Another Wave of COVID-19 Closings: Do Businesses Need to Submit Another Round of Claims to their Insurers?
In our last post, we said that there are many reasons why a business should consider submitting a claim to their insurer for COVID-19 related business interruption losses. See http://bizinsandouts.com/2020/04/23/advice-about-business-interruption-insurance-coverage-for-covid-19-related-losses/. At the time, many businesses had suffered losses due to a suspension of operations beginning in mid-March. Some businesses already knew of infected persons on their premises, but most claims pertained to losses associated with shutdown orders.
In May and June 2020, many businesses reopened. Infection and death rates started to decrease. The authorities eased or lifted restrictions. Then again in the last few weeks, some those same businesses have suspended operations, most often because of the presence of a COVID-19 infection on the premises and sometimes because of a renewed shutdown order.
Many businesses that suffered losses beginning in March notified their insurer of these first round of losses. Those businesses may be in the midst of what may be a burdensome and frustrating claims process with their insurers. Regardless, those businesses that intend to pursue an insurance recovery for this second round of losses should notify their insurer again and initiate a second claims process.
At an elementary level, the situation is really no different than with a business that suffers two fires at the same location weeks apart. The insurer must pay the business for separate losses suffered on each occasion. So the business should notify the insurer and pursue each claim for losses separately.
Insurers will contend that any business that fails to pursue the second claim forfeits coverage by failing to comply with insurance policy obligations. These obligations can vary from one insurance policy to another. But following are some typical obligations:
- an obligation to notify the insurer promptly of a loss;
- an obligation to provide a sworn proof of loss within a certain time period; and,
- an obligation to file a lawsuit on a disputed claim within a period shorter than the statute of limitations. (We’ve written about this shortened limitations period issue a few times before, see http://bizinsandouts.com/2019/04/04/policyholders-should-be-prepared-to-address-short-limitations-periods-under-property-business-interruption-policies-or-risk-of-losing-their-rights-to-coverage/ and http://bizinsandouts.com/2019/06/13/policyholders-beware-courts-continue-to-enforce-short-limitations-periods-to-dismiss-property-insurance-lawsuits/).
Apart from these obligations, different facts and circumstances pertaining to each round of losses may affect coverage, including triggering different types of coverage. The first round of losses may have been based on a civil order requiring the business to suspend operations, implicating civil authority coverage. But the second round of losses may be based on the presence of infected individuals on the premises, implicating standard business income coverage. Or the evidence of contamination may be better, now that businesses have a heightened awareness and have implemented stricter protocols designed to identify infections. And due to pent up demand or other factors, business losses may be greater this time.
As we’ve said before, while some businesses may reasonably decide not to pursue COVID-19 related business interruption insurance claims, no business should approach that decision casually. Those businesses that intend to pursue an insurance recovery for this second round of losses should notify their insurer of these separate losses and initiate a second claims process.