Insurance Coverage for Business Losses Sustained by Coronavirus
Many lawyers have reported, and we are also seeing, the insurance industry using COVID to drag their feet and stall against valid claims. Because of that, we are seeing people very concerned about their claims and financial situation. We work with you to discuss your potential financial options during this time for your business.Business Interruption Claims During COVID-19
This situation is changing day by day. Businesses have had to shut down during the coronavirus pandemic, and their losses are huge. Early estimates show the potential business economic losses across the country is between $200-300 billion dollars per month during the shut down. The next question: is there insurance coverage to help businesses deal with their losses sustained by coronavirus?Is There Going to be Insurance Coverage Available to Business Owners to Help With Their Losses Due to Coronavirus?
We wish we could look you in your eyes and tell you all the answers, but at this time, we just can’t. You should be sceptical of any lawyer who tells you differently at this time. But, we have a definitive roadmap for how to handle these claims. We provide you with the most up-to-date information on making an insurance claim for business loss during COVID-19.The Avenues and Issues
There are many different legal issues to navigate, and there are many different avenues we discuss. This will continue to evolve as this issue is litigated across the country. Our goal and purpose is to get business owners familiar with the primary issues, some of which have already been raised and others we anticipate based on our experience and research to date.1.- What is the Government Going to Do
There are a lot of issues surrounding what the government is going to do both on a state and federal level and how will this impact recoverable damages.2.- Insurance Coverage is Highly Individualized
Insurance policies are highly individualized and are all different. In determining whether a business can recover, each policy and its language must be reviewed. There is no one size fits all rule here.Why You Should Contact an Attorney to Assess Your Potential to Recover for Your Business 1.- We Offer a Free Insurance Policy Review Even if Your Claim Has Been Denied
We have seen the insurance industry try and get out in front of this issue, and in doing so we believe they have deliberately spread misconceptions. The insurance industry has tried to say these claims are blanketly excluded. They have told many people there will be no business insurance coverage for this pandemic as a bottom line. Starting in March 2020, we saw a lot of media coverage and insurance statements to this effect. Click here to read the insurance industry’s response to the US Congress.
The intent of this is to dissuade business insurance policy holders and attorneys from even pursuing this because it is clear cut.
It is not clear cut. We are not saying there will clearly be coverage, but we are saying it is not as cut and dry as the insurance industry wants you to believe.
You may have already contacted your insurance company or your insurance broker/agent and they may have denied your claim or told you that your losses are not covered. You may have heard:
- Insurance companies and policies excluded virus claims 15 years ago after SARS;
- There is no coverage for a loss of revenue after a pandemic; or
- Virus exposure is excluded from liability policies.
However, even if your insurance company has denied your claim, we will still review your business insurance policy. Because, the bottom line is each insurance policy is different. We review the terms and conditions of each specific business insurance policy. You have nothing to lose.2.- If You Do Not Act Soon, You Could Lose Your Rights
Your policy may have a “notice provision”. This is important in all insurance claims and each policy has different notice provisions. You will be required to comply with the notice provisions in your policy, and if you do not, you could lose your rights.
Your policy may require you to provide the insurance company with notice within a specific timeframe and within a specific manner. These must be followed precisely. For example, a phone call may not be enough. In some cases you are required to send a letter detailing your losses and this letter must be sent within a certain timeframe. Also for example, notice may be required to be submitted within 60 days and if this is not done, the insurance company can deny your claim. For these reasons, you must comply with the exact notice requirements in your policy.
In summary, failing to notify your insurer promptly and properly may give the insurance company the right to deny your claim on a technicality. We work with business owners to make sure this doesn’t happen.3.- We Ensure Your Rights are Protected
By putting your insurance company on proper notice, we ensure you are then protected by law. Notice triggers the insurance company to act in accordance with “good faith” laws when handling your claim. Good faith laws in Louisiana are favorable to insurance policyholders not insurance companies.4.- You Cannot Wait on the Insurance Company
As we always advise our clients, if you do not ask, the answer is always no. The insurance company is not going to show up at your door and say here is your money. With COVID-19 claims, we know we are going to have to fight for the rights of our business owners. You must be proactive if you want to pursue any potential recovery here.Insurance Laws in General
Your insurance policy is considered to be a “contract” between you (the business owner) and the insurance company. That means we have to “interpret” the provisions of the insurance policy.1.- Courts Want to Find Coverage for You
As a general rule, courts interpret insurance policies broadly looking to find coverage for businesses rather than to deny coverage. In fact, insurance companies are controlled by laws which state they should read their policies in a way to find coverage rather than to exclude coverage.2.- Courts Require Insurance Policies to be Clear
Every insurance policy has “exclusions”. However, these exclusions are to be narrowly read to be interpreted against the insurance company. For example, if there are two reasonable interpretations of the policy exclusion, meaning two people could give different meanings to the same phrase or same word, that creates a “legal ambiguity”. When there is ambiguity, that means the policy is not clear.
