Making A Business Interruption Claim
Responding To COVID-19
Making a Business Interruption Claim
The COVID-19/Coronavirus pandemic has stopped the world in its tracks. Millions of businesses worldwide have been affected by either outright closures or limited operations. People are suffering, and some businesses may never recover. As business owners ourselves, we are sensitive and empathetic with what many business owners are going through. Small businesses are the life blood of our community and our economy. It is more important than ever to review your business insurance policy to determine the best course of action in making a claim.
What is a Business Interruption?
A business interruption is simply an event – typically a disaster such as a fire, hurricane, earthquake, flood, or other natural disaster that interferes with the business’s normal operation. Pandemics such as the COVID-19/Coronavirus outbreak are also business interruptions as businesses everywhere have been forced to close or otherwise modify their normal business practices.
What Is Business Interruption Insurance?
Simply put, insurance policies are contracts between the insurance company and the insured, such as a business. Typically, the business agrees to pay premiums in exchange for the insurance company’s promise to pay for a portion or all of the business’ covered loss. Covered losses are usually listed specifically in the insurance policy language. Businesses can add in additional covered events by endorsements, also known as riders.
Business interruption insurance is a form of rider that covers businesses when the business is interrupted for certain covered incidents. Every insurance policy is different, so it is important to check your specific policy to verify what is covered under your policy. Business interruption policies will typically cover lost income, rental value, etc. However, many business interruption policies require “physical loss” in order to be triggered. Some business insurance policies exclude claims for losses as a result of pandemics, epidemics, or other infectious or communicable diseases.
While business interruption policies typically require a “physical loss” to the business in order to be applicable, a civil authority rider could cover a loss as a result of no physical damage. A civil authority rider is an additional coverage in the event the business is closed by civil authorities. A prime example being a government mandate that businesses must close or modify their operations i.e. take-out only, delivery only, contactless curbside pickup, etc.
A business interruption may result in government-mandated closure of business resulting in complete loss of revenue.
What does Business Insurance Cover?
In order for damages to your business to be covered they must be able to be ascertained. In essence this means the business must be able to show with a high degree of certainty the damages sustained as a result of the covered event. Often this requires a showing of what was earned over the past several years if the business has existed for that amount of time. If the business is less established it is still possible to ascertain damages, this is done in the same manner, past revenue earned for however long the business has been in existence or even projected earnings. However, projected earnings are much less likely to satisfactory for establishing damages to a certainty.
Many business interruption and civil authority insurance will reimburse businesses for:
- Lost Profits
Based on prior performance, these insurance policies may provide reimbursement for lost profits that would have been earned had the catastrophe not happened. Not only does this apply to normal lost profits but also cancelled events may be covered.
- Expenses/Fixed Costs
These can include operating expenses such as rent and utilities, clean up from a COVID-19 exposure, and other costs of doing business.
- Relocation
Your policy may cover the costs involved with moving to and operating from a temporary business location or changing business practices such as operating as a “take-out/to-go” facility only. - Training Employees
In the wake of a business interruption event, a company will often need to shift business practices. For example, you may be a distillery but have switched to producing hand sanitizer. Business interruption insurance may cover these costs. - Government Mandates
A business interruption may result in government-mandated closure of business resulting in complete loss of revenue. Examples include forced closures because of government-issued “social distancing” or “stay at home” orders. - Employee Wages
Coverage of employee wages is essential if a business wants to resume operations as soon as the coast is clear. Making payroll while shut down is a benefit to not only the business, but to the employees as well. - Taxes
Uncle Sam still requires businesses to pay taxes, even when disaster hits. Tax coverage will ensure a business can pay taxes on time and avoid penalties. - Loan Payments
Loan payments are often due monthly. Business Interruption and civil authority coverage can help a business make those payments even when they are not generating income.
Potential Legal Ramifications
Since the pandemic outbreak, many state governments have drafted proposals to force insurance companies to cover COVID-19/Coronavirus claims, even if the insurance policy specifically excludes such claims. For example, the South Carolina State Senate introduced a SB 1188, which proposing to amend the Code of Laws to require insurance policies to cover losses, up to the policy limit, as a result of the COVID-19 pandemic. Nationwide there have been calls from members of Congress for Insurers to cover COVID-19 related losses, despite what the insurance contract says.
When Should a Business Make a Claim?
Business owners should not wait to file a business interruption claim. This is because most policies require businesses to promptly file a claim and any delay may be the basis for the Insurer to deny the claim. In most policies promptly means within a week or two after a potential claim arises. If your business has been closed or drastically altered due to COVID-19 you should file a claim as soon as possible.
Some suggested steps, you as a business owner, should take today to make sure you do not miss out on any benefits you are entitled to:
- Check your business insurance policy for business interruption and civil authority coverage. If you do not have your policy on hand reach out to your insurance agent to obtain a copy.
- Contact your insurance agent to get information regarding your policy and the steps to file a claim.
- Gather copies of previous years’, at least three years if possible, tax documents, accounting ledgers, payroll documents, expenses incurred to come into compliance with government orders, expenses for re-tooling a business, and any other files you may have to demonstrate your revenue and expenses.
- Promptly file your claim with the insurance company. Make sure to retain copies of all documents provided to you in filing a claim.
- Wait to get a response from the insurance company. Often a response will take one to two weeks. Make sure to promptly respond to any inquires so as to avoid delays in a decision.
If the insurance company denies your claim do not panic. Insurance companies routinely deny completely legitimate claims. If this happens you should seek legal counsel to advise you on next steps. Legal counsel can help you negotiate with the insurance company to make sure you get what is owed to you under your business interruption insurance coverage.
We represent business owners nationwide. Yanni Law understands that this is the most financially challenging time a business may ever face. Therefore, Yanni Law does not charge up-front fees for Business Interruption cases and only takes a fee if we recover for you. If your business has been affected by the COVID-19/Coronavirus Pandemic, please contact us immediately for a free case evaluation.
The Yanni Law Group refuses to settle for less than you deserve. Yanni Law is 100% dedicated to representing injured plaintiffs nationwide and we never represent insurance companies. With offices coast to coast, our law firm is built to handle cases of any size, anywhere. If you cannot come to our office, we will gladly meet you at your home, hospital, or local coffee shop. You will never pay a dime unless we recover on your behalf. We have recovered millions for our clients and try cases in courts nationwide.
Nation-wide resources, small-town devotion. We pride ourselves in treating our clients as part of our family and treat every client like they are our only client. As committed community partners, we believe that a stronger community makes everyone better, that a rising tide lifts all boats. We look forward to the privilege of representing you in the most difficult time of your life and rising together for a better tomorrow.
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