I continue to receive inquiries from friends, family, existing clients, and former clients, regarding the types of insurance that may be available to their businesses due to loss suffered as a result of COVID-19. Instead of providing a link to higher level discussions about the issues, I want to offer a short primer and practical approach to the situation.
Oftentimes in the law, we attorneys look to prior cases to inform how to proceed. However, there are also times – and this is likely one of them – where prior cases do not necessarily inform how to proceed, and new case law will be established due to the unique and changing circumstances.
There is a lot of discussion in the marketplace about business interruption insurance, and the fact that MOST policies do not provide coverage for “viruses”, “epidemics” or anything that is not a “physical loss” or “direct physical damage”, which arguably would not apply in the case of a business closure due to a virus. This is the argument that the insurance companies will typically use to deny your claim.
There is also a lot of discussion that there may be coverage for business loss caused by acts taken by “civil authorities”. There is discussion about what makes a “physical loss” versus “physical damage”. Other discussions focus on policies that have coverage for loss of “business function” caused by a “physical harm”. This is where disputes will likely arise, which MAY provide coverage for your business.
The availability of coverage for your business will hinge completely on the type of insurance policy you have, whether it is an “All risk” policy, the endorsements and/or exclusions in the policy, or even whether the insurance company omitted something typically found in most policies (which actually does happen). So before you pack up shop on the issue under the assumption that you don’t have coverage, consider taking the time to ensure that you have exhausted all possibilities for coverage.
What should the insured do in the first instance?
- Get organized
- Gather all insurance policies that could be on the risk, from business policies, to personal policies, and umbrella policies
- Ask your broker to provide you copies of all policies on the risk
- Evaluate whether your insurance policy could provide coverage for ANY of the loss that your business has suffered
- Don’t make assumptions, ask an attorney
- Gather documents and information
- Documents regarding the monetary loss, employees, wages, etc.
- Give notice of the loss to the insurance company – DON’T WAIT
- Identify for the insurance company the loss and the coverage sought
- Go after them
- If your insurance company denies your claim, consult with an experienced insurance coverage attorney, if you haven’t already
Remember, insurance company’s initial response to ANY claim is often to simply deny coverage and dare you to challenge the decision. There are many unresolved coverage issues relating to the current circumstances. Don’t just sit around assuming you don’t have coverage, or that coverage will not be available down the line. Get your claim on file and evaluate next steps as the insurance industry, and the insurance coverage bar, prepares to fight for coverage.