Frequently Asked Questions
Business Interruption Insurance (also known as “Business Loss Insurance”) is a type of insurance coverage that business owners purchase to cover the loss of business income following a business interruption, such as a natural disaster or pandemic.
Whereas property insurance typically covers physical damage to a business, business interruption insurance covers the profits that a business would have been earned if not for the interruption. The intent of business interruption insurance is to put a business in a similar financial position as it would have been in without the interruption.
Although all insurance policies differ, many business interruption insurance clauses cover:
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- Lost profits
- Fixed costs
- Temporary relocation
- Taxes
- Additional expenses
It is likely that if you have a commercial insurance policy, you have some form of business interruption insurance. Most commercial insurance policies are lengthy and account for some type of business interruption coverage, even if this point was not specifically negotiated during the purchase of the policy.
What does my policy cover for Business Loss Insurance? It depends on your policy. Typically, if the circumstances affecting your business are the same as those covered in your policy, your business loss claim would be triggered. In the context of COVID-19, such triggering circumstances arose when various state and local governments prevented businesses from operating.
Policies offered by The Hartford typically contain a clause in the policy related to a “civil authority” shutdown. The majority of businesses in the United States were under such orders. If business losses occurred as a result of such orders, it triggers the policy.
Figure 1: Text taken from a Hartford Insurance Policy
Is COVID-19 Covered Under My Insurance Policy?
Do you have coverage for COVID-19?
Insurance coverage for COVID-19 has become a thought in the forefront of many people’s minds. First, it is helpful to define the term “exclusion.” An “exclusion” is a provision that negates insurance for some type of risk in the insurance context. Exclusions narrow the scope of what the Carrier is obligated to cover. Sometimes the insurance agreement uses comprehensive language. Carriers use exclusions to carve away coverage for some risks they are unwilling or unable to insure.
In the COVID-19 context, some commercial insurance
e policies include language that expressly excludes coverage for damages caused by bacteria, viruses, or microorganisms. This could mean that there is no insurance coverage for COVID-19 on your policy.
The primary things that you should look for in a commercial policy are:
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- Business interruption coverage
- Civil authority coverage
- Microorganism coverage
- Any coverage exclusions
In most cases regarding business losses from coronavirus, insurance companies are doing what they do best: denying claims. Most of these denials are likely made in bad faith for the overriding purpose of profitability for the insurance company. After all, insurance companies follow a simple business model built on maximizing their profitability:
Revenues (i.e. premiums) – Overhead (i.e. expenses) – Claims Payouts = Profits
By denying business interruption claims—even if such claims are proper—insurance companies can increase profits. Given such bad faith practices, it is no wonder why The Hartford’s market cap is currently $12.7 Billion, Allstate’s at $32 Billion, and AIG’s an impressive $72 Billion.
The insurance company, of course, cannot state that outright denial is their objective from the start. For this reason, they will find language in the policy that they claim excludes the policy from being effective. The exclusions they will point to often concern viruses, bacteria, and micro-organisms, but rarely, if ever, do they interpret these provisions in a light favorable to the policyholder, even when the explicit language in the policy covers government shutdowns.
A Policyholder has Recourse Against their Insurance Company in the form of a Lawsuit.
A denied business loss claim can ruin a business and insurance companies know that even though an insured individual can file a lawsuit at no upfront cost to the insured (i.e., a contingency-based lawsuit), such lawsuits are time-consuming. In many cases concerning widespread losses, insurance companies make a financial bet that their payout in the form of lawsuits would be less than if they honored their claims.
Business interruption insurance is, by definition, a first-party claim. A “first-party claim” involves a policyholder filing a claim against their own insurance company. This terminology differs when a claimant asks someone else’s insurance to cover a loss. That is called a “third-party claim” and often rises in the case of a vehicle collision.
Many states offer additional protection to first-party claimants to prevent insurance companies from acting in “bad faith.” In the insurance context, “bad faith” means that the insurance company did not act fairly.
Examples of “bad faith” range from an insurance company misrepresenting the policy’s language to avoid paying a claim to unreasonable demands on the policyholder to prove a covered loss and many circumstances in between. Upon finding “bad faith,” it is not uncommon for a Court to award three times the number of the insured’s damages against the insurance company. Moreover, they require the company to pay the insured’s attorney’s fees. Such practices help hold insurance companies accountable.
Contact Cobos Law Firm for a free consultation.
No. It appears that many Carriers are denying business loss insurance policies as a matter of course. Honoring these policies would put them in a precarious financial position, and they have choses to safeguard their business instead of yours.
A business owner certainly has the right to file a claim but doing so is likely to result in unnecessary (and potentially costly) delay.
Initiating legal action requires hiring an attorney to file a lawsuit against your Carrier to enforce the insurance policy. The recovery of certain damages also requires a “notice” letter, which is a process that is straightforward for an experienced insurance coverage attorney.
You can see if you qualify and file a legal claim completely online HERE (function() { var qs,js,q,s,d=document, gi=d.getElementById, ce=d.createElement, gt=d.getElementsByTagName, id="typef_orm_share", b="https://embed.typeform.com/"; if(!gi.call(d,id)){ js=ce.call(d,"script"); js.id=id; js.src=b+"embed.js"; q=gt.call(d,"script")[0]; q.parentNode.insertBefore(js,q) } })() .
We represent clients on a contingency fee basis. This means you pay no upfront costs and we only get paid if we win your case.
Our fee is 33.3%, which is a fee that is substantially lower than many (if not most) law firms handling business interruption insurance cases. We know that the viability of your business requires as much capital as possible in the post-coronavirus era. As such, we strive to get you the largest recovery possible.
The Cobos Law Firm and the Ammons Law Firm pooled our experience and resources to provide the best possible representation for businesses who seek to file a business interruption claim. Andrew Cobos is a West Point graduate and U.S. Army combat veteran. His firm fights insurance companies every day.
The Ammons Law Firm is a top-tier trial firm with a solid track record of success, including Rob Ammons’ $82.5 million-dollar verdict in the Texas Verdict Hall of Fame.
Collectively, we focus on providing top-notch legal representation while promoting the highest ethical standards and achieving superior results.