As businesses are allowed to begin to reopen, now is the perfect time to check your “must-do” list for pursuing COVID-19 business interruption insurance claims. Here is a list of three things to do as you begin to reopen your business.
- Submit your claim to your commercial property insurer for your losses resulting from the shut-down orders. Most insurance policies require that you give notice of your claim and submit a sworn proof of loss within a short time period as a condition precedent to coverage, so now is the perfect time to submit your claim if you haven’t already done so.
Commercial property insurers generally provide business interruption coverage resulting from direct physical loss or damage, including loss of use, to covered property. A governor, mayor, or health department issued order shutting down a restaurant’s indoor seating area or preventing a hotel from using its large conference rooms, for example, may trigger your coverage. Commercial property insurers also provide civil authority coverage, where a government official closes your property as a result of direct physical loss or damage to nearby property. Civil authority coverage may often be limited to a short time frame, such as 60 days of coverage, but you need to check your policy.
If your loss is covered and not subject to a virus exclusion, your insurer will pay you for your lost net income and continuing expenses, including payroll, less any expenses saved or not incurred, subject to the time and dollar limitations under your coverage. Since many shutdown orders were issued in early to mid-March, you should have at least two months of accounting records to document your losses. Also, you don’t need to know your loss to the penny. Just submit your best estimate of your loss for now.
- Check your policy to see if it shortens the time in which you have to file a lawsuit. Once you’ve submitted your claim, you then may have several years in which to decide to file a lawsuit. For example, the statute of limitations for a breach of an insurance contract requires that you file a lawsuit within six years of your loss under Minnesota law, eight years under Ohio law, and 10 years under Illinois and Indiana law. You must check your policy, however, because some policies mandate a shorter time period in which to file your lawsuit, such as one or two years after your loss. Once you have your deadline for filing a lawsuit, you should add it to your calendar to know the deadline in which you must act or forever lose your claim.
- Check your policy to see if it provides other benefits, such as paying for the cost of decontamination, public relations, and an accounting firm to calculate your losses. It's been a pleasant surprise to find that several insurance companies did not include a virus exclusion in all of their commercial property insurance policies, like Aspen American Insurance Company, Auto Owners Insurance Company, certain underwriters at Lloyd’s London (Beazley Insurance), Cincinnati Insurance, Erie Insurance Company, and Society Insurance), to name a few. Indeed, some insurers explicitly covered losses and damages resulting from viruses, such as The Twin City Fire Insurance Company, an affiliate of The Hartford.
Many policies will pay for the cost to clean and sanitize your premises should they be contaminated by the coronavirus. These coverage extensions are often subject to lower dollar limits in comparison to your overall coverage, for example, $25,000 or $50,000 of coverage, and there is no limit to the number of decontamination events as it is only limited by the dollar amount of the coverage under your policy. Following the decontamination, some policies will pay for the cost of a public relations firm to communicate to your customers and employees that your premises are safe. Some policies will pay for your lost net income and continuing expenses, including payroll, during the decontamination and any period of restoration. Finally, some policies have a small limit of coverage for paying accountants to help calculate your losses, again subject to lower dollar limits, such as $10,000 or $25,000. It’s important to learn the benefits that you have been paying for and are entitled to under your policy.
Finally, speak with your attorney. If you have a substantial loss and want to control your own destiny, you may want to consider suing your insurer. On the other hand, you and your attorney may want to keep track of other lawsuits against your insurer for COVID-19 business interruption claims. For example, numerous lawsuits have been filed against various insurers in both state and federal court, including several seeking statewide and nationwide class action status. And if you, unfortunately, have a policy with a virus exclusion, you and your attorney may want to track lawsuits against those insurers to see if courts find the exclusion unenforceable. There are also legislative efforts in several states seeking to provide small businesses relief from the effects of the virus exclusion in their policies. All of your recovery options will be lost, however, if you never file a claim.
Please visit our COVID-19 Toolkit for all of Taft’s updates on the coronavirus.