Business Interruption Insurance and COVID-19 – Are You Covered?

Famed celebrity chef Thomas Keller has filed a lawsuit against his insurance company, seeking compensation for business losses suffered during the current coronavirus pandemic. This is likely the first of many business interruption claims coming – and many insurance companies are already denying claims.

Keller is asking the California courts to decide whether or not his business interruption insurance covers damages and lost income after his restaurant was shut down by the state to slow the spread of COVID-19. His insurance company has denied the claim, stating that business disruption caused by contagious disease is exempt. Keller is not the only restaurant owner facing the same issue, as other restauranteurs across the country are discovering.

Any business owner who is not considered an “essential business,” and even those who are, is likely suffering cutbacks and losses during the coronavirus pandemic. Businesses and companies are shuttering for the foreseeable future and losing revenue every day. Employees are losing jobs and income.

When you purchase business interruption insurance as part of your policy, it’s meant to cover losses from damages resulting from disasters that shut down your business. You pay your premiums on the good faith that your provider will hold up their end of the bargain when you need them.

However, the current COVID-19 pandemic sweeping our nation is unprecedented. Many business owners are unaware that insurance companies have added exclusions to policies regarding communicable diseases and viruses. In general, your business interruption insurance should kick in after meeting two requirements – your loss must result from a covered cause, and there must be physical loss or damage to your business.

Your business may have experienced physical losses due to coronavirus, even if your insurance company attempts to deny your claim. Here’s why:

• If business interruption is due to contamination, like your premises is exposed to COVID-19, it must be closed and completely sanitized.
• If business interruption and closure is due to government restriction or quarantine, you and your employees have no physical access to your premises.

Whether or not closures related to the coronavirus pandemic will qualify is still under question. However, many businesses have been forced to close by the state, as well as undergo sanitization, requiring physical closure or relocation.

There are challenges with these claims

It’s crucial you review your business insurance policy immediately, as well as document and organize any coronavirus-related losses and documents. All cases have to be evaluated individually, because every business owner’s policy is different.

These policies often contain clauses which exclude coverage for natural disasters, wars, etc. However, under Arizona law, the exclusion must be conveyed to the insured and it must be specific. If your policy does not name exclusions for diseases, viruses or pandemics, you may be entitled to make a claim.

Currently, there are no state or federal guidelines in place regarding COVID-19 and business interruption insurance companies. However, many states and legislators are putting pressure on insurance companies to pay for business losses related to government-mandated shutdowns – despite any contract exclusions.

If your policy does not exclude diseases, viruses, and/or pandemics, and your claim is denied by your insurance company, you may be able to recover damages through a bad faith claim. Again, each case must be evaluated individually to see if such an option applies.

The Phoenix attorneys of Plattner Verderame, P.C. can help if your insurance company is acting in bad faith and denying your claim. Our goal is to protect our clients during this pandemic and work to ensure our citizens come through this tough time safe and financially secure. To set up a consultation, call us today at 602.266.2002 or complete our contact form.