COVID-19 Business Interruption Claims at a Crossroads: Insurance Policy Limitations May Require Businesses to Sue Now or Risk Losing their Claims
We’ve written before about the perils of contractual limitations periods in insurance policies. 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/ ; http://bizinsandouts.com/2019/06/13/policyholders-beware-courts-continue-to-enforce-short-limitations-periods-to-dismiss-property-insurance-lawsuits/ The problem is that, while state law may provide a statute of limitations period of five years or more, from when the insurer refuses to provide coverage, insurers often add provisions to their policies shortening the limitations period to 12 or 24 months from when the business first suffered any loss. In Missouri, these shortened periods are not enforceable. In many other states, however, a business that does not sue in time may be left without recourse against an insurer that refuses to provide coverage or merely delays its decision to provide coverage.
While not universal, these 12 and 24 month limitations periods are prevalent. It’s been nearly 12 months since most affected businesses started suffering pandemic-related business income losses. We are on the cusp of many businesses losing their claims if they haven’t sued or secured an extension from their insurer before the deadline. The word on the street, which is consistent with our experience, is that insurers generally are not granting extensions.
Some might think that any businesses with a valid COVID-19 business interruption claim should have sued by now. But there are many legitimate reasons why many businesses have not. Some are in the midst of the claim process with their insurer. Others have had enough to handle in the last year without the added expense and distraction of a lawsuit. Still other businesses have taken a wait and see approach, deferring any lawsuit hoping that courts would bring more certainty to the issue of coverage.
On that note, in the months that have passed since businesses starting suing insurers for COVID-19 business income losses, insurers have prevailed in most cases involving policies with virus or similar exclusions, but some businesses with those exclusions have survived insurer motions to dismiss. Factoring out disputes involving virus or similar exclusions, the pro-business decisions are running a closer race nationally. In some jurisdictions, the pro-business decisions have the lead. Nevertheless, the bulk of the litigation has not yet matured to a point where there’s much certainty on the issue of coverage.
If your business has postponed litigation on a COVID-19 business interruption claim and your insurance policy has a 12 month limitations period, you may be at a crossroads. If you don’t know whether your policy has a 12-month limitations period, you’d better check. And if you need help or want to hear possible options, you should consult an experienced insurance coverage lawyer ASAP.