Lawmakers, Lawyers Challenge Insurance Companies’ Denials of Business Interruption Claims Due to COVID-19
Some insurance policies have specific language that eliminates viruses as a “covered cause,” or a source of loss that a business owner can cite to file a claim. With insurance companies refusing to pay COVID-19-related business interruption insurance claims, Massachusetts, other states and the Federal government are attempting to force these companies to make good on past promises of support.
Massachusetts Bill SD.2888 is emergency legislation that would require insurance companies to pay business interruption claims for businesses with fewer than 150 employees, even if policies specifically exclude viruses as a covered cause. PA, NY, OH, LA TOO. Other states have proposed similar legislation, including New York, New Jersey, Ohio, Pennsylvania, South Carolina, and Louisiana.
This proposed legislation in Massachusetts will still need to be signed into law, and survive a likely legal challenge from the insurance industry, before anyone can benefit. Legal challenges will drag on for months at a minimum, even if cases are expedited to try and provide relief for small businesses.
The U.S. House of Representatives also intends to introduce legislation that would make insurance coverage available for business interruption losses due to viral pandemics, forced closures of businesses, mandatory evacuations, and public safety power shut offs. However, similar to the various state bills, extreme pushback is expected from the insurance industry.
Some businesses have proactively filed lawsuits, asking courts to rule on whether their insurance policy covers losses from business interruption due to COVID-19.
One early case we are following is Cajun Conti, LLC, et al. v. Certain Underwriters at Lloyd’s of London, et al., out of New Orleans, Louisiana. In that case, Cajun Conti, LLC, which owns a well-known restaurant called Oceana Grill, purchased an “all risk” policy from Lloyd’s of London, which does not contain a specific exclusion for losses due to virus or global pandemic. All-risk insurance policies provide broad coverage to businesses, insuring against all losses except those losses that specifically excluded under the policy.
However, one of the prerequisites to coverage under Cajun Conti, LLC’s policy is that there must be a “direct physical loss” to its premises. The direct physical loss requirement is contained in many business interruption policies, and how courts interpret what direct physical loss actually means in light of COVID-19 will have a major impact on any future litigation.
Another similar case is Big Onion Tavern Group, LLC, et al. v. Society Insurance, Inc. filed in federal court in Illinois. The plaintiffs are owners and operators of restaurants and movie theaters in Chicago. They also purchased all-risk policies that do not contain a specific exclusion for losses caused by viruses. This group of restaurants is also arguing that the presence of the coronavirus in and around their premises have rendered the premises unsafe and unfit for their intended use, and therefore constitutes physical property damage or loss.
These early cases will not only signal how courts will legally interpret these insurance policies but will also signal whether the immense cost COVID-19 has already imposed on businesses and individuals will impact how generously courts are willing to interpret these policies.
In response to the various lawsuits being filed across the county, law firms out of New York and Pennsylvania have proposed a new federal multidistrict litigation (MDL) program to consolidate these cases. The purpose of the proposed MDL is to address the issue of whether coverage exists for these business interruption claims in a uniform manner with consistent rulings country-wide. The MDL petition was filed with United States Judicial Panel on Multidistrict Litigation on April 20, 2020 under the caption In re: COVID-19 Business Interruption Insurance Coverage Litigation.
Should I File a Business Interruption Insurance Claim for coronavirus-related closures?
Every business closed by a government order should file a business interruption insurance claim. Unless a claim is filed within time frames set by your policy, there will be no opportunity to collect on a claim in the future.
You should expect this claim to be denied. Restaurants, bars and entertainment venues may see fewer immediate denials, depending on whether they have specific coverage that includes viruses. All other businesses should expect denials either on the basis of “no physical damage” or “no virus coverage.”
Why should I talk to an attorney about business interruption insurance claims?
Insurance companies will deny claims to protect their own financial interests. In some cases, insurance companies may deny all claims by default. By working with an attorney who is knowledgeable in insurance claims and mediation, you will find out if the denial was legitimate, or if your insurance company owes you money to get your business open again.
Your insurance company has been there every month to collect your payment. Now it is time for them to be there for you. If you believe your business interruption insurance claim has been unfairly denied, please call us at 1-888-423-4477 or contact us online. We will review the details of your case for free. If we take your case, you will owe us nothing unless you receive a settlement or court award.