When the policy is not clear, the policy must be construed in favor of the business owner and against the insurance company.How to Know if Your Business Insurance Policy May Cover Your Coronavirus Loses
We look at each business policy, but we are interested in helping business owners who have the following types of insurance policies:
- Commercial Property
- Event Cancellation
- Worker’s Compensation
- Communicable Disease and Contamination
It must be stressed, most people are just referring to their claims as business interruption claims, but there are multiple different types of business coverage in an insurance policy. What we are seeing is that business owners will call their agent and ask if they have “business interruption coverage” and the agent says no or cites the virus exclusion, and the business owner walks away without realizing they may have another type of coverage that will apply. We want to educate you on these issues.
It is important to analyze the entire business insurance policy and not just use the blanket term “business interruption coverage”. You need to get your entire policy. Once you have your entire policy, we look over it completely to analyze each type of coverage our clients may have which may entitle them to recover:
- Business Interruption
- Civil Authority
- Extra Income Express Provisions
- Contamination/Pollution Extensions
- Contingent Business Income a.k.a. Dependent Property Coverage
- Communicable Disease and Contamination Coverage
- Event Cancellation Policies
- Coverage for Business Interruption
Inability to use the building for its normal intended purpose is key here. We work with business clients to ensure this is properly documented. A business owner may need to show the physical presence of the coronavirus.
- Inspecting/testing of the premises
- Documented presence of customers or employees infected with COVID-19
- Various emergency proclamations and orders issued by the local, state and federal government
- The CDC reports the coronavirus may last on surfaces up to 17 days
We are continuing to keep and log all government orders to show how these affect business owners and their rights under insurance policies. We work with you to ensure we present evidence and prove there was contamination depending on how you are trying to trigger insurance coverage. This may not apply if you are trying to trigger coverage under the civil authority provision of the policy.
If there is no coverage for business interruption, you still may find coverage under the civil authority provision of the policy. Courts have held that where access to a business is prohibited by a government order due to a peril insured against by the policy, the civil authority coverage is triggered. Many businesses, such as restaurant owners, were required to shut down or operate under limited circumstances - such as filling take out orders only. These business owners can potentially make claims under their civil authority coverage.
However, it should be noted, we are seeing many business policies with limited coverage for a specific time frame when making claims under the civil authority provision. For example, we looked at a business owner’s policy for his Airbnb rentals. Here, they only allowed recovery for 2 weeks, when coverage under the business interruption part of his policy would cover his losses for a longer period. This demonstrates why it is important to have a lawyer look at your policy and see the best ways for you to maximize recovery.
This coverage kicks in once the civil authority order has been lifted. It provides coverage for extra expenses for the business to get back on its feet after it has been closed. This will also usually be limited by a specific timeframe.
Contingent business income or dependent property coverage is where the loss or damage occurred at some other location upon which the business depends. For example:
- Delivery of materials or services, such as suppliers;
- Acceptance of products, such as shippers;
- Manufacturers of products under contracts of sale, such as Chinese factories; or
- Attraction or transportation of your customers to your locations, such as airports that get shut down.
Here, the policy may specify that the dependent properties be listed in a schedule, or may just define properties by reference to relationship such as those identified above.
Some commercial property business policies actually contain communicable disease and contamination coverage. This is rare, but we have seen this type of coverage in some church insurance policies and it may be in other business policies as well. Each policy defines “communicable disease” and “contamination” differently.
Under this type of coverage, you may be able to claim expenses for:
- Clean-up costs
- crisis/public relations expenses
- Business interruption losses
Some policies may require “actual not suspected” presence of disease. If so, inspection/testing may be key and the presence of COVID-19 infected workers or customers should be documented.
Thousands of events will be cancelled due to coronavirus. This is especially true and is a big deal for Louisiana because there are many festivals, fairs and events traditionally scheduled in the springtime. Billions of dollars will be lost in the travel, hospitality and live entertainment industries.
Some of the expenses that may be recovered under event cancellation policies includes:
- Costs associated with notifying the attendees
- Additional staffing
- Additional venue fees & cancellation fees
- Relocation fees
- Remarketing fees
There are many insurance exclusions which insurance companies may allege apply to your claim to prevent you from recovering under your policy. Here is an overview of an explanation of the common exclusions we are seeing, and how you may be able to get around those exclusions to get your insurance company to pay your claim.1.- The Virus or Bacteria Exclusion
Some policies have virus exclusions which apply only to the business interruption part. Other virus exclusions are broader. We can review your policy to determine the way in which your exclusion may be drafted.
- The exclusion may not be clear
- Your insurance company and the age of your policy is important
- The required language is not in the virus exclusion
We look at the virus exclusion with a legal eye. We look to see what the policy excludes under the law and insurance regulations. Wording and legal interpretation is key here.
