Businesses are already claiming COVID-19 damages — Will insurance companies step up?

Editor’s note: The opinions expressed in this commentary are the authors’ alone. Travis Holt is CEO and co-founder of Brush Creek Partners, a risk management consulting firm and full service brokerage.

The current coronavirus, COVID-19, has already had a significant impact on businesses and there is uncertainty about how long the impact will be felt.  The most significant challenge facing both small and large companies is the loss of revenue as a result of the virus and subsequent stay at home orders.

While business owners try to navigate these challenging waters, one area that has received significant attention is business interruption insurance.  There are differing opinions about whether or not insurance carriers should and will pay these claims to their policyholders. While there currently isn’t an answer, there are steps you can take to put yourself in the best position for recovery.   

“We’ve noticed a significant amount of confusion in the marketplace and want to do our part to help,” said Emily Short, who runs the COVID claims team at Brush Creek Partners.   

To start, insurance carriers and the industry as a whole have asserted business interruption coverage does not apply to COVID-19 claims.

The American Property Casualty Insurance Association argues in an April 6 press release that “any action to fundamentally alter business interruption provisions specifically, or property insurance generally, to retroactively mandate insurance coverage for viruses by voiding those exclusions, would immediately subject insurers to claim payment liability that threatens solvency and the ability to make good on the actual promises made in existing insurance policies.”

Additionally, most insureds who have filed claims have received claims denials from their carriers.  

While every insurance policy is different, there are two primary reasons carriers are denying claims. First, they’re arguing the virus did not cause direct physical damage, which is the coverage trigger for the most common business interruption forms. Later in most policies, there are typically exclusions relating to viruses or pandemics.  

Although carriers are denying claims, insurance recovery attorneys believe there may be a legal path to recovery. There have been numerous lawsuits filed already and none more prominent than the one filed by famous restauranteur Thomas Keller against the Hartford Insurance Company.

“To avoid payments for a civil authority shutdown, the insurance industry is pushing out deceptive propaganda that the virus does not cause a dangerous condition to property,” Keller’s attorney, John Houghtaling, said in a press release. “This is a lie, it’s untrue factually and legally. The insurance industry is pushing this out to governments and to their agents to deceive policyholders about the coverage they owe.”  

On top of the battle going on between insurance companies and their policyholders, politicians are throwing their hats in the ring as well.  Seven states including Louisiana, Ohio, Pennsylvania, New York, New Jersey, Massachusetts, and Rhode Island have introduced business interruption bills requiring insurance carriers to pay business interruption claims even when the policy language specifically excludes these claims.  

Given all of this confusion, you may wonder what you can do to protect your business. Here are three steps we’re recommending: 

1. Explore all alternatives to replace lost income including Paycheck Protection Program and Economic Injury Disaster loans
2. File a business interruption claim with your insurance carrier or carriers
3. If your carrier denies the claim, talk to an attorney who specializes in insurance recovery and counseling 

If you follow the steps above, you’ll be well prepared to make the moves necessary to continue growing your business. 

Travis Holt is CEO and co-founder of Brush Creek Partners, a risk management consulting firm and full service brokerage.