Practical Advice Regarding Your COVID-19 Business Interruption Loss/Claim

As of March 26, 2020, a majority of businesses across the country are suffering business interruption losses and to the extent a business has some form of business interruption insurance, irrespective of whether coverage is clearly afforded under the verbiage of the policy, a claim should be filed.

As an advocate for policyholders as well as a business owner for over 25 years, I know that business owners prefer direct and accurate information in order to make prompt and informed business decisions. Many of the blogs I have read regarding COVID-19 business interruption claims are not written to be direct and in certain cases contain inaccurate or misleading information. Frankly, almost all blogs, including mine, can be accused of being self-serving.

COVID-19 Business Interruption Claims

With that said, while I recognize that many small business commercial property insurance policies clearly exclude coverage for virus and/or business owners will run into carrier defenses such as no direct physical damage to trigger the virus or communicable disease coverage, it is my firm’s opinion that most consumers should not immediately engage law firms at this time on 25-40% contingency arrangements. It is, however, smart to have your trusted insurance professionals such as brokers, property loss consultants and/or attorneys review your insurance policies so a plan can be formulated and implemented.

The facts surrounding COVID-19 as well as its resulting business owners’ business interruption claims are still evolving, including the legislative response to the coronavirus on both a state and national level. This uncertainty makes it difficult at this time to evaluate losses and predict coverage outcomes for business interruption due to COVID-19. For instance, at least one state (New Jersey) has recently taken up legislation to possibly force insurance carriers to pay some business interruption claims in the wake of COVID-19. Also, it is my understanding that the current version of the trillion-dollar Federal stimulus package/bill, which has not been fully passed or published, may include benefits for certain businesses that would reduce their business interruption loss.

Note that even if your business is fortunate enough to clearly or arguably have virus or communicable disease coverage under your specific insurance policy, it will take time to get paid by your insurance carrier. Many policies cover business interruption based upon the actual loss sustained. As such, even in the unlikely event your carrier grants coverage promptly despite their inevitable inundation of claims to address, you won’t get paid until actual economic losses have been sustained, documented, calculated, submitted, reviewed and potentially questioned/audited.

Take Reasonable Measures

In light of the above, while business owners should proffer/give prompt notice to their insurance carriers, over the next 4-12 months, they have the time to actually determine how a mandatory closing and/or the presence of COVID-19 affected their business and potential reopening thereafter (e.g. carriers may want to evaluate and/or consider potential make-up for certain types of businesses). The period of time needed in order to calculate their losses will provide business owners the time to track evolving legislation and receive an initial coverage position from their respective insurance carrier(s). Business owners will have no less than one year to file suit and in many cases longer.

Meanwhile, policyholders should take reasonable measures to mitigate their loss, preserve applicable records and documents, capture the costs of rescheduling and/or other mitigation measures, and cooperate with their insurance company’s investigation.

Due to the evolving nature of the facts surrounding COVID-19 and the business interruption losses that are ensuing, a business owner will be better served to pay an accountant and/or lawyer with business interruption experience hourly to assist them or to possibly hire a public adjustment firm that can assist with complying with policy requirements as well as assemble and advocate the claim on a much smaller contingent percentage (e.g. 10%) than a law firm. Without filing suit, it may be possible to get paid much more efficiently and expeditiously.

Of course, should your insurance carrier deny your business interruption claim in writing and the quantum legislative response is unsuccessful in indemnifying your business, at that time considering and/or utilizing an attorney in a contingency arrangement could be ripe for many business owners.