Coronavirus Pandemic and Business Interruption Insurance
On March 18th, 2020, 18 U.S. Lawmakers signed on to a letter addressed to trade associations for insurers asking them to work with member companies to “make financial losses related to COVID-19 and other infectious disease-related losses part of their commercial insurance business interruption coverage for policy-holders.”
However, the very need for this type of letter illustrates the frustration many business owners are feeling trying to obtain coverage from their insurers due to COVID-19. In the typical commercial insurance policy, business interruption insurance coverage is triggered whenever an insured business suffers “direct and physical loss of or damage to” insured property. Additionally, many policies also provide for coverage whenever a governmental authority prohibits or impairs access to the insured’s premises.
As of early April 2020, 43 states and Washington, D.C. have issued some form of a stay-at-home directives for all residents to help contain the spread of the deadly virus. As a result, many businesses are now seeking claims against insurers due to the forced cessation of their business operations. As it turns out, however, business owners are finding that their claims are not as easy as they thought. Let’s take a look at all sides of this issue.
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“Standard business interruption policies do not, and were not designed to, provide coverage against communicable diseases such as COVID-19, and as such, were not actuarially priced to do so.”
Interestingly, this response does not assert a contractual argument against coverage. Instead, the insurance company trade organization is making a fiscal argument. “Insurance coverage works by spreading risk, but that model simply cannot account for a situation in which losses are catastrophic and nearly universal.” While this argument may have practical applications, it does little to resolve the dispute about whether this unprecedented pandemic has triggered coverage pursuant to contract. The ability of the insurer to adjust to a simultaneous loss scenario should not be the problem of the insured businesses that have faithfully paid their premiums. On Good Friday, the White House agreed.
The White House Weighs In
In a daily press briefing on April 10th, 2020, the President of the United States addressed the issue of coverage under business interruption insurance during the pandemic. In his answer to a question, he said:
“Business interruption insurance. I’d like to see these insurance companies — you know, you have people that have paid — when I was in private, I had business interruption.
When my business was interrupted through a hurricane or whatever it may be, I’d have business where I had it. I didn’t always have it. Sometimes I had it; sometimes I have a lot of different companies. But if I had it, I’d expect to be paid. You have people — I speak mostly to the restauranteurs, where they have a restaurant, they’ve been paying for 25, 30, 35 years — business interruption. They’ve never needed it. All of a sudden, they need it. And I’m very good at reading language. I did very well in these subjects. Okay? And I don’t see the word “pandemic” mentioned.
Now, in some cases, it is. It’s an exclusion. But in a lot of cases, I don’t see it. I don’t see a reference, and they don’t want to pay up. I would like to see the insurance companies pay if they need to pay, if it’s fair. And they know what’s fair and I know what’s fair. I can tell you very quickly.
But business interruption insurance, that’s getting a lot of money to a lot of people. And they’ve been paying for years. You know, sometimes they just started paying. But you have people that have never asked for business interruption insurance, and they’ve been paying a lot of money for a lot of years for the privilege of having it. And then when they finally need it, the insurance company says, “We’re not going to give it.” We can’t let that happen.”
Insurance Claim? We Can Help
Our family of lawyers has over 35 combined years of legal experience recovering millions of dollars for our clients. If your business has a claim for business interruption insurance, we can review your insurance policy and help make sense of the often tangled web of exclusions and terms.
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Dennis E. Sawan
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Dennis P. Sawan
Licensed in Ohio and Georgia
Christopher A. Sawan
Licensed in Ohio and Michigan
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