shops. City officials had ordered the closing of all non-essential businesses, including salons and barber shops. Within days of the closures, Brown filed his claim with State Farm Lloyds. Those claims were all denied. But Brown is fighting back. He filed a lawsuit in state District Court against his insurer for breach of contract.

In a March 24 letter to Brown, State Farm said that his policy “specifically excludes loss caused by enforcement or ordinance or law, virus, and consequential losses.”

Brown is not alone. Hundreds of businesses across the country suffering financial losses due to COVID-19 closures have been rejected by their insurance companies. Insurers say that due to the fact the businesses didn’t experience any “physical damage,” their claim is null and void.

Beasley Allen lawyers are actively investigating and filing similar claims against various insurance companies for denial of business interruptioncoverage 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.

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