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Business Interruption Insurance

Business interruption insurance promises to pay the insured for the income that was lost during the time period of interruption resulting from disaster. While a fire insurance policy covers damage to a property after a fire, business interruption insurance compensates for lost income when a business must close down completely because of disaster-related damage. It also covers operating expenses, such as electricity, that must continue to be paid after the catastrophe. Insurance coverage can be triggered either because of an interruption to the business itself, or because of a closure of the insured’s supplier. Both types of business interruption coverage usually required a “physical loss or damage” to property..


In a letter dated Wednesday March 18, 2020, a bipartisan group of U.S. Congressional lawmakers urged four major insurance trade organizations “to make financial losses related to COVID 19 and other infectious disease-related losses part of their commercial business interruption coverage for policy holders.” The same day, in a joint response, the National Association of Mutual Insurance Companies, Independent Insurance Agents & Brokers of America, the Council of Insurance Agents and Brokers, and the American Property Casualty Insurance Association wrote: “Standard commercial insurance policies offer coverage and protection against a wide range of risks and threats and are vetted and approved by state regulators. Business interruption policies do not, and were not designed to, provide coverage against communicable diseases such as COVID-19.”

On March 24, 2020, the Ohio Legislature introduced House Bill 589, the purpose of which is to “protect small businesses from catastrophic losses” arising from the COVID-19 pandemic. As drafted, the Bill purports “[t]o require insurers offering business interruption insurance to cover losses attributable to viruses and pandemics…..” If enacted in its current form, H.B. 589 would require that every property insurance policy providing business interruption coverage be construed to provide “coverage for business interruption due to global virus transmission or pandemic during the state of emergency.”

Obtaining coverage for losses resulting from the Corona virus is an uphill battle. Insurers are relying on a lack of “physical damage” as a basis for denial. Also problematic, some policies specifically include an exclusion for losses due to viruses. In early 2020, there were already lawsuits pending in California, South Carolina, and Louisiana.

Given the challenges facing a business owner who is dealing with a shut-down business and a difficult insurer, it is important to have experience insurance coverage lawyers in your corner. If your business interruption insurance claim was denied after a disaster that forced the closure of your business (like Coronavirus or COVID-19), then contact us to discuss your case. We offer free business insurance claims consultations.

How Business Interruption Insurance Works:
• Standard time provisions on a business interruption policy are defined as the starting date of the peril, through the repair, and to the restored condition the loss.
• When filing a business interruption claim, a few supporting documents are needed. These documents include business expense reports, business revenue reports, details regarding business history, number of employees, and more.
• The basic business interruption claim formula is: Net Income + Continuing Expenses + Extra/Additional Expenses = Business Interruption Loss
• There are several elements to be inspected when handling a business interruption claim. Utility costs, payroll, taxes, and additional advertising are some factors that can be overlooked.

The types of Business Interruption Insurance coverages:
• Extended business interruption coverage pays for the income that is lost after the property is repaired but before the income returns to the pre-loss level.
• Contingent business interruption provides the insured with coverage for loss to the property of suppliers or consumers of its products or services. The latter two business interruption options are extensions beyond a basic business interruption insurance policy.
• Ingress/egress coverage applies when entry to or exit from a piece of business property is made impossible or extremely difficult.
• Services interruption is intended to cover for losses caused by inability to access vital services including communication, electricity, water, gas, air-conditioning/heating, or transportation of supplies.

Insurance Company Strategies to deny, delay or minimize your claim:
When an insurance provider denies coverage, this can lead to even more problems for the business owner. For example, most insurance policies require a waiting period before benefits begin to be paid. Issues arise when the insurer drags on this waiting period beyond a reasonable time. The longer this waiting period extends, the more damages pile up without any monetary relief. A safeguard for the business owner that may be found in a policy is the extended period of indemnity. This is meant to keep the insurer from cutting off payments after a business is able to reopen. Just because the business reopens does not mean that all is back to normal, and sometimes a business takes a long time to rebuild itself to its former capacity. Insurance companies sometimes attempt to circumvent this benefit by falsely inflating the business’s earnings after reopening. Disputes with the insurance company like these can be harrowing for a business owner to deal with alone on top of all the other difficulties.

For coronavirus losses, obtaining coverage will likely turn on the interpretation of the “physical loss” requirement in the policy. obtaining coverage will depend on the specific policy language.

If your business interruption insurance claim was denied after a disaster that forced the closure of your business (like Coronavirus or COVID-19), then contact us to discuss your case. We offer free business insurance claims consultations.