Advice about Business Interruption Insurance Coverage for COVID-19 Related Losses
Since mid-March 2020, many U.S. businesses have suffered business interruption-related losses from the COVID-19 pandemic and associated government orders. Much has been written in the popular, legal, and insurance industry press about the potential of insurance coverage for these losses under property insurance policies. Some articles express a dim view of the potential for COVID-19 related insurance coverage, focusing on a physical loss or damage requirement and potentially applicable exclusions. Some articles have even implied that businesses might as well not submit claims.
While some businesses may reasonably decide not to pursue a COVID-19 related business interruption insurance claims, no business should approach that decision casually. There are many reasons why a business might have a solid insurance claim for COVID-19 related losses:
- While policy language is standard in some respects, there are many variations, and the merit of arguments may turn on slight variations in policy language.
- Many policies issued by the same insurer vary substantially from one policyholder to another.
- Some policies include extensions of coverage and supplemental coverages that have lax physical loss or damage requirements, if they have them at all.
- Many policies do not have any applicable virus-related exclusions.
- The science concerning the novel coronavirus and COVID-19 is developing and may impact views of physical loss and damage, among other things.
- The law is unsettled:
- In the last two months or so, businesses seeking COVID-19 related business interruption coverage have filed over 100 lawsuits, including class actions, against insurers; and,
- Legislation is under consideration in many states and at the federal level that may influence whether insurers must provide coverage.
In exercising appropriate diligence and deliberation concerning the pursuit of a COVID-19 related business interruption claim, a business should consider taking the following steps.
First, in order to assess coverage, the business should review its property insurance policy cover-to-cover, word-by-word, in light of the particular circumstances affecting the business. It may be helpful to enlist the assistance of experienced insurance coverage counsel that understand the nuances of coverage under these novel circumstances. Depending on the results of that review, the business should consider notifying the insurer of its losses.
Second, after notifying the insurer of its losses, the business should comply with all insurance policy requirements to perfect its claim. A business should receive the insurer’s initial coverage position and request for information within a few weeks of giving initial notice. Under some policies, a business may not be required to submit a formal, executed proof of loss until requested by the insurer. These more lenient policies may afford the business an opportunity to postpone undertaking time-consuming and sometimes complicated efforts to determine the amount of loss. Under other policies, however, a business may be required automatically to submit a fully executed proof of loss with supporting documentation regardless within a specified time period (e.g., 60 or 90 days). Any business that fails to perfect its claim, including providing the insurer all necessary forms and relevant information, may jeopardize its ability to further pursue a claim, whether in an individual lawsuit or as part of a class action. While insurers often make unreasonable and/or overbroad requests for information, businesses often are not necessarily able to understand whether a request is legitimate or inappropriate or how to respond. Experienced insurance coverage counsel can help, by advising businesses how to comply with insurance policy requirements, including how and whether a business should respond to an insurer’s requests for information, and on asking for waivers or extensions of claim-related deadlines.
Third, any business that is interested in perfecting its claim but intends to take a “wait and see” approach to any lawsuit should account for contractual limitations periods embedded in many property insurance policies. Those periods may require any lawsuit to be brought, if at all, within 12 or 24 months. A business that does not address such a contractual limitations period, whether by filing a lawsuit or getting a tolling agreement or some other extension or waiver from the insurer, may be forever barred from recovering.