By Jeff Johnston, CPA/ABV/CFF, JD, LLM
Almost every business has been touched by COVID-19. Losses are historic. But are the losses covered by your insurance policies? The answer to this question largely depends on the wording and interpretation of your insurance policies. Currently, there is disagreement over whether insurance policies will cover business losses related to COVID-19.
As you assess your current situation, here are points to consider and a game plan for reviewing your coverage.
What’s happening around the country?
Insurance companies are generally taking the position that losses are not covered. In response, numerous policy holders claiming they have coverage have filed lawsuits across the country. For example:
- The French Laundry and Bouchon Bistro in Napa County have filed in California state court.
- The Chickasaw and Choctaw nations filed in Oklahoma state court.
- Indiana Repertory Theatre filed in Indiana state court.
- Plaintiffs engaged in the wholesale business of designing, developing, sourcing, marketing and selling footwear filed in California state court.
- Bridal Expressions filed in Ohio federal district court.
- Rojas Family Dental filed in Texas federal district court.
In addition to the numerous lawsuits that have been filed, at least three state legislatures have proposed bills that would retroactively expand business interruption insurance policies to cover losses. In addition, the Business Interruption Insurance Coverage Act of 2020 was recently introduced in the U.S. House of Representatives. This proposed legislation ensures businesses that have purchased interruption insurance won’t see their claims denied because of major events such as the coronavirus pandemic.
There’s encouraging news coming from the White House too. At his April 10 press conference, President Trump showed support for business owners by saying, “You have people that have never asked for business interruption and they’ve been paying a lot of money for a lot of years for the privilege of having it. And then when they finally need it, the insurance company says we’re not going to give it. We can’t let that happen.”
What should you do today?
It’s important to understand your insurance coverage and the notice of loss required to preserve your rights. Consider taking the following steps as soon as possible:
Step #1 – Inventory the insurance policies you have in place.
Step #2 – Meet with your insurance broker and ask them the following:
- What type of commercial insurance do I have?
- What do my policies cover?
- Do I have “business interruption” or “time element” coverage?
- Do I have “contingent business interruption” coverage?
- Do I “extra expense” coverage?
- What type of damage or loss is needed to trigger coverage under my policies?
- For what period is my policy in place and for how long?
- Does my policy cover professional fees? (Professional fees are the fees incurred to assist in preparing the insurance claim.)
- What type of notice of loss am I required to provide the insurance company to protect my rights? What should it include, and when do I need to provide it?
Step #3 – To protect your rights, prepare a notice of loss and send it to your insurance company. Your insurance broker should be able to help you prepare the initial notice and send it to the insurance company on your behalf.
As you begin documenting and assessing your business losses, consider working with an insurance recovery professional who can help ensure your insurance claim accurately and fairly reflects the losses you’ve experienced. If you have any questions or would like to know how we can help with your insurance claim, please call Jeff Johnston at 763-557-2582.