What we are seeing is that business owners have spoken to their insurance agent and their agent has told them there is no coverage because there is a virus or bacteria exclusion. The fact is, the agent may not know and is not a legal authority. So just because your policy contains a virus or bacteria exclusion - this does not mean you may not be able to recover. We give free consultations to business owners on all of these issues and review each business policy, even if it has a virus or bacteria exclusion.
As lawyers, we know different types of insurance companies have different types of exclusions, but in some cases there may not be a virus exclusion. We are seeing many older insurance policies which do not even contain virus exclusions. For example, we represent a restaurant with an older insurance policy which they bought through Lloyds of London and the policy does not contain a virus exclusion.
Even if you have an exclusion, there is an argument to be made, the virus did not solely cause the damage. The question is did the virus cause the loss or the order of the government cause the loss? This may depend on where your business is located. What happened first where your business operates? The virus or the order?
In some cases, businesses were required to close even before we saw a first confirmed case of COVID-19. So the businesses were already impacted before the order of the Louisiana governor in areas of the state where there were no confirmed cases. In these cases, under a concurrent cause analysis, it can be argued it was the order itself and not the virus that caused the loss. Many business insurance policy virus exclusions do not have the required anti-concurrent clause language.2.- The Pollution/Contamination Exclusion
We do not believe the pollution/contamination exclusion applies to the COVID-19 pandemic. These exclusions are held to usually only apply in traditional industrial pollution and contamination cases. The coronavirus pandemic will not be considered to be a pollution incident and thus your insurance company should not deny your claim on this basis.The Current Legal Climate Relating to Covid Insurance Claims
In Louisiana, a business owner has already filed suit seeking a ruling on a business insurance claim relating to COVID-19. Cajun Conti LLC et al, v. Certain Underwriters at Lloyd’s London, et al. The restaurant owner purchased business insurance covering losses to business income. The policy had no virus or pandemic exclusion. They are seeking coverage under the civil authority clause based on the existence of the coronavirus at nearby locations. The court has not yet made a ruling.
You may have also heard in the media about New Jersey which introduced Bill (A-3844) attempting to require insurance companies to cover business interruption claims relating to COVID-19. This bill would have invalidated virus exclusions with respect to coronavirus claims. This legislation was very detailed and would require trusts and partial reimbursement with federal funds. However, this bill was withdrawn and legislators are in discussions with insurers with how it may be re-introduced.
On March 31, 2020, Louisiana proposed similar legislation to that of New Jersey, Louisiana HB 858 & SB 477. Both of these filed bills would require retroactive coverage till March 11, 2020. At this time, the Louisiana legislature has been suspended but this Bill will eventually be addressed. Whether it will pass or be implemented is yet to be determined.
Other states across the nation are considering similar legislative action including Ohio, New York and Massachusetts.
It should also be noted, they are attempting to get some federal regulation introduced to also address this issue. President Trump has even raised this issue and he commented insurance companies should cover these claims if the policy does not contain a pandemic exclusion.Our Advice to Business Owners When Documenting COVID-19 Claims
Documenting and saving information now is critical to a successful insurance claim.Business Checklist for Documentation
The following is a checklist for business owners to utilize when documenting COVID-19 claims:
- Make a timeline. Capture information for each impacted facility which includes dates of closure, reasons for closure, actual presence of coronavirus, infected employees, chain failures, etc.
- Save copies of all government orders and closure notices for each impacted facility.
- Decisions to close facilities (if not related to a government order) should be written and saved.
- Save all correspondence to/from customers and suppliers regarding reasons for closure.
- Create new accounting codes to document COVID-19 related costs.
- Document any new policies regarding employees (paid leave, work at home, etc.) during this time. Put those policies in writing.
- Save copies of any and all pre-loss business forecasts - February, March, April 2020 projections.
- Include both revenue and expense forecasts
- Get customer specific forecasts where applicable
- Group cancellations, in the hospitality industry
- Nearby event cancellations, such as sporting events
- Maintain monthly profit and loss statements. Use older accounting data to prepare monthly loss statements from January - June in previous years for comparison purposes.
- Understand and document new sources of revenue
- Revenue earned in mitigation of your loses
- Document any additional expenses incurred in connection with the new business by using COVID-19 accounting codes.
- Document costs associated with employees “working at home” or employees on furlough
- Telecommunications costs - teleconferencing, broadband access, file sharing services
- It is very important to make sure all of your business units (divisions, subsidiaries, different locations and premises) receive guidance on documentation requirements.
- Cancelled contracts, orders, reservations
- Extra expenses
- Expenses to reduce the loss - mitigation costs
- Discounts, price decreases or other concessions to customers
- Expediting costs, including overnight delivery and overtime expenses as examples
- Preservation of property expenses, including extra security
- Employee costs including paid family leave, paid sick leave, additional work at home expenses and telecommunication costs
- Decontamination costs
- Property damage related costs
- Potential saved costs - what costs did your business not incur because it was shut down?