If your business has business interruption insurance and has shut down due to the current COVID-19 pandemic, there are at least three steps you should take now in order to understand what coverage your policy may provide and to protect any possible rights you may have.
Three Critical Factors to Understand Your Business Interruption Insurance Policy:
- Review Your Policy
The first thing to do is to review your insurance policy to see what it says about business interruption coverage. While many insurance policies contain similar language, small differences in the particular words used can have a big impact on whether or not coverage exists. In addition, some policies contain specific exclusions for losses due to viruses, while others do not, and certain industries – particularly those involving food service – will oftentimes obtain specific endorsements to provide coverage for incidents relating to food contamination. So, first and foremost, review your policy and all endorsements to see what coverage may be available.
- Identify the Reason Your Business Closed and the Extent of the Closure
Did your business shut down because it was required to by an Executive Order? Or, did your business shut down because an employee contracted COVID-19 and came in contact with other employees while at work? Also, is your business completely shut down, such that no one is working? Or, are some employees still working on a limited basis? Answers to these questions and others will play a big part in dictating whether you have a viable claim under your business interruption or civil-authority coverage. For example, many policies require some kind of physical damage or harm in order to obtain coverage, and cases are already being filed seeking coverage and claiming that COVID-19 caused physical damage to their business. In addition, Michigan's Executive Orders are some of the broadest in the country and may present different arguments for coverage than claims filed in other states.
- File a Claim and Gather Information
Depending on the specific circumstances of your shutdown and business losses, if you think you may have coverage, then it is important to timely file a claim with your insurance company. Every policy contains specific timeframes within which you must file a claim in order to have the right to seek coverage. So, review your policy for those timeframes, consult with a lawyer, and, if your policy and circumstances support it, file a claim with your insurer in order to protect your rights. If your insurer investigates the claim, be prepared to support your business losses. To that end, gather financial statements, payroll records, sales records, expense information, inventory records, and any other documentation needed in order to clearly explain your losses to the insurance company.
Finally, opportunities for businesses to obtain relief are ever-evolving. For example, some legislators are analyzing legislation that would force insurance companies to cover business losses due to the COVID-19 pandemic.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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