Business interruption insurance is usually part of a broader Property/casualty insurance package bought by companies. The coverage is intended to pay a business for its losses incurred due to a business shut down or slow down beyond its control due to physical loss or risk of a physical loss. Often, the “loss” is defined as the “net income or profit” that the company would have earned during the shut-down or slow-down period. In addition, the recoverable loss may include the on-going normal operating expenses incurred by the company (including payroll) during the shut-down or slow-down period.
Many insurance companies inserted purported exclusions after the 2003 SARS Flu epidemic and the 2009 H1N1attempting to exclude coverage for losses sustained as a result of “viruses” or “bacterium”. However, the attempted exclusions need to be read and interpreted very carefully. Sometimes the attempted exclusion turns on whether or not the virus or bacterium caused actual harm, and other language may only exclude coverage if the virus or bacterium risks physical harm (even if it did not actually cause such harm). In addition, many policies include clauses that specifically provide coverage for losses sustained as a result of a “Civil Authority Order”, that prohibits access to the premises. However, these Civil Authority clauses often times also require that the Civil authority action (i.e. Shut-down Order, Stay-At-Home Order) is taken in response to dangerous physical conditions or actual physical damage. The general lesson here is that insurance contract language is extremely detailed and is often open to more than one interpretation.
The other general point of insurance contracts is that they are contracts of “adhesion”. This means that you did not bargain for the language. It was presented to you in policy form and you did not have bargaining power to change language or exclusions in the policy. . For this reason, in insurance disputes, Courts generally interpret policy ambiguities or language that is subject to more than one interpretation, in favor of the Insured and against the Insurance Company who drafted it.
Conclusion: Do NOT assume that just because an insurance company denied your claim for Business Loss insurance, that that is the end of the story and you do not have a valid claim for coverage. In fact, YOU MAY HAVE VALID COVERAGE. You just need to assert your rights. You bought coverage for business loss and it is reasonable to expect the Insurance Company to pay on the Claim that you bought coverage for. For instance, you do not see the word “pandemic” excluded in many of these insurance contracts. This may be a fine point, but if the insurance companies intended to exclude losses from pandemics, they could have specifically included the word “pandemic” in their language, and they did not do so apparently. It will be interesting to see how many insurance companies in future specifically exclude “pandemics” going forward. If they can exclude it going forward, they could have excluded it in past policies as well, and they did not!
According to Insurance Industry information, the property and casualty sector brought in $1.22 trillion dollars in 2018 alone. That is “trillion” with a “T”. According to industry information, the sector was sitting on $1.7 trillion in Cash and reserves in 2018. Do not fall prey to the Insurance Industry claims that they cannot afford to pay these claims or that it is somehow unfair to pay for the claims. In fact as of April 23, 2020, there is legislation pending in several states that would require insurance companies to pay on these claims, regardless of attempted policy exclusions.
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