COVID-19 Business Interruption Insurance Claims
The COVID-19 pandemic has effectively shut down many industries in the United States, impacting the bottom lines of companies large and small across the country. Even with stay-at-home orders being lifted throughout much the U.S., many Americans are indicating they will not be ready to resume normal spending practices. This makes it difficult to predict when business will return to normal.
But your insurance may already have a key means of recouping the losses you've suffered as a consequence of the coronavirus outbreak: business interruption (BI) insurance. But many insurers are moving quickly to discourage policyholders from exercising their rights. Even if your insurer has denied your business interruption claim and refused to pay anything, you may be entitled to compensation. Penney & Associates stands ready to help you exercise your rights, and go to litigation in necessary to compel your insurer to honor your policy.
GET THE COMPENSATION YOU DESERVE FOR REVENUE LOSSES DUE TO COVID-19.
Business interruption insurance cases have yet to be tried in a court of law, but there is clear precedent suggesting that COVID-19 constitutes a direct physical loss or damage to property, thus triggering the business interruption provision of your commercial property insurance policy.
If your insurance provider has denied your BI claim, or you are considering filing a BI claim, the lawyers at Penney and Associates can review your policy to determine your rights, and assist you in successfully making a claim.
Despite insurers' claims to the contrary, COVID-19 may constitute "physical loss or damage" under your policy.
Typically, insurance providers honor business interruption policyholders who are forced to cease business operations due to direct "physical loss or damage" to a property. The question thus becomes, does COVID-19 and/or the subsequent California government-mandated shutdown satisfy direct physical loss or damage to a property?
The only instance in which a business insurance policy would clearly not apply to the current COVID-19 pandemic would be if the terms explicitly exclude damages resulting from pandemics and other disease-related scenarios.
However, historically, insurance providers have been keen to interpret their policies to exclude the consequences of non-visible damage (such as mold, bacteria, etc.) which compels businesses to temporarily close, and thus deny BI claims.
In the wake of the COVID-19 outbreak, it is clear that insurers are keen to avoid their financial obligations based upon this perspective.
YOUR BUSINESS INSURANCE MAY COVER LOSSES DUE TO PUBLIC HEALTH HAZARDS
You may well have contacted your insurance company in an attempt to make a claim, only to be told that your business insurance policy doesn't cover interruptions stemming from COVID-19 and other pandemics. However, while providers have long balked at paying BI claims due to environmental or health concerns, legal precedent makes it clear that the word “damage” in BI policies describes any type of loss, not strictly physical, such as would be the case with fire damage.
In the case of Gregory Packaging, Inc. v. Travelers Property. Cas. Co. of America (2014), a company was forced to shut down after an ammonia leak. The court found the insurance provider responsible for compensating the company under their BI coverage, stating that the ammonia leak constitutes a direct physical loss or damage, regardless of if structural damage is present. Another case that holds damage can be something other than structural is Western Fire Ins. Co. v. First Presbyterian Church (1968), which held that the plaintiff suffered a direct physical loss when gasoline contaminated soil around their building, making it uninhabitable.
Another court concluded that a direct physical loss can occur when damages affect building use, even if they are not structural (Sentinel Mgt. Co. v. N.H. Ins. Co. (1997): “Though asbestos contamination does not result in tangible injury to the physical structure of a building, a building’s function may be seriously impaired or destroyed and the property rendered useless by the presence of contaminants”).
THE STATE OF CALIFORNIA'S MANDATORY BUSINESS SHUTDOWN MAY HELP SUPPORT YOUR BUSINESS INTERRUPTION CLAIM.
Some business interruption policies include a clause specifically relating to business closure as a direct result of a civil mandate prohibiting facility use. Known as the Civil Authorities Clause, this coverage can be triggered when a local, state, or federal official closes business.
The California government was the first state government in the United States to institute mandatory social distancing and gathering policies, causing businesses to close. This means that businesses in California have been more severely impacted than in any other state. But the state's actions also bolster your argument as to COVID-19's damage to your business.
In Company of America v. BBB Service Company, Inc. (2002), the plaintiff contended that due to county authorities forcing evacuations because of an impending hurricane, they were entitled to BI compensation. The court decided in the plaintiff's favor, stating that the threat of damage, as evidenced by damage in counties previously hit by the oncoming hurricane, was enough to trigger BI insurance coverage.
Though not a natural disaster, COVID-19 heavily impacted other countries before it became a major issue in the United States. In California, Governor Newsom issued a stay-at-home order on March 19th to curtail the spread of COVID-19. Depending on the type of BI coverage that you have, it may be possible to argue that the stay-at-home order was in response to a potential threat that already ravaged parts of the world, thus triggering BI coverage.