17 Apr What is business interruption insurance coverage?
What is business interruption insurance coverage?
With the entire country under lock down and businesses forced to shut down, many are wondering what is business interruption insurance coverage? Business interruption insurance coverage is optional insurance a business purchases that covers it in the event of certain conditions. Coverage for this COVID-19 period depends on insurance policy language with a business’s insurance company. Some policies explicitly state a virus or forced government shutdown is covered under business interruption insurance coverage. Others either exclude it or are silent on whether coverage applies. Whenever reviewing an insurance policy for coverage, basic rules about contract law apply. Any ambiguities are construed against the drafter which, in this situation, would be the insurance company. If the policy is silent about the coverage, it is possible that coverage could apply.
What are insurance companies saying?
Insurance companies are already parading their spokesmen in the media crying foul that they were unprepared and cannot handle the scope of the losses from the business interruption insurance coverage. They say it was not contemplated and paying these claims would cause solvency issues. The problems with this argument are numerous. When they sold the product, they had no problems making assurances of coverage while taking in the insurance premiums from their customers. Moreover, insurance companies routinely make record profits and now want the government and taxpayers to subsidize their poor choices. No one forced them to include this language and charge customers money for business interruption insurance coverage. Are they going to return ALL the money they received for this coverage? Doubtful. They cannot state that viruses or government shutdowns were not part of the original agreement – that is not how contract law works. Either the insurance policy stands on its own or it is considered ambiguous and therefore coverage would apply.
What should businesses do?
It will be interesting to see what happens with these cases. CBS ran a story about chefs creating a group to take on the insurance companies. A restaurant in Los Angeles already filed a lawsuit against their insurance company and we expect many more to be filed in the future. The first thing for any business to do is make decisions as if they will NOT have business interruption insurance coverage apply since any potential money would likely be months or potentially years away. Instead, do what you can in the present to remain afloat, which includes taking advantage of all government programs such as the PPP. Then, contact our office with a copy of your insurance policy so we can review to see if we may have a potential case for coverage. We have vast experience reading and interpreting insurance policies and can provide some free legal advice.
Wishing everyone health and happiness during this difficult time.
Tarun B. Rana, Esq.
Rana Law Group
655 Craig Road, Suite 252
St. Louis, MO 63141