Road Map to Insurance Coverage for COVID-19 Business Interruption Losses

Business Interruption Insurance for Covid-19 losses
The presence of Covid-19 triggers coverage under “all risk” property insurance policies

Insurance Should Be Part of the Covid-19 Solution

Roughly three thousand years ago, King Solomon was asked for a maxim that was true in both good and bad times. He offered, “This, too, shall pass away.” Most businesses will readily admit that, because of the presence of COVID-19, they are in the midst of some dismal times. The presence of coronavirus has rendered business premises unsafe and unusable for their intended purposes. Governmental closure orders have forced many companies to shutter or drastically reduce their operations. In addition, COVID-19 has prevented access to business premises and disrupted the supply chain. Businesses are losing billions of dollars due to the pandemic. These are the exact kinds of risks that “all risks” insurance policies are designed to cover. Yes, this too shall pass, and if history is a barometer of things to come, insurance payments will be part of the solution, not part of the problem.

Insurance Carriers are Part of the Problem

From the start, insurance carriers recognized that their universally sold “all risks” commercial property insurance policies could provide business income protection for COVID-19 losses. They were rightly concerned that their many policy forms might cover coronavirus-related losses. Given the risk, insurance carriers reserved billions to pay for COVID-19 losses. But rather than pay, the insurers have circled their wagons, leaving policyholders wondering how they can secure coverage for COVID-19 losses.

Given how insurance carriers are adjusting COVID-19 losses, recovery for many policyholders may prove to be difficult. Some insurance carriers initially denied COVID-19 claims without investigation, only to be sued for bad faith. Now, most insurance carriers are holding off on rapid denials in the hopes that policyholders will unwittingly compromise their claims. This adjustment process is designed to entice policyholders to make admissions against coverage that can later be used to deny claims. Unfortunately, the tactics being employed to minimize coverage can be difficult to spot. As a result, the road to recovery will likely be littered with businesses that unwittingly fell prey to expertly devised insurance company tactics.

Corporate Policyholders Need a Road Map to Recovery

Although insurance carriers have a road map for denials of coverage, most policyholders do not have a corresponding road map to recovery. While no two policies are exactly the same, “all risks” policies are standard form. Many of the COVID-19 issues raised by insurance carriers today, such as whether “physical loss or damage” has occurred or whether Civil Authority provisions require a complete prohibition of access to the insured premises, have been addressed before, and most of the case law on these issues is positive for policyholders. But not all businesses will recover. Some have difficult policy language. Others will unwittingly support insurance carrier denials by improperly responding to questions and information requests. Still others will make strategic errors in presenting and pursuing their claims.

To prevent these kinds of errors, policyholders need to understand the issues and devise a plan for recovery. This article addresses the issues that corporate policyholders need to consider in developing their specific road maps to coverage.

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This article has been published in PLI Current: The Journal of PLI Press, https://plus.pli.edu.

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