As of April 2020, governors across the U.S. have ordered non-essential businesses to close their doors or offer products and services through pick-up and delivery only. They intend to reduce the number of people in public and slow the transmission of COVID-19. But the orders hit many businesses hard, including restaurants, bars, hotels, motels, salons, commercial real estate, dental offices, dermatologists, and other non-essential health care providers.
Non-essential businesses are looking at weeks, if not months, of lost revenue. Businesses of all sizes are suffering, and many responded with layoffs immediately. More than 6.65 million people filed for unemployment between March 22 and 28. Small businesses are worried about whether they’ll survive.
Now is the time for businesses impacted by the coronavirus to review their insurance policies carefully. Business interruption/income insurance might help businesses cover lost profits and other expenses. But whether the current circumstances qualify for coverage depends on the specific wording of the policy.
Brooker Law, PLLC, is offering free insurance policy reviews for businesses in the Dallas area and throughout Texas. Owners should know the ins and outs of their insurance coverage to best prepare for filing a claim for COVID-19-related losses. To schedule a free policy review, call Brooker Law, PLLC at (214) 217-0277 or contact us online.
Business Insurance Policies
Businesses, depending on their structure and size, carry several types of insurance.
- General Liability Insurance covers bodily injuries caused by your product, service, or employee.
- Property Insurance covers damage to your property from fires, vandalism, theft, and certain serious weather events and may include coverage for business interruptions and civil authority orders.
- Business Interruption/Income Insurance covers lost income and other expenses if certain covered losses cause loss of use of the property or damage to the property that disrupts your business.
- Workers’ Compensation Insurance covers medical expenses, wages benefits, and death benefits if your employee was injured at work or diagnosed with an occupational disease.
- Commercial Umbrella Insurance covers additional expenses when you reach the policy limit on other liability policies.
- Business Owner’s Policy is a bundle of insurance products that includes bodily injury liability, property insurance, and business interruption insurance.
- Directors and Officers Insurance covers losses if a lawsuit seeks to hold someone responsible for their conduct while they were a director or officer of an organization.
- Errors and Omissions Insurance covers professionals against claims of negligence.
Business Interruption Insurance
Your most pressing concern right now is your diminished revenue and income. If you can’t see your patients or serve customers, you lose your entire income. Restaurants that can offer carry out and delivery might salvage a small percentage of their ordinary income, but it might not be enough. Plus, this still qualifies as an interruption.
You hope business interruption/income insurance will cover all or a portion of these lost profits. Business interruption insurance and contingent business interruption insurance are typically part of commercial property insurance. These policies are meant to cover expenses and losses when certain covered losses disrupt your business, forcing you to close, limit hours, or make repairs.
The big question right now is whether business interruption insurance will cover lost profits and expenses related to COVID-19 closures. Will the coronavirus count as property damage, or will the executive orders closing non-essential businesses trigger the civil authority provision of your policy? It’s important to have a lawyer review your policy to make sure you know what your insurance covers and when.
Filing a Claim for COVID-19 Related Losses
If you shut down your business because of either a direct order or other coronavirus-related circumstances, review your insurance policies right away. Though many business interruption insurance policies are similar, they aren’t all the same. What your insurance company covers depends entirely on your policy—and you need to know what it says.
We recommend you:
- Gather documentation related to your insurance policies, including property insurance and business interruption insurance. You might find you don’t have a copy of the full policy—many business people just have copies of their declarations, endorsements, and riders, rather than the full policy.
- Reach out to your insurance agent and request a copy of your complete policies, including any endorsements, addendums, or other attachments.
- Begin documenting your expenses and losses as thoroughly as possible.
- Schedule a free policy review with attorney Chip Brooker as soon as possible.
Prepare for Your Insurer to Deny Your Business Interruption Claim
You must understand what your business insurance policies cover or don’t cover. Whether or not you’ll be able to file a valid claim depends on several factors—most importantly, the wording of your policy. We anticipate many insurers will automatically deny business interruption insurance claims, and it’ll be up to you to prove the policy covers your lost revenue and expenses related to COVID-19.
An insurer might deny a business interruption insurance claim based on:
Lack of proof of physical damage
Business interruption insurance typically requires proof of direct physical damage or loss to your property. However, how courts define damage and loss vary by state. Not all courts require structural or physical damage for you to receive an insurance payout; loss of use of the property may be enough. That being said, you might have a stronger claim if you can prove your business was exposed to COVID-19. This might be evidence of physical damage or loss at a microscopic level.
Exclusion for viruses, bacteria, fungus, and other diseases
In 2003, the Severe Acute Respiratory Syndrome (SARS) outbreak spread across two dozen countries and hit many businesses hard. Insurance companies learned from the outbreak and started to include a provision excluding coverage for losses based on a virus, bacteria, fungus, or other infectious diseases. You should review your policy for this type of exclusion. If your policy has this type of provision, read the wording carefully—not all of these provisions cover viruses like COVID-19.
Lack of property damage under civil authority
At first glance, it seems like a civil authority provision would enable businesses to pursue insurance settlements. Most provisions require that the government makes it impossible for you to access your property due to or related to property damage near or surrounding your business. COVID-19 might not be enough to prove physical property damage. Also, an insurer might find the executive orders weren’t based on property damage but were intended for another purpose, like slowing transmission of the virus.
Brooker Law Offers Free Policy Reviews for Businesses
COVID-19 and business closures are raising a lot of questions. Your most important question is whether you’ll be able to recover lost income through insurance. It’s impossible to answer that question without thoroughly reviewing your policies.
As a business owner, right now, you can take steps to protect your staff and customers from coronavirus, thoroughly document your losses and expenses, and talk with a seasoned attorney about your insurance coverage. Chip Brooker, the founder of Brooker Law, PLLC in Dallas, TX, is offering free policy reviews to get you started.
Use the online form or call (214) 217-0277 to schedule your free business insurance policy review. Brooker Law, PLLC, has transitioned to remote work but is fully operational during the COVID-19 pandemic.