With the spread of the coronavirus or COVID-19, businesses throughout the world have been forced to close their doors to prevent further contagion. Unfortunately, this has impacted the economy in an unprecedented way, and today, it is of utmost importance to understand any possible source of aid that can help alleviate the interruption of your business. An experienced business interruption attorney can take a more in-depth look into the type of insurance policies that your business has to determine how to provide emergency funding in these difficult times.
WHAT IS BUSINESS INTERRUPTION INSURANCE?
Business interruption insurance is a type of policy that protects the insured from losses during a damaging event. However, when it comes time to open a claim, the process of doing so is often complicated and stressful. Additionally, insurance companies will always attempt to minimize the value of any claim, which means that proper documentation of your losses should always be a priority.
Loss of business is becoming a significant concern for everyone due to the COVID-19 pandemic. Few insurance policies have outlined specific coverage for the outbreak of this disease and for the rapid effects that it brought. Given the unprecedented circumstances, most current policies only include vague language or no language at all, which is why having an experienced attorney helping you can be beneficial in ensuring that your insurance policy reimburses your losses adequately.
SHOULD YOUR INSURANCE PAY YOU IF THE GOVERNMENT ORDERS YOUR BUSINESS TO CLOSE?
Generally, a government mandate to shut down businesses during an emergency will not change your policy coverages. Many policies include language and restrictions related to civil government and military actions. However, with the Coronavirus pandemic, there may be certain developments that entitle you to reimbursement. For example, if you are required to clean and disinfect your property, then a claim for property damage is more easily supported. Proving that your property was damaged is required to recover any business interruption losses.
There are other scenarios where you may be covered by your policies, even if you’re not directly affected by COVID-19. For example, if the virus prevents a significant supplier to your business from delivering their goods, you may be covered from your losses if you have Contingent Business Interruption coverage on your policy. This type of insurance protects businesses from losses due to a supply chain disruption. And again, the proper documentation of every issue during this process is fundamental to the success of your claim.
TYPES OF INSURANCE
Most businesses carry commercial property insurance as a requirement to operate in California. This includes coverage for damage to their building and contents due to a covered cause, which can be something like a fire. According to the Congressional Research Service, “viruses and infectious diseases are generally not designated perils in a standard policy.” Many policies now contain explicit exclusions for viruses.
Back in 2006, “the Insurance Services Office introduced an exclusion for loss due to virus or bacteria that applies to property damage to buildings or personal property and endorsements that cover business income, extra expense, or action of civil authority.” However, the language in which this exclusion was written excludes coverage for loss or damage resulting from any virus that induces disease, illness, or physical distress.
Commercial Property Damage Insurance Policies that do not exclude viruses, can include several types of protections that could help you recover your losses:
FBusiness Interruption Insurance
This could either be an add-on to your property damage insurance or be a stand-alone policy, which is usually beneficial in terms of coverages. This type of policy covers loss of income, contingent business interruption, and possible losses due to actions by civil authorities.
Civil Authority Coverage
This provides specific coverage for business interruption losses when access to the business’ premises is prohibited or impaired by civil authority. However, the wording of the policy will be crucial in determining whether the COVID-19 mandates apply.
Contingent Business Interruption
This will cover you if your business is indirectly affected by the closure, damage, or loss of the property of one of your suppliers. Even if you can operate fully, the resources needed for your business may not be available, and this coverage can protect you if your losses are contingent on other businesses.
Business Income Coverage
This provides coverage for sustained loss of income due to the suspension of the business operations. The suspension has to be due to a covered cause that results in direct physical loss or damage to the business property.
THE IMPORTANCE AND DEBATE AROUND PROPERTY DAMAGE
In any claim against your commercial property insurance policy, the most important factor is proving that there is direct physical loss or damage to tangible property. A typical example is a fire; when it happens, it makes the building of a business inhabitable, and the losses are evident. However, given that the COVID-19 pandemic is a relatively new development, the way that property damage is assessed may have to change permanently. This means that if your business was closed due to a mandatory or voluntary closure aimed to protect against contamination, there might be a basis to claim that a direct physical loss occurred even if the business seems to remain habitable.
Some government orders, such as the one issued by the Mayor of New York, have cited property damage as one of the underlying reasons for the COVID-19 shutdowns. However, this does not mean that insurance companies are eager to pay policyholders fair reimbursements for their losses. On the other hand, it is to their advantage to ignore or minimize business interruption claims, and their interpretation of property damage will reflect their interests.
HOW CAN A BUSINESS INTERRUPTION ATTORNEY HELP?
Dealing with the pandemic on a personal level is overwhelming enough without taking into consideration the business obligations or coping with the economic repercussions of a global medical emergency like the one we are experiencing. Most business owners do not understand the complicated language used in the insurance policies that they are required to purchase. At the same time, insurance companies have teams of experts ready to minimize any claim that is made. Having an experienced business interruption attorney on your side can even out the playing field and ensure that you receive what you are entitled to.
The attorneys at Arash Law can help review your insurance declaration page for any potential coverages. The wording of your policy will be fundamental in determining whether or not you are entitled to compensation. It is not as simple as checking to see if you purchased the right plan. The attorneys will be able to explain any exclusions and limitations better.
An experienced business interruption attorney can also make sure that your claim is made within the appropriate deadlines. In any insurance claim, time is of the essence; the clock starts running as soon as there are any damages. Additionally, the legal team assisting your attorney will ensure that your losses are correctly documented to ensure that the claim is successful.
Due to the economic disruption from the Coronavirus pandemic, many businesses will be forced to seek compensation from their insurance companies. Whether the loss of income is the result of mandatory or voluntary closures, reduced demand due to social-distancing, or even supply chain reductions, an experienced business interruption attorney can help you clear a path to your compensation. Business owners are currently facing many obstacles and difficulties when dealing with their insurance companies, Arash Law can help! We are available for consultations 24 hours a day and 7 days a week. Call us now at (888) 488-1391!