COVID 19 Business Interruption Insurance

Business owners throughout Pennsylvania continue to struggle from the financial losses and interruption to their business caused by the COVID-19 pandemic. While state and federal aid might have helped keep some businesses open, many businesses may close forever if they cannot recover the loss of income caused by the virus.

Insurance claims for business interruption (BI) insurance coverage might provide the benefits owners need as they try to keep their businesses open. However, insurance companies are aggressively fighting BI claims. The insurance companies allege that the policies do not cover incidents involving diseases and government shutdowns that do not result in physical property damage.

If you are unsure whether your business interruption claim is valid, contact an insurance attorney to discuss your specific case. The attorney can review your BI insurance policy to determine if the terms and conditions in your policy cover a COVID-19 BI claim.

What is Business Interruption Insurance Coverage?

Business interruption (BI) is a type of insurance coverage a business can purchase, in addition to general liability and other insurance coverage. BI is generally sold as a rider to another insurance policy for an additional premium.

Interruptions to regular business operations can cause significant losses in revenue. The policy covers losses of income and some operating expenses if the business must close because of a covered event.

Most BI insurance policies compensate owners for losses related to:

  • loss of revenue;
  • rent, lease, and mortgage payments;
  • taxes;
  • employee payroll;
  • loan payments; and,
  • relocation costs.

Each policy is unique. You must look at the terms and conditions to decide if the policy covers incidents like COVID-19. Unfortunately, after other outbreaks, insurance companies added exclusions in BI policies to avoid paying claims related to losses caused by infectious diseases.

What is Pennsylvania Doing About Business Interruption Insurance Claims?

Pennsylvania is one of several states that may pass laws related to coronavirus-related BI insurance claims. Several bills have been introduced that related to BI claims in the state.

Pennsylvania H.B. 2372

This bill would require insurance companies to pay BI claims, even if the policy expressly excludes viruses. Insurers who pay BI claims for COVID-19 losses could apply for reimbursement from the state insurance regulator.

Pennsylvania S. 1114

This bill requires insurers to pay BI claims, even if the policy excludes viruses or requires property damage for a civil authority claim. Small businesses would receive 100 percent of their claims. Policyholders that are not classified as a small business by the SBA would receive 75 percent of the claim.

The bill defines property damage for a civil authority claim to include someone who has been infected with COVID-19 on the property, in the city where the property is located, or in the Commonwealth of Pennsylvania. The bill does not reimburse insurance companies for paying claims.

Pennsylvania H.B. 2386

Creates a COVID-19 Business Interruption Grant Program to provide grants for businesses that have had BI claims denied. Businesses must remain open and not lay off any employees during the COVID-19 disaster emergency. A business that did not comply with the rules must pay back the grant plus 10 percent.

Federal Lawmakers Also Weigh in About BI Claims for COVID-19

Some House Members in Congress are also pursuing legislation that would force insurance companies to pay COVID-19 BI claims.

Several Members sent a letter to four insurance organizations asking about payment of business interruption claims related to coronavirus losses. The organizations responded that BI insurance was not designed to cover losses related to infectious disease. In other words, insurers did not intend to pay these claims.

Lawsuits Related to Business Interruption Claims are Making Their Way to Judges

The courts are also beginning to rule on cases related to BI insurance claims for COVID-19 losses. A Michigan judge ruled in favor of the insurance provider on July 1.

A business owner in Michigan filed a BI claim for $650,000 related to business losses caused by the coronavirus. His attorney argued that coverage applied under the civil authority provision in the policy.

A civil authority provision states that BI coverage applies when a government entity closes down a business or interrupts regular business activity. The restaurant owner claimed that the government COVID-19 orders restricted business, which resulted in a physical loss by effectively blocking public access to his business.

The judge disagreed and granted the motion to dismiss. She did not accept the physical property damage argument. The judge noted that the virus was not on the property, and even if it was, the virus does not hurt the property.

A New York judge ruled similarly on a motion for a preliminary injunction. The New York judge said that the coronavirus “damages lungs,” not printing presses. The BI claims lawsuit by a magazine publisher is still pending.

With the number of BI claims being filed, additional lawsuits are likely as business owners fight insurance providers for coverage and benefits.