The Covid-19 pandemic that has devastated the planet in terms of loss of lives has also caused substantial economic losses for businesses. Mandatory closures, shipping delays and the need for increased safety measures have caused significant financial losses for businesses around the globe.
Are the losses U.S. businesses experienced covered by their business interruption insurance policies? The answer to that question is less than clear, given the individualized nature of insurance policies and the unprecedented nature of the COVID-19 pandemic.
What Is Business Interruption Insurance?
As a small business owner, you undoubtedly invested considerable financial resources and personal time getting the business to the point where it was running successfully. To protect your business, you likely purchased insurance to cover things such as theft, natural disasters, and other threats.
You may have also purchased business interruption insurance, which is intended to protect a business against financial loss when the business is forced to close. Typically, a policy provides income replacement that is used to cover day-to-day operating expenses and overhead costs while the business is unable to operate.
This income replacement is supposed to offset the loss of income when business operations are temporarily halted due to a covered event. For business owners impacted by Covid-19, the concern centers around whether loss of income resulting from the pandemic is considered a covered event.
What Is a “Covered Event” in Florida Business Interruption Insurance Policies?
A business may close for a wide variety of reasons; however, only reasons that are included as “covered events” or “named perils” will trigger the policy coverage. Each business interruption insurance policy is unique, though some commonly covered events include:
- Fire damage
- Damage from wind or falling objects
- Lightning damage
As these covered events suggest, most policies require physical damage to the business or to an adjacent business to trigger income reimbursement benefits. That requirement can pose a significant hurdle when making a COVID-19 business interruption claim.
Business Interruption Insurance Coverage for Civil Unrest and Infectious Disease Events
Unfortunately, most business interruption insurance is aimed at providing income during the time it takes to repair physical damage to a business. However, that does not mean that your policy will not cover losses caused by the Covid-19 pandemic. The key may be to make a claim using the “civil unrest” or “infectious disease” triggering event in your policy, if it is not a listed exclusion. Many policies also include riots, vandalism, or civil unrest. They may also include “infectious disease” as a named peril. Note, however, that some policies specifically exclude any, or all, of those events.
How Are Courts Treating Covid-19 Related Business Interruption Insurance Claims?
Neither businesses nor insurers have experienced anything like the Covid-19 pandemic in the past. As such, it is new territory for everyone involved, including the judicial system. When a policy has a virus exclusion, something that many insurers began including in business interruption policies after the SARS outbreak almost 20 years ago, insurers and some courts are dismissing claims outright based on that exclusion. For those policies that do not exclude virus-related claims, many insurers are denying claims based on the argument that COVID-19 cannot cause the physical damage or loss that is typically required for a business interruption claim to be approved.
There is, however, good news for Florida policyholders, given some recent court decisions. The U.S. District Court for the Middle District of Florida in Urogynecology Specialist of Florida LLC v. Sentinel Insurance CO. Ltd., for example, the judge recognized that virus exclusion provisions in business insurance policies do not necessarily exclude losses due to COVID-19.
In that case, the insurance company denied a business interruption coverage for losses incurred when the business was forced to shut down because the Governor of Florida issued an executive order declaring a state of emergency due to the ongoing COVID-19 pandemic. The Plaintiff filed a lawsuit claiming breach of contract, claiming losses accrued due to loss of the use of the insured property during this time should have been covered because the policy included coverage for loss of income in instances when the insured could not access their premises due to an order of a civil authority.
The defendant insurer filed a motion to dismiss based on a policy exclusion for losses caused by a virus which included language that stated the insurer “will not pay for loss or damage caused directly or indirectly by” fungi, wet rot, dry rot bacteria or virus, except for a “specified cause of loss” to covered property. The Plaintiff countered this by arguing that the policy language is ambiguous, and any ambiguity should be interpreted as being in favor of coverage.
The judge agreed with Plaintiff’s argument, stating that there are “several arguable ambiguous aspects of the Policy” that make ruling on coverage “inappropriate” at this stage in the game and that there is no applicable case law to support dismissing the case. More importantly, the judge also recognized that virus exclusion provisions in business insurance policies do not necessarily exclude losses due to COVID-19. In other words, a virus exclusion in a business interruption policy does not clearly exclude losses related to Covid-19, stating that there is no “binding case law on the issue of the effects of COVID-19 on insurance contracts virus exclusions.”
How Do I Know If My Florida Covid-19 Business Losses Are Covered?
Although the court decisions to date have tended to favor insurers, who have dismissed or denied coverage, all is not lost. There are some recent court cases that have interpreted business interruption insurance policy terms as outright providing coverage for losses related to Covid-19. Other courts have concluded that terms used in a policy are ambiguous at best, therefore allowing the case to move forward and let a jury decide if the insured business is entitled to coverage.
Because every business interruption insurance policy is tailored to the needs of the insured business, the only way to know where you stand regarding coverage is to consult with an experienced business interruption insurance attorney. Only an attorney can review your policy’s terms and apply them to the factors that led to your loss of income to decide if you have a valid claim.
Where Can I Get Help with My Florida Business Interruption Insurance Claim?
If your business has suffered financial losses as a result of the Covid-19 pandemic, you may be entitled to income reimbursement from your business interruption insurance policy. Because you risk having your claim undervalued, delayed, or outright denied, which could lead to litigation, it is in your best interest to contact an experienced business interruption insurance claim attorney right away to discuss your legal position.
Call us at 407-500-1000 or submit our FREE CASE REVIEW form today. One of our experienced Florida business interruption insurance claims attorneys will explain your rights to you and discuss your legal options at no cost.