If you have business interruption insurance and you’ve closed or reduced your operations due to the pandemic, if your policy does not have a virus exclusion, do not give up on your claim. Despite what you may have read in the news media, courts have allowed claims of restaurants, hotels, and movie theatres to proceed past the insurers’ efforts to dismiss them. The claims that are proceeding are based on several theories, including that: (1) the virus causes direct physical damage to the property because the virus particles can be spread by droplets in the air through the HVAC system (similar Legionnaires’ disease), and (2) the virus renders the property unfit and unsafe for its intended use thereby causing “loss” and “damage” to that property. While proceeding against the insurance company is always an uphill battle, we recommend that if you have coverage without a virus exclusion, you may do well to take a “wait and see” approach and maintain communication with both your insurance agent and your attorney.

In addition to the two (2) theories cited above, other creative arguments have been made by United Policyholders (“UP”), a non-profit organization advocating for individual and commercial policyholders in the United States. Instead of looking to the courts, however, UP researched insurers’ rate setting proceedings to find acknowledgements and admissions by insurers looking to justify their rates. For example, UP has noted that:

1. In 2005, the Insurance Services Office (“ISO”) insurance trade group introduced the ISO Virus Exclusion to standard-form property insurance policies. In introducing the exclusion, ISO acknowledged that viruses have the potential to cause damage to property and related business interruption losses.
2. To allow some classes of policyholders to hold policies without the ISO Virus Exclusion, some insurers, to avoid having to reduce their rates, asked that the exclusion to be optional rather than mandatory. In these rate setting proceedings, insurers acknowledged that “direct physical loss of property” included covered losses resulting from communicable diseases spreading indoors in highly trafficked spaces (like the restaurants). Insurers recognized that “restaurants are probably the most likely to experience such events.” In these rate setting proceedings, insurers acknowledged that restaurants expected coverage in the absence of a virus exclusion.

As part of states’ efforts to help small business owners whose business have suffered due to shutdowns and slowdowns due to Covid-19, some state legislatures have focused on business interruption insurance with the goal of providing greater fairness to the business owners.
If you have a question about your business interruption claim or coverage, please email or call us for help.