What is Business Interruption Insurance?

• May 20, 2020
• Insurance Disputes

Business interruption insurance, also referred to as business income insurance, replaces lost income and amounts paid for bills and payroll in the event of a disaster that forces the business to close or reduce operations.

When your business is shut down or working at reduced operations due to a damaging event, you lose revenue, but your business still has to pay its bills. Business interruption insurance helps to provide the protection needed to recover from disasters such as a fire or possibly a pandemic event.

In general, policies cover (but are not necessarily limited to):

• Profits lost which normally would have been earned
• Fixed costs, such as rent and utility costs and other operating expenses
• Expenses of operating from a temporary location (i.e., if you have to move the business to a temporary location)

Common types of coverage

Please note, this is a general description and overview. You will want to refer to your policy for your specific coverage.

• Business income coverage provides basic coverage to reimburse businesses for a loss of income during the period when they undergo the activities necessary to put the business property back into a usable condition. It typically pays net profits that the insured would have earned absent a suspension of operations and normal operating costs that the insured still incurs while operations are suspended.
• Civil authority coverage is an additional coverage that may pay for losses caused by when a civil authority such as a state, local or federal government entity prohibits access to an insured’s premises due to direct physical loss of or damage to property other than at the insured’s premises
• Dependent property coverage provides coverage to pay for losses arising from the shutdown of operations of another business, such as suppliers, retailers or companies that attract customers to the business.
• Extra expense coverage pays for expenses incurred to restore business operations or to avoid/minimize the suspension of business operations. It allows the business to continue operations at a new location and be covered for the additional expenses that go along with it.

Need Additional Information?

• Small Business Interruption Insurance, Missouri Department of Insurance

Will business interruption insurance cover pandemic impacts?

That is the question.

Many, if not all, insurance companies are denying COVID-19-related claims right now, telling business owners that their policy does not cover losses caused by a business slowdown or closure due to the pandemic. Many note that these policies provide coverage when a policyholder suffers a loss of income as a result of physical loss or damage to covered property. According to their interpretation, COVID-19 does not qualify as a physical loss.

Lawmakers in several states are proposing bills to force insurance companies to pay for COVID-19-related losses under business interruption insurance policies. Currently that includes New Jersey, Massachusetts, Ohio, New York, Pennsylvania, South Carolina, Louisiana; and many are calling for federal legislation.

steps you can take now

Review your policy in detail. If you do not have a copy, contact your insurance company and ask for a complete copy of your policy. Look at the type of losses covered as well as the policy’s exclusions and limitations. If the language is confusing, ask your attorney to review your policy.

Determine the notification period. Many policies require policyholders to notify their insurance company of a loss within a certain time period. Make sure you know what that is and comply with it. Document in your business records and send an email or letter to your insurance company.

Build your claim. Document the impact of COVID-19 on your business. Document the financial impact of the pandemic. Include the loss of income, customer attrition rates and incremental expenses incurred.

Business owners should pursue insurance claims immediately. Although, it is likely that your insurance company will deny your claim; filing it now establishes your company’s rights to contest the claim as legislation evolves.

HOW CAN WE HELP YOU?

DO YOU NEED LEGAL ASSISTANCE?

Are you counting on your business interruption insurance to replace lost income, pay bills, and cover payroll? Has your COVID-19-related claim been denied? If so, you may want to speak with an experienced attorney who can interpret policy language, advise you on your legal options and fight claim denials. One of our experienced staff will speak with you personally and provide you with a free, no-obligation case evaluation.

Contact us for a Free Review of Your Case

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