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Business Interruption Policies and the Law

Business Interruption Policies and the Law

As the lockdowns, movement restriction and limited business measures imposed by government subsists, many business and companies are taking and may continue to take catastrophic hits. As a result of this, business owners and companies are returning to their insurance contracts to look for a possible protection under their Business Interruption policies. 

Business Interruption insurance simply means insurance coverage for losses incurred due to business halt or suspension of operations caused by various reasons ranging from property damage, fire disasters etc.  

The typical latitude of business interruption insurance covers include; 

  • Profits 
  • Hike in Operating Expenses 
  • Operation from temporary location etc.

In some rare occurrences when extensions are provided for in the BI policy, the insurance cover may be limited to a certain percentage of the sum insured. Examples of extensions include prevention of access to the premises, interruption of supply of goods and services etc. 

Covid-19 Pandemic and Business Interruption Insurance 

Lockdowns, movement and business restrictions put in the place by the government to curb the spread of the virus has forced companies and businesses in the US to suspend operations. This has occasioned financial hardships on business owners and many now seek to understand the import of their business interruption insurance and how they can claim compensation. 

There has been many issues surrounding whether standard business interruption policies should be extended to cover the current COVID-19 pandemic. Chief among the issues raised is whether a pandemic is contemplated within the Material physical Damage Proviso. As earlier mentioned, business owners may try to claim recovery on the basis of a wider latitude of interpretation of the insurance clause.

A clog in the pursuit of recovery under the business interruption claim is the Virus and Bacteria Exclusion. The wordings of the insurance has a huge bearing on the claim and sometimes insurance companies insert Virus and Bacteria Exclusion in their policies. 

On the face of it, the clause exempts the insurance company from liability for loss or damages caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease. This may ordinarily operate to invalidate your claim. 

Legislative measures are however being processed in some states to nullify such exemptions from liability in part or in whole. On the whole, the chances of obtaining a compensation in that case is unclear but not impossible. Only the courts can effectively provide some clarity and solidify any protection of business owners. 

What to prove to trigger a Business Interruption Provision

For a successful compensation claim under BI insurance, you must be able to show the following; 

  • Physical Loss or Damage
  • Claiming compensation from your insurance service providers is hinged mostly upon proof of physical loss or damage caused by the business interruption. To determine this, recourse must be made to the language of the policy and extent of coverage it affords.

    In most cases, business interruption policies cover damage to premises or property. This may prove to be a stumbling stone in insurance claims for business interruptions caused by other events other than property damages like the outbreak of a virus or detrimental government policies. 

    Specialized attorneys have been looking to argue a widened construction of the standard policies although there is scarce legal precedents to back those arguments. Their position is largely hinged on the use of “or” in the phrase “direct physical loss or damage”. 

    This alternative position has been the basis of many lawsuits against insurance companies in the wake of the coronavirus pandemic. Hopes of claiming recovery under this is wholly dependent on the context of the insurance clause and the interpretation by the courts. 

  • Civil Authority Provision 
  • You may also be able to claim compensation for business interruptions due to civil authority provisions. Thus, you can claim compensation If you can show stipulations within the insurance contract that covers loss of business income due to laws or orders of a civil authority prohibiting access to property or damaging business property.

    More business owners are coming forward to claim an extension of coverage to the mandatory business closure and movement restrictions without express stipulations. This has led to a wave of class action lawsuits and legislative deliberations. 

    Legislative Fixes and Immediate Insurance Response; Business Owners Win

    Insurance companies are expectedly wary of processing compensation for business interruption claims arising from the COVID-19 pandemic. While government seeks to extend the ordinary insurance covers to the current situation of things as current legislative proposals suggest, it may spell a meltdown for insurance companies. 

    The immediate response to this proposal is a counter proposal by insurance companies for the establishment of a COVID-19 Business and Employee Continuity and Recovery Fund. The fund is to be financed by government and processed for impaired business owners by Insurance companies.

    The ultimate implication of either proposal is that there is hope that business owners may be able to recover compensation for business impairments. Assessing your position places you in a better position for any compensation that may be derivable. Contact a BI insurance attorney today to discuss your options. 

    Recovering Compensation for Business Interruptions 

    Currently, the position appears a little nebulous and much of your hopes of recovering compensation based on your Business interruption insurance depends on the wordings of the clause. Our attorneys at Oshan and associates have considerable experience in fighting for business owners whose claims have been denied or undervalued. They can help in the evaluation of your case and review of insurance contracts where possible.

    All hopes of recovering compensation is not lost as the legislative process is already in motion for a possible extension of insurance coverage to the COVID-19 pandemic. The outcome of that process would ultimately affects rights of business owners and duties of insurance service providers. 

    However, it may be smart to not wait for the legislative fixes before litigating your claims. Many restaurants and barbershops have approached the courts for declaratory reliefs to show that their business interruption insurance cover includes damages occasioned by COVID-19. 

    Class Action BI Claims

    In some states in the US, restaurant owners, barbershops and other business owners have resorted to filing class action claims against insurance companies. The crux of most of these actions is to seek for a declaratory judgment to find that COVID-19 is covered under BI Insurance. 

    Our attorneys are ever ready and competent to handle class action lawsuits bordering on BI claims to fight for Business owners in California. 

    You need a Business Interruption Claims Attorney 

    The period succeeding the lockdowns would predictably see an overwhelming number of insurance claims and lawsuits by business owners and companies. Given that insurance companies are business outfits, they may not be easily given to providing compensation for everyone who claims same due to the current pandemic. You need an attorney to effectively pursue that. 

    Insurance clauses and coverage issues can be very complicated for business owners to handle on their own. Making a claim for compensation usually involves complications and legalese like statute of limitations, notices etc. To ensure that your best interests are protected, you may need to consult an attorney. 

    Your chances of recovering compensation depends largely on the wording of your insurance contact. An experienced BI insurance attorney can painstakingly review your contracts for possible adjustments and analysis of the strength and weakness of your claim. 

    As your attorney, we can help track and keep record of losses in computation of fair compensation. Where necessary, we will compare losses from years prior to COVID-19 and the ones incurred during COVID-19 years. 

    Our Attorneys can fight for you

    Our attorneys at Oshan and associates can help evaluate your position, review your policies, negotiate a fair settlement and handle litigations where necessary. Contact us for a free consultation to discuss your case or place a call to us at (206) 335-3880 or (646) 421-4062. 

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