When the COVID-19 crisis began, and states started mandating nonessential business shutdowns, many did not think business owners stood much of a chance against their insurers in seeking financial relief from their business interruption clauses in their coverage contracts. That thinking is beginning to change dramatically now that more than a hundred federal cases have been filed.
Common in the lawsuits is the question – did COVID-19 amount to physical loss of property? Dental practices, daycares, salons, restaurants and bars in federal filings all across the country are asserting an emphatic yes. Government ordered closures, in the plaintiffs’ views, amount to a physical loss of property which should be covered under business interruption insurance.
Thus far, insurers have largely delivered blanket denials to such claims, while business owners like restaurants are heavily relying on insurance funds to make it. One estimate by the National Restaurant Association is that 40 percent of restaurants will not survive the pandemic without an insurance payout.
On the other side of the argument, the American Property and Casualty Insurance Association has estimated business closures are costing small businesses, with fewer than 500 employees, from $393 billion to $668 billion per month, and tagging insurance companies with those costs is not sustainable for the industry.
Should your business sue?
There are many considerations and each circumstance varies. Your policies, size of business, length of impact and shutdown costs are three of the largest. It is likely that such cases will be consolidated and there are a number of pieces of proposed legislation in both states and at the federal level to address these issues. Our best recommendation is to contact us to review your circumstances.