Running a business in today’s world involves risks and uncertainty. Commercial property and casualty insurance policies are tools available to businesses to help weather unforeseen events that adversely affect their operations. To survive circumstances that can cause a temporary suspension of operations or a sudden loss of revenue, many business owners opt to add business interruption coverage to their insurance policies.
Business interruption coverage generally covers lost revenue due to an unexpected closure of your business, carrying expenses such as rent and utility costs, and expenses specific to the closure such as relocating to a temporary location, and advertising to let your customers know about changes in your operations. Knowing this kind of help is available if your company is faced with a disaster that interrupts its operations makes it easier to focus on what you care about most – your business and your customers.
However, insurance companies do not always meet their obligations. They might deny reasonable claims or interpret your policy in a way that favors their interests over yours. When you do not receive from your insurance carrier the support to which you are entitled, it can add stress to an already difficult situation. You paid hard-earned money for a policy that was supposed to help you through unforeseen events. What do you do now?
Knowing your options and your rights during this time is essential. To keep your business above water, you need experienced, effective legal support to hold your insurance company accountable. At Stark & Stark, our legal team will help you understand your options and come up with a plan that can help your business get on the road to recovery.
Business Interruption Services
If you had to close your business or experienced revenue loss, you might be feeling overwhelmed right now. There is a way forward. Our attorneys start by reviewing your business insurance coverage, your recent financial performance prior to the closure, and your present losses. We will work closely with you as we advocate for you with your insurance provider and the court system. You are not facing this alone.
Our services include:
- Obtaining relevant insurance policies and reviewing the coverage scheme
- Documenting and managing your potential claims
- Documenting losses and recoverable expenses
- Identifying preliminary estimated periods of restoration
- Determining efforts to mitigate losses
Business Interruption Losses and COVID-19
COVID-19 has not just threatened public health – it has also wreaked havoc on the economy. Thousands of businesses, big and small, are facing significant hardship because of stay-at-home orders, with many facing indeterminate closures, massive layoffs, and more.
However, the utility of business interruption insurance has been a murky area for many business owners. Some insurance carriers are denying claims based on exclusions they say specifically exclude coverage for viruses, which carriers started inserting in policies after the SARS outbreaks of 2002-2004. Even in the absence of a virus exclusion, or any other language addressing a pandemic, most carriers are denying claims by taking the position that no physical loss or damage has occurred.
The vague language in many policies sets the stage for potential legal battles over whether COVID-19 closures constitute the type of event that trigger coverage for business income loss and expenses. Most insurance companies are leaving policyholders with no choice but to pursue legal action to recover their losses.
Frequently Asked Questions about Business Interruption Claims
Below are some frequently asked questions and answers regarding business interruption coverage to help you better understand the process.
What is business interruption coverage?
Most commercial property or package policies either insure specific named perils, losses from specifically identified “causes of loss”, or provide coverage for so-called “all-risks” with specific named perils excluded. Business interruption coverage is normally purchased as an additional coverage to a business owner’s property or commercial package policy. It provides coverage for businesses that are required to close because of unforeseen events. A policy may also include coverage for business interruptions resulting from the order of a civil authority or caused by closures of upstream or downstream suppliers. Business interruption insurance typically provides coverage for the policyholder’s lost revenue and additional expenses resulting from the closure of its business.
When is business interruption coverage triggered?
Business interruption coverage is typically triggered by direct physical loss or damage to the premises, or to property in the area that the business is located in, which requires the closure of the policyholder’s business or operations. Every policy will be governed by the specific language of the coverage and the facts surrounding the events that lead to the closure of the policyholder’s business.
Does COVID-19 trigger business interruption coverage?
Most insurance carriers are rejecting claims for business interruption caused by the coronavirus pandemic. Most carriers are taking the position that the pandemic has not resulted in a direct physical loss or damage to the insured’s premises or property, therefore business interruption insurance is not triggered. Carriers are also denying claims based on a common exclusion for losses caused by the “presence, growth, proliferation, spread or any activity of” mold, bacteria, fungi or viruses.
The law, however, is not as supportive of the insurance carriers’ position as they would like you to believe. Since “direct physical loss or damage” is not a defined term in the subject insurance policies, courts in several States have expansive interpretations of what can qualify as “physical” damage. For example, one federal court found that the presence of an asbestos contamination in a building qualified as “physical loss or damage.” Port Authority of New York & New Jersey v. Affiliated FM Insurance Co., 311 F.3d 226, 236 (3d Cir.2002). Another federal court concluded that a release of ammonia into the policyholder’s facility constituted “direct physical loss of or damage.” Gregory Packaging, Inc. v. Travelers Prop. Cas. Co. of Am., Civ. 2014 WL 6675934 (D.N.J. Nov. 25, 2014).
The important point is that the relevant language of each insurance policy must be examined independently against the facts and losses applicable to each insured. Contrary to the insurance industry’s attempts to treat all coronavirus related business interruption claims as identical, every claim has its own pattern of coverage and facts that should be closely examined to determine if both the covered peril and the required direct physical loss requirements have been satisfied.
A New Jersey Law Firm to Resolve Business Interruption Concerns
Steering your business successfully through loss, disruption, and damages is challenging, no matter what the cause. However, you are most likely to have good outcomes when you know your policy and have a plan in place for handling your claim.
The sooner you start the better. Let us help you guide your business through this crisis.