Insurance May Significantly Help Your Company Survive COVID-19
The bad news is all California Businesses Have Been Very Significantly Impacted by the Patchwork of State, County, and City COVID-19 Related Shutdown Orders.
The uncertainty about when there will be return of some semblance of normalcy for California businesses for their suppliers, their customers, and their employees adds to the problem.
The good news is various forms of business interruption insurance coverage may be available under one or more insurance policies which many businesses may have already purchased. Additionally, AALRR can help.
What is Business Interruption Insurance Coverage?
Generally speaking, business interruption insurance provides two primary policy benefits when there is an underlying cause of loss:
- Coverage for loss of business income.
- Coverage for extra expenses incurred.
In addition, some policies contain “contingent business interruption coverage,” which covers business interruption losses resulting from damage to the property of suppliers, of customers, and/or of other third parties that result in a disruption of the policyholder’s business.
What Kinds of Insurance Policies Contain Business Interruption Coverage?
Generally speaking, business interruption coverage is contained in three kinds of insurance policies:
- Stand-alone commercial property insurance policies.
- Package policies containing, among various other coverages, a commercial property coverage part, which are sometimes entitled various forms of “business insurance.”
- In addition some umbrella policies contain business interruption coverage. An umbrella policy is a policy that expands the coverage provided by the underlying policy and provides additional policy limits for the coverages provided.Business interruption coverage can also be added to a commercial property insurance policy or package policy by an endorsement to such policies. A policy endorsement is a policy form that adds to, subtracts from, or changes the terms of a given insurance policy.
What Underlying Cause(s) of Loss Trigger Business Interruption Coverage?
Generally speaking, most policies require that there be “direct physical loss to covered property” caused by a covered peril that results in business interruption.
- The meaning of the “direct physical loss” caused by a covered peril requirement is already the subject of a growing number of disputes between insurers and policyholders seeking coverage for COVID-19 related losses, and the landscape continues to evolve as policyholders and insurers alike navigate the uncharted waters of the current pandemic.However, there are exceptions to the general rule in some instances. One policy we recently reviewed provides that business interruption coverage is triggered when “access to scheduled premises is specifically prohibited by order of civil authority” without requiring that there also be “direct physical loss to covered property.”
Are There Deadlines To Submit Claims?
- Most policies contain strict claim reporting requirements. To avoid jeopardizing potentially available business interruption coverage, policyholders should promptly report their claims. It is not necessary to know the full extent of a business interruption loss to submit a claim.
- Timely reporting of a claim preserves the policyholder’s rights. So long as the policyholder provided timely notice of the policyholder’s claim, the policyholder generally has four years within which to file suit in the event of a denial of coverage. This is particularly important in a changing landscape that is likely to produce court rulings and, possibly, legislation.
Will There Be Legislation Similar To the CARES Act for Policyholders?
The Coronavirus Aid, Relief, and Economic Security Act (“CARES”) is an unprecedented federal $2 trillion economic relief package intended to help combat the impact of shutdowns on businesses and employees.
A California member of the House of Representatives recently released plans for a Pandemic Risk Insurance Act (“PRIA”) that would require the provision of pandemic business interruption coverage with reinsurance provided by the federal government, which could become part of a subsequent amendment to the CARES Act.
What Can AALRR Do To Help?
The firm is rolling out a program to assist our clients affected by the various shut down orders to preserve whatever rights they might have to business interruption coverage in a cost effective way. For a flat fee of $1,500, the firm will review the applicable policy or policies. If business interruption coverage is potentially available, the firm will, as part of the $1,500 flat fee, also prepare and submit to the applicable insurer notice of our client’s claim that complies with the notice requirements of the policy or policies in question.
For more information please contact Chris Andre, partner or your regular AALRR attorney.
This AALRR publication is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process.
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