The pandemic and its related shutdown orders have cost businesses trillions of dollars. They have also sent business owners scurrying to review their insurance policies. Many are not making business interruption insurance claims.
Business interruption coverage occurs when there is an insured peril. Your regular casualty coverage rebuilds and replaces physical items damaged or lost. Business interruption coverage pays for economic loss, or lost profits.
For business interruption coverage to apply, though, there must be an actual insured loss. In the case of a fire or tornado, the casualty loss is clear and business interruption coverage would replace the lost profits. In the pandemic, however, the loss is likely not so clear. Many policies have exclusions for pandemics. In many instances it may be difficult to prove that the suffering the business is going through is actually caused by COVID. You can expect insurers to bring up all other possible reasons for loss, including poor management, competition, and change in consumer behavior.
Insurance claims are assets in bankruptcy, so we review our clients’ coverages to see if any viable claims exist. You can expect bankruptcy trustees to do the same. You can also expect that insurers will argue that even if coverage exists, there are likely no damages. The business, they will argue, was already losing money.
Business owners should review their policies for coverage definitions but should expect pushback from insurers. See your insurance advisor and your attorney for help.