Last week, a bipartisan group of Congress members requested that property insurance providers retroactively cover claims for business interruption caused by coronavirus-resulted shutdowns — even if the language in their policies excluded such coverage.
Unsurprisingly, insurers declined. As representatives told lawmakers, most business insurance coverage plans “do not, and were not designed to, provide coverage against communicable diseases such as COVID-19.”
Jon Bergner, assistant vice president of public policy and federal affairs for the National Association of Mutual Insurance Companies (NAMIC), says that insurers have urged Congress to offer assistance in response to mass unemployment and other business problems.
David Sampson, president and CEO of the American Property Casualty insurers, agrees. In a web conference for the National Association of Insurance Commissioners, he said that the business concerns are at so massive during this crisis that a government response — not insurance company response — is needed.
Meanwhile, financial professionals have noted that there is room for interpretation in rare commercial insurance policies — particularly those with specialty business insurance interruption coverage.
Understanding Florida Business Interruption Insurance
So, what does this mean for business owners in South Florida? To summarize, it is likely to be very difficult to claim any losses for a forced shutdown or a dive in revenue caused by COVID-19.
Under rare exceptions, however, you may be able to claim business interruption losses — depending on the type of coverage you have and the specific language of your policy.
To determine whether or not your business might be covered, you must first and foremost determine whether your plan includes business interruption. Business interruption coverage is typically included as an (optional) part of commercial property insurance or commercial package policy. This type of coverage is not purchased separately.
Business interruption insurance is designed to safeguard your business from losses caused by shutdowns related to disasters and other dangerous situations. There’s also contingent business coverage interruption, which covers losses caused when your business suppliers are forced to shut down in such emergencies.
Losses covered under business interruption insurance could compensate businesses for lost income, rent, and even employee payroll.
Will Your Business Policy Cover Florida Coronavirus-Related Shutdowns?
Sounds pretty good, right? Here’s the catch, though: most business interruption policies only cover “direct physical loss or damage to” caused by disasters and other dangers to your property. That means that most business losses connected to COVID-19 will not be covered since such losses do not qualify as “direct physical damage.” Pandemic-related losses, while devastating, do not typically cause direct physical damage to your property and not likely to trigger a payout under standard policies.
Insurance companies are more than likely to quickly deny any business interruption claim you file related to the coronavirus. However, whether their denial is legal or in bad faith could depend on a few factors. Different policies have different terms, and if your policy does not expressly define the term “physical damage” or uses ambiguous wording, the language could be construed in favor of having your claim covered. In addition, some types of insurance plans for industries like hotels and healthcare do include coverage for communicable diseases.
What does it all mean? It’s worth reviewing your business insurance policy very closely — both to determine whether it includes business interruption coverage and the language included within such coverage — in addition to staying abreast of legislative developments regarding COVID-19.
About the Author:
Andrew Winston is a partner at the personal injury law firm of Winston Law. For over 20 years, he has successfully represented countless people in all kinds of personal injury cases, with a particular focus on child injury, legal malpractice, and premises liability. He has been recognized for excellence in the representation of injured clients by admission to the Million Dollar Advocates Forum, is AV Preeminent Rated by the Martindale-Hubbell Law Directory, enjoys a 10.0 rating by AVVO as a Top Personal Injury Attorney, has been selected as a Florida “SuperLawyer” from 2011-2017 – an honor reserved for the top 5% of lawyers in the state – and was voted to Florida Trend’s ”Legal Elite” and as one of the Top 100 Lawyers in Florida and one of the Top 100 Lawyers in the Miami area for 2015, 2016, and 2017.