Business Interruption Insurance Claims

Business interruption insurance is coverage for businesses that helps replace lost income due to physical damage in the aftermath of a disaster.  If a business experiences loss of a building, in a flood or fire for example, business interruption insurance can help cover operating expenses, payroll, loan payments, taxes or even the cost of moving to a temporary location.  Very rarely, but in some cases, a business interruption policy may cover costs associated with a business being forced to close by a civil authority due to physical damage from a nearby business.  Most standard business interruption policies will not cover business closures that are due to a pandemic and even some all-risk policies have language excluding losses due to viruses and bacteria. 

After a natural disaster, most insurance companies will honor their contract and provide a fair payout to their client.  In some cases, however, an insurance company may deny or underpay a business interruption claim. When this happens, it is important to consult with an attorney who will work with a public adjuster to examine the language in the policy contract and compare it to the damage that occurred.  

There are proactive steps you can take to reduce the chances that your business interruption claim is denied or underpaid.  The first step is making sure to do your due diligence when selecting a policy.  You will want to review the proposed policy and determine that it meets the needs of your business.  In general, your insurance agent should be able to discuss possible scenarios that may or may not be covered in the policy, but keep in mind that they work for the insurance company’s best interest.  Because filing a timely claim is crucial, it is important to keep your inventory and equipment lists regularly updated.  Experts recommend that businesses keep a backup of this information at an offsite location.  In the event of a tornado, for example, an accurate account of inventory and equipment may be impossibly difficult, especially if the computers are irreparably damaged.  Even if you’re perfectly prepared an insurance company may still deny or underpay your claim.

Business Interruption and COVID-19.

Following the 2003 SARS outbreak the insurance industry began rapidly adding exclusionary language to policies that would allow them to deny businesses that file claims for business interruption due to pandemics.  This exclusionary language has not deterred business from filing claims during the COVID-19 government-ordered lockdowns, but judges have dismissed over four times as many business interruption lawsuits as they have allowed to move forward.  The cases that were allowed to proceed were due to ambiguous language in the policy, which the insurance industry quickly corrected.

If your business interruption claim was denied by your insurance company, call The Cochran Firm today.  Materials you can have on hand that will helpful include:

  • A copy of your business interruption insurance policy.
  • Any business records that support the value of your claim. 
  • Any business records related to employees and finances. 
  • Any materials that document the correspondence between you and your insurance company related to your business interruption insurance claim. 

Source Material: 

https://www.investopedia.com/

https://www.insurancejournal.com/news/national/2020/11/30/592047.htm