Some FAQs About Coronavirus Business Interruption Claims

Collectively, insurance companies have assets totaling over $7 trillion. Insurance companies are legally required to set aside much of these assets as a financial reserve to pay unexpected claims. Yet despite this enormous reserve and the applicable laws, many insurance companies refuse to pay COVID-19-related business interruption claims.

As coronavirus quarantines continue, at least in part, many businesses are looking for financial relief. Government stimulus payments and loan guarantees certainly offer some solace, but they are not enough to completely eliminate COVID-19 losses, and they were never meant to do so.

Business owners do not purchase insurance to obtain financial windfalls. They buy insurance to prepare for the unexpected, and coronavirus quarantines certainly qualify as such. In the current environment, it’s very important to partner with a Los Angeles business interruption insurance attorney and at least learn more about your legal rights. There is a good chance that coronavirus quarantine is a covered loss, and an attorney can force the insurance company to make good on its financial promises.

Does My Business Interruption Policy Cover Coronavirus Losses?

Maybe. Traditionally, these policies insure losses related to natural disasters, such as earthquakes and fires. Specifically, many policies cover losses due to business closure because of:

• Civil Action, or
• Physical Damage.

These situations involve direct and indirect losses. The direct losses include loss of business because the doors are closed. Until the business reopens, it is a step behind the competition. Since customers quickly develop new shopping and spending habits, once business goes away, it often never returns.

Coronavirus coverage issues probably go back to the SARS (Severe Acute Respiratory Syndrome) outbreak. There were a number of these cases in China and East Asia, but only a few in the United States. After this first coronavirus outbreak in the early 2000s, many business insurance companies rewrote their policies to exclude infectious disease losses. 

California law is very strict when it comes to policy exclusions. First, the insurance company has the burden of showing the exclusion applies. Second, the exclusion is void as a matter of law unless it is “conspicuous, plain, and clear.”

Most insurers did nothing in response to the SARS outbreak. If your policy contains no infectious disease exclusion, the next question is the definition of “physical damage” and/or “civil action.” COVID-19 is certainly not a fire or a lightning strike, but the virus does contaminate surfaces. Alternatively, the coronavirus quarantine might not have shut down the business altogether, but it did create so many operational restrictions that it made profitable operation impossible.

Is BI Insurance the Only Available Insurance Remedy?

No. Many policies contain independent civil action clauses. Traditionally, these clauses apply to things like riots, wars, or other forms of civil unrest that cause business shutdowns. They could just as easily apply to coronavirus quarantines, as outlined above. Other possibilities include dependent property and extra expense coverage. A few policies also contain explicit pandemic or virus coverage.

A Los Angeles bad faith insurance attorney should carefully review the language in these policies. Pandemic/virus coverage is a good example. Many people, including many medical professionals, interchangeably use words like “outbreak,” “epidemic,” and “pandemic.” But each word has a specific meaning in a medical and legal context.

What Should I Do Next?

Do not contact your adjuster, at least not straightaway. Talk to a Los Angeles bad faith insurance attorney first, to put your claim in the most favorable light. Here are some other tips:

• Obtain a complete copy of your policy. Do not rely on the declarations page.
• Record all expenses during the lockdown, such as payroll, rent, and supplies. You will need these figures to prove a financial loss.
• Do not rely on a broker’s or adjuster’s coverage opinion. These professionals almost always say the loss is not covered, regardless of the merits of the claim.
• Document all conversations with your insurance company. Use email whenever possible. These communications are as fast as a phone call and as verifiable as a letter.

During all these steps, remain as positive as possible. Your business, and the health and safety of you and your employees, are the most prominent concerns. A business interruption payout might enable your business to reopen once coronavirus quarantines end. For a free consultation with an experienced Los Angeles bad faith insurance attorney, contact the Law Offices of Eslamboly Hakim. We do not charge upfront legal fees in insurance dispute matters.