As businesses across the country deal with the fallout of COVID-19, all of those affected are certainly looking for ways to maximize the money coming in to keep businesses open or viable during this extended period of uncertainty. Of course, many businesses have multiple insurance policies in their filing cabinets to call upon in a variety of situations.
One line of insurance is becoming the center of a legal battleground related to COVID-19: loss of business coverage insurance. In fact, this dispute is spilling over into the political arena as well, even drawing comment from President Trump. Generally, business coverage insurance, or business interruption insurance, is a form of property insurance. Policies typically cover loss of income due to a slowdown or shutdown of business under certain circumstances. Whether the current COVID-19 pandemic and related consequences falls under the umbrella of those circumstances covered by the policies is the current legal question.
Typically, loss of business coverage is an extension of property insurance in that the policyholder must suffer physical loss or damage that causes a disruption to the business. While one policy provision may cover physical damage to the property, the loss of business coverage will let the policyholder be compensated for the income they would have made had their business remained open. The COVID-19 situation is different because the businesses are not physically affected. In fact, in most cases, they are closed by virtue of executive orders from state or city officials. Some policies include coverage for such “civil authority” closures. Recovery will depend on close examination of each business’ individual policy.
As one example, on March 16, 2020, Washington D.C. Mayor Muriel Bowser issued an order prohibiting table seating at any bars and restaurants in the District through at least April 24, 2020. A District sports bar was forced to close and made a claim on its loss of business income policy. The claim was denied, and coverage is now being litigated in Court. Numerous other cases like this one have popped up across the country.
Interestingly, in the D.C. case, the policy also contained a “virus exclusion” which excludes coverage for closures due to a virus outbreak. The sports bar’s lawyers are arguing around that by saying it was not the virus that closed the bar but rather the Mayor’s order. As such, they argue that the closure should be covered under the policy. It will be interesting to see how this litigation plays out which may pave the way for other insurers and suits.
These topics are further complicated by outside political influences. At his April 10 task force press briefing, President Trump said, “You have people that have never asked for business-interruption insurance, and they’ve been paying a lot of money for a lot of years for the privilege of having it. And then when they finally need it, the insurance company says, ‘We’re not going to give it.’ We can’t let that happen.” If his theme continues or comes from additional sources, it will be curious to see how insurers and judges handling these coverage cases evaluate this debate.
If you need help reviewing your insurance options, feel free to reach out to us for assistance.
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