Business Protection During the Coronavirus; Insurers Not Covering Losses During Pandemic

Daily life has drastically changed since the beginning of the Coronavirus pandemic and the stay-at-home orders across many states. Aside from the question of when everyday life will return to normal, many businesses-particularly small businesses deemed “non-essential” to the infrastructure of the United States are facing a highly uncertain future. 

States have been given leeway to decide which types of businesses are considered essential, and generally include supermarkets, food production, banks, garbage collection, shipping facilities, transportation, gas stations and repair shops, daycare facilities, pharmacies, and healthcare operations. The Department of Homeland Security has deemed most recreational businesses or those that do not provide groceries, healthcare, utilities, or financial support as non-essential, although this varies by location. 

It is these businesses that are beginning to realize that the business interruption insurance (BI), also known as business protection insurance, they’ve been paying into will likely exclude the current Coronavirus pandemic. 

Business interruption insurance, a part of property insurance policies, typically takes effect when a property is unusable due to the damage from fires, explosions, flooding, or other natural disasters. Depending on the specific policy, a business may also be covered under a civil authority clause if the government denies access to the business, such as an area being deemed unsafe following such a disaster.

While the Federal government passed the Coronavirus Aid, Relief, and Economic Securities (CARES) Act on March 27 to aid individuals and small businesses with programs and initiatives such as paycheck protection, small business debt relief, and economic injury disaster loans and emergency grants, the Small Business Administration (SBA) and the Department of Treasury are notoriously slow-moving and the process is difficult to maneuver even in emergency situations.

Following the 2002-2004 outbreak of another Coronavirus, known as Sudden Acute Respiratory Syndrome (SARS), many insurance providers began excluding viral and bacterial outbreaks under their BI policies. However, many policies do not have these exclusions, prompting business owners to attempt to file claims with their insurance providers during the current outbreak as a safety net, only to have those claims denied and denied quickly, often immediately or within 24 hours. Many of the one-third of American small business owners are understandably frustrated, feeling that they have nowhere to turn and fearful as to what this could mean for their employees and businesses.

Insurance industry representatives state that these types of exclusions and denials are necessary to prevent a tidal wave of claims from every business affected by the Coronavirus, which they claim would potentially devastate many insurance providers as businesses are losing between $255 million and $431 billion of income monthly while monthly commercial property insurance premiums only total approximately $6 billion. 

Critics believe, however, that insurance providers are essentially looking for a loophole to deny coverage and if the events were considered a “true” natural disaster affecting this many businesses simultaneously, they would be required to provide payments. 

This has prompted over a dozen business owners, mainly those who own restaurants and bars and include well-known and highly decorated chefs Thomas Keller and Wolfgang Puck, to file business interruption lawsuits. These suits allege that their BI policy does not specifically contain virus exclusions and that the presence of the Coronavirus on or around these properties has rendered the premises unsafe and unfit, therefore causing physical property damage or loss as written in their policies, thus resulting in a breach of contract. The lawsuits also claim that by issuing blanket claim denials without a proper investigation, insurance companies are acting in bad faith, which under Illinois law carries a penalty of $60,000 per claim in addition to attorney’s fees. 

Half a dozen states, which do not currently include Illinois, have introduced bills that would require insurance policy carriers to cover small business interruptions even if they have viral exclusions. They would also allow some carriers to seek partial reimbursement from the states. Unfortunately, these bills could be challenged on constitutional grounds should they be passed as the U.S. Constitution does not allow states to retroactively change contracts. Meanwhile, lawmakers are considering a federal backstop similar to the terrorism insurance program created following 9/11.

If you are a small business owner and you are unsure where to turn, experts recommend reading your BI policy and continuing to file a claim. They also recommend you pursue the loans and grants that may be available to you under the CARES Act. You should also consider contacting the experienced consumer law attorneys at 844 See Mike to review your case and discuss your options. 

Helping our clients is about counseling, advocating, and ultimately solving problems. With years of experience successfully representing the people, not the powerful, we will take care of the insurance adjusters, your medical bills, your property damage, and your lost wages, and monitor your treatment so you can focus on healing and getting your life back to normal. Our unique formula has earned us over 1,000 outstanding client reviews on our website, an A+ BBB rating, and over 135 five-star reviews on Google. Call 888-572-0176, e-mail us at michael@agrusslawfirm.com or schedule a meeting with us here. We’re here 24/7.