COVID-19 has had an unprecedented impact on businesses throughout the country. A recent study suggests that over 100,000 small businesses have shut down due to the coronavirus. Paying employees, the rent, the mortgage and providing for their families are obligations that business owners all continue to have despite lockdown measures and decreased revenues.
In these tough times, some business owners are turning to their business interruption insurance to file a COVID-19 business interruption claim. If you own a business, you may be wondering whether you can file a COVID-19 business interruption claim to recover money from your insurance policy. The business insurance lawyers at Bottari & Doyle are here to help – read below for more information on business interruption insurance and how it may apply to COVID-19.
What is Business Interruption Insurance?
Business Interruption Insurance, or Business Income Insurance, is often included in a Business Owner’s Policy. This type of insurance provides coverage if your business experienced a covered loss that prevents you from operating your business, resulting in a loss of income. For example, a fire to your office would be an example of a covered loss, because the fire caused physical damage to the building that prevents you from operating the business. Business interruption insurance will vary from policy to policy, but most business insurance policies cover the following:
- Mortgage, Rent, or Lease Payments for the space your business operates from
- Lost Net Income you’d normally make if your business was open
- Relocation Costs if you have to move to a new or temporary location
- Taxes and Payroll for your employees and business
- Extra Expenses such as employee training costs, replacing damaged equipment, etc.
Is COVID-19 a covered loss for business interruption?
This is an issue that will ultimately have to be settled by the courts. There are many insurance policies that require the business property to experience a “physical loss” to trigger business interruption coverage. The argument will be that the building did not experience a physical loss (fire, flood, natural disaster) because the virus is incapable of destroying the property. However, there are court decisions that state contamination from foreign agents can constitute physical loss. One sign of hope for small business owners was a recent court ruling in North Carolina that determined a government shutdown does constitute a “loss of property” – thereby triggering a business interruption insurance claim.
Other recent court rulings with regard to COVID-19 have found that the language in some business interruption insurance policies is too ambiguously worded. In some cases, an insurance policy may not have the proper exclusions – it may state that your policy excludes coverage due to a business shutdown from bacteria, but not a virus, which is a key distinction.
Civil authority coverage for business interruption insurance
Some small business owners may have civil authority coverage on their business insurance policy. This type of coverage protects you in the event that the government issues orders to shut your business down. Local government mandates shuttering small businesses continue to be implemented across the country due to the coronavirus, which means it may be possible to file a business interruption insurance claim.
While it may be some time before things return to normal, if you’re a business owner and your business is suffering or shut down due to the pandemic, it’s worth looking at your business insurance policy to see if you might have a valid business interruption insurance claim.