According to a tracking system at the University of Pennsylvania’s law school, the number of coronavirus-related business interruption claims recently exceeded 700.
This figure is three times the number of business interruption claims filed after recent serious hurricanes, such as Ike, Harvey, and Sandy. One reason for the spike is that hurricanes are regional disasters and the spring 2020 lockdown was a nationwide disaster, at least for the most part. Additionally, the nature of these COVID-19 lawsuits is different. Instead of financial disputes, these cases usually involve coverage issues.
Observers believe the number of such claims will continue to climb.
Business Interruption Policy Language
These policies are a standard part of business insurance policy suites. They usually cover losses related to natural disasters, like floods and hurricanes. Since these incidents are rare, unless the business is in a flood or hurricane zone, the premiums are usually low. Most insurance companies never expected to cover such losses. And, they are hesitant to do so now.
Language varies in different policies, but for the most part, business interruption policies cover losses related to one or both of the following:
- Physical Damage: COVID-19 lives in surfaces for several hours or even several days, so it arguably inflicts physical damage. Most insurance companies claim such language only applies to severe physical damage, like fire damage.
- Civil Action: As mentioned, most coronavirus-related business interruption claims involve restaurants. Insurance companies re=outinely refuse to cover lockdown-related losses. They argue that the restaurant was technically still open, or at least allowed to be open, during the lockdown.
After the SARS outbreak in the early 2000s, some insurance companies amended business interruption policies to exclude losses related to infectious diseases. But for the most part, the boilerplate language remains in effect.
Insurance Company Duties
Regardless of the circumstances, insurance companies have a duty to promptly acknowledge claims. They cannot use a high claim volume as an excuse to drag their feet.
Additionally, insurance companies have a duty to diligently investigate claims. They cannot stamp them “approved” or “denied” and close their files. At a minimum, this investigation usually involves sending an adjuster to inspect the damage.
Finally, if liability and coverage is relatively clear, the insurance company has a duty to promptly and fairly resolve the claim. Once again, the insurance company cannot drag its feet. Furthermore, the insurance company cannot make a “low ball” offer. Typically, the insurance company bears the entire financial risk. This means the company must reimburse the policyholder for the full insured value.
A business interruption payment could be the lifeline your business needs. For a free consultation with an experienced bad faith insurance attorney in Columbia, contact the Michael Jeffcoat Firm. After-hours visits are available.