Insurance Claims Related to Covid-19 Losses

Unfortunately, many business owners are now dealing with the loss of revenues caused by a state ordered shut down and/or the change in customer habits due to virus concerns in Pennsylvania. In this regard, businesses small and large in PA may be entitled to “business interruption/loss of business” and related benefits through their property/casualty/ business insurance coverage.  Some of the business that may be affected include:

  • Restaurants
  • Bars
  • Entertainment Venues
  • Hair Salons
  • Spas
  • Gyms and Health Clubs
  • Chiropractors
  • Dental Offices
  • Car Dealerships
  • Therapists
  • Retail Stores
  • Boutiques
  • Hotels
  • Banquet Halls

First, let me say if you have called your “insurance agent” to get an opinion on this, I would not rely on it. The actual first step to determine if you have coverage is to obtain a complete copy of the applicable insurance policy along with all endorsements, waivers and amendments. These documents are the road map to what losses are covered and not covered related to your business. If you do not have a current copy of the above, you can get them from your agent or the insurance company directly. After obtaining all of the above, the next step is a thorough review of the policy language related to this issue. If you are in the process of doing this and are having some difficulty, don’t feel too bad. These policies are convoluted, confusing and very difficult to navigate.

What you may find in your policy is language similar to this:

  • We will pay for the actual loss of business income you sustain and necessary extra expense caused by action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property… other than at the described premises… caused by or resulting from any covered cause of loss.
  • We will pay for the actual loss of business income you sustain due to the necessary suspension of your “operations” during the “period of restoration”. The suspension must be caused by direct physical loss of or damaged property at the described premises. The loss or damage must be caused by the result from a covered cause of loss.

The analysis of your insurance policy starts with the above or similar provisions and then to the other sections of the insurance policy referenced therein. Specifically, those sections addressing “covered losses” and “physical loss or damage”. These as well as any potential exclusion language, must be carefully reviewed and applied to your business situation and existing case law.

COVID-19 Insurance Claims

While every business situation is obviously different, I believe for many businesses there is a viable claim for such benefits as a result of the circumstances surrounding the COVID-19 virus. However, I expect some insurance companies may deny a considerable number of claims for different reasons. One of the issues at the crux of some claims is whether there is “physical loss/damage” to the property or surrounding area. Per some policies, this is required for the business interruption coverage to be applicable. As to this issue, COVID-19 is a potentially deadly virus that can stay on surfaces, objects and materials for a significant period of time. This is in part the reason for the closure of some businesses. Therefore, in many instances there is a “physical loss”, arguably “damage” to the property or within the vicinity of the business which would qualify under some policies. Once this can be established, then business losses caused by the state ordered shut down or from the virus concerns generally should be covered. In the policies I’ve reviewed, I have yet to see a specific exclusion for such a viral pandemic, therefore this is a grey area to say the least.

If a legitimate claim is denied, the course of action would be to file a lawsuit. That would likely be what is called a Complaint for Declaratory Relief “Dec. Action”. This action allows the Court, a judge, to determine whether there is coverage for the claimed loss. Many of these actions would be filed in federal court for procedural reasons. That’s in Pittsburgh for any businesses in Southwestern Pennsylvania. In some cases, there could be additional claims for breach of contract and/or bad faith against the insurer, potentially allowing for recovery of attorney’s fees and additional damages.

If a claim is accepted or judicially determined to be covered, there still may be a question or dispute as to the amount of lost revenue and related damages. This also requires analysis of the policy and circumstances of the loss, and the economics of the business. This may also be an issue subject to contention that requires litigation.

Contact us today for a free consultation

In summary, if you think you may have a claim for loss of business revenue and related expenses due to the COVID-19 virus, you should start the insurance claims process now. Further, as this can be difficult to navigate without some help, I would suggest consulting an attorney with insurance litigation experience. If you have questions about your coverage or have filed a business interruption insurance claim and have been denied, please call me today at 412-260-6540 for a free consultation.