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Has COVID-19 Affected Your Business? Does Your Business Insurance Cover Your Losses?

The harm all businesses, in this case California businesses, are suffering as a result of the recent pandemic continues to grow with every passing day they remain closed.  Although the government has offered assistance to businesses through the CARES Act, the truth of the matter is that these funds have already run out and many businesses saw no relief.  As a result, the question that has surged is, do I have any business insurance that would help cover these losses my business is suffering?  Unfortunately, the answer is not clear, but aside from not being clear, has become a highly debated topic.  If you have business insurance, the first step in determining what type of insurance you have, specifically do you have the type of insurance called “business interruption insurance?”

What is business interruption insurance?

Business interruption insurance is a specific type of business insurance meant to help businesses cover loss of income after a disaster and help cover expenses such as rent as well.   Usually this type of insurance requires that there be an actual physical loss as a result of a peril, such as a fire or water damage.  However, this pandemic has many attorneys throughout the country questioning the language included in these policies as many are not clear while others do include viruses/bacteria losses.

Generally, business interruption insurance coverage will list what is covered and what is not and each policy is different as to what is and is not covered.  The question businesses are facing right now is, does my business interruption insurance cover closure as a result of COVID-19?

Unfortunately, this is a highly contested subject and currently the answer is unclear.  However, many insurers have already stated that claims as a result COVID-19 are not covered.  This is not the answer business owners want to hear after the many years they have spent paying these insurances.  This has lead to the filing of several lawsuits in California and we known there are many more to come.  California has taken the lead in this dispute as many lawsuits have already been filed by businesses that have already either been denied or have reason to believe that they will be denied.

I do have business interruption insurance; can I make a claim due to the pandemic closure?

As everything in the law, the answer is: it depends. Before taking any step, however, it is crucial to review your business interruption insurance policy, which will dictate the terms and requirements in order to determine if you have a viable claim under your specific policy.  Some policies state that there needs to be a direct physical loss or damage as a result of a virus, many attorneys are interpreting this to mean that the business is covered, however, even then insurers are denying claims.  Some policies specifically exclude losses as a result of virus or bacteria.  When analyzing these policies, the policies that include viruses/bacteria have a better chance at succeeding, however, this is still not certain.  The strength of your claim will strongly depend on the language of your insurance policy.

Another angle that is being taken by business owners whom have policies explicitly excluding virus claims, is that their policy is completely silent on forced government shutdowns.  Therefore, does the government shut down count as a business interruption?

On the other hand, insurers are arguing that COVID-19 did not close the business, that it was the government with the California’s Stay at Home Order. This is something that will need to be disputed with your insurance company if you receive a denial on your claim or perhaps in court.

Recently, President Trump weighed in on the topic during his April 10, 2020 Coronavirus Task Force Briefing[1], indicating that he believed if unless the policy excludes pandemics, then insurers should pay. This is a hot button topic and has the attention of the President, which may lead to legislation in the future to deal with the many policy interpretation disputes that are currently coming to light.

It may be possible that you have a claim or need to dispute your claim denial with your insurance company. With the ever-changing landscape of responses to the pandemic it can be important to obtain legal advice early to assist you in navigating the complexity of dealing with insurance claims.

By: Iris Gomez, Esq., Attorney at Contreras Law Firm

[1] https://www.c-span.org/video/?471115-1/white-house-coronavirus-curve-starting-level

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