Can Hotels and other Hospitality providers file a ‘business interruption’ insurance claim for COVID-19?

The hospitality industry has gone through some rough times in recent years. Owners have had to cut costs as a result of a decline in occupancy and average daily rates. With COVID-19 and the ‘shelter-in-place’ rules, it appears no other sector has been hit harder than hospitality sectors.

According to the American Hotel and Lodging Association (AHLA), from the moment the public health issue began in the country around mid-February, hotels have now lost more than $31 billion in room revenue. What this means is that hotels currently forfeit up to $400 million in room revenue per day based on current occupancy rates and revenue trends. Should the coronavirus continue, it is forecast that the hospitality industry will lose about $2.8 billion – every week.

With the equally high premium that hotel owners pay per annum on their ‘business interruption’ insurance, it would be expected that some of it will cover their loss during this pandemic. 

Your insurance may be able to cover your loss of revenue during this pandemic. An insurance claim attorney at Oshan and Associates can help you go through your policy. Call us today on (206) 335-3880 or (646) 421-4062 to get in touch.

What is Business Interruption insurance?

Business interruption insurance is the coverage that exists to cover your income loss as a result of the closure of your business. The ‘business interruption’ coverage may be included as part of your commercial all-risk property insurance or as an independent policy.

For Hotels and hospitality industry in general, the insurance is expected to cover your loss of earnings during the ‘period of indemnity’ or for ‘extra expenses’ incurred. Usually, the insurance will cover loss of net income during the time an operation is closed or partially suspended.

For standard business interruption policies, the coverage may be activated if there's:

1. physical damage,
2. to insured property
3. caused by a covered peril,
4. resulting in quantifiable business interruption loss,
5. during the period of time it takes to restore the damaged property.

Civil Authority Coverage

Insurance for commercial properties may also include coverage for losses caused by closure of property by order of a civil authority. This insurance will ordinarily protect your losses when you're unable to access your property due to a government order.

In some policies, it is also required that the order of the 'civil authority' must be as a result of 'physical damage' to your hotel or a nearby property. 

Can your ‘business interruption’ insurance kick in during this coronavirus pandemic?

Ordinarily, it should. However, this largely depends on a number of factors like insurance policy limits and sublimits, the particular terms of your policy, and the nature of the loss suffered.

It can be argued that the spread of the plague has, and is still doing, damage to your business premises as defined in your insurance policy. The existence of COVID-19 in your commercial environment poses a direct threat to the business itself. It resulted in the lockdown of your hotel. It may thus be argued that this alone qualifies as ‘physical damage’.

Also, the 'shelter-in-place' directive can be considered an order from a 'civil authority'. Thus, the order of the government falls under the 'civil authority' clause.

What are Insurance Companies saying on business interruption coverage for COVID-19?

Some insurance companies, in a letter to a group of members of Congress, argue that COVID-19 related losses should not be included in business interruption coverage. According to the insurers, 'business interruption' policies do not, and were not designed to provide coverage against communicable diseases such as COVID-19.

Unsurprisingly, insurance companies also argue that the presence of the virus in your hotel or hospitality premises doesn't constitute 'physical damage'.

It is further stated that Coronavirus is a 'pollutant' and most insurance policies contain specific exclusions to claims arising from or related to 'pollutant' and 'viruses'.

Can you still file a business interruption claim for your Hotel?

The arguments or legal discourse on whether or not the business interruption claim will cover COVID-19 is still ongoing.

It however appears that the odds may be tilting towards Hotel owners. On April 10, President Trump addressed the issue of business interruption insurance during his daily coronavirus (COVID-19) task force press conference. Trump stated that it is only fair for business owners to get a safety net from insurance companies.

Even more importantly, many states are in the process of enacting laws that will compel insurers to pay business interruption claims stemming from this pandemic. In many of the laws to be passed by State Legislature, insurance companies will be obligated to extend their coverage to COVID-19 business interruption claims even when “viruses” are specifically excluded from the policies.

Litigation and legislations are in the process of righting the wrong that may be done to you if your business interruption claim gets denied.

Filing a business interruption claim as soon as possible will be a smart business decision. Your insurance claim attorney can help you examine your policy and find out if your revenue loss is covered by your business interruption policy.

Get in touch with an experienced insurance claim attorney today

Protect your Hospitality business as soon as you can. Most business interruption policies contain limitations on the timing to file a claim.

Even if you have filed a claim and it has been denied, an experienced insurance claim attorney may still be able to negotiate your claim or file a suit to make sure you get the benefit you deserve.

At Oshan and Associates, our skilled attorneys know how to navigate insurance claims. Our attorneys in our offices in New York, Washington, Pennsylvania, Illinois, California, & Puerto Rico are up and ready to get your insurance claim to you.

Get in touch with us in our offices. You can contact us online for a free 'no obligation' consultation here or call us at (206) 335-3880 or (646) 421-4062.

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