Business Interruption Claims

Business Interruption Insurance Claim

Small businesses are the lifeblood of the U.S. economy – accounting for 99% of all businesses in our country. Small businesses make-up more than two-thirds of the new jobs and 44% of our country’s economic activity. The COVID-19 outbreak has struck an unprecedented disruption to our economy with most small business being forced to lay off workers and shutter their doors during the pandemic. The recovery of these small businesses is critical to restarting our economy. However, the welfare of these small-businesses and the U.S. economy are being threatened by the insurance industry.

About one-third of American small businesses have business interruption coverage. This type of insurance can provide coverage for lost income, operating expenses, or additional expenses suffered by a business whose operations are disrupted by an unexpected event, such as a fire, natural disaster, or a government mandated shutdown like with COVID-19. The coverage is not usually sold as an independent policy, but added on or bundled in a business owner’s policy. Many business owners may not even know they have such coverage.

TYPES OF COVERAGE

There are variety of business loss coverages offered by insurance companies. Some of the more common insurance that may provide coverage for COVID-19 related losses include:

Business Interruption Insurance:

This provides coverage for lost business earnings and/or covers extra expenses that result from business operations being disrupted or shutdown due to a covered cause.

Extended Business Income Insurance:

Many businesses struggle to regain their prior levels of income following a disruption/shutdown caused by a covered event. This type of coverage helps replace the income loss while building the business back to pre-shutdown levels.

Contingent Business Interruption Coverage:

Many businesses depend on third parties to operate. If a third party is unable to operate and supply or support a business relying on it, this coverage can help cover resulting losses.

Civil Authority Coverage:

This coverage is offered to protect businesses from losses suffered when a business is disrupted by an order or action of a governmental agency for a covered event.

Ingress/Egress Coverage:

This covers business losses sustained during the period of time when access to the property is restricted by a covered event.

Industries affected by the COVID-19 pandemic

Virtually every business in the United States, large and small, has been damaged by the pandemic.
Specific industries that have been affected include:

  • Hospitality IndustryHospitality Industry
  • Service IndustryService Industry
  • ManufacturingManufacturing
  • RetailRetail
  • Real Estate BusinessesReal Estate Businesses
Hospitality Industry

Hospitality is one of the biggest industry sectors in the world.  It physically connects businesses to each other and consumers to businesses.  Shutdowns, quarantining, and consumer fears of COVID-19 have resulted in serious economic damage to this industry.

  • Lodging: The bottom line is that if people are not in hotels, motels, vacation rentals, or resorts, those businesses have no revenue.  Conventions and weddings also generate significant revenue for these venues, but restrictions have resulted in the loss of billions for cancelled events.  It is expected that the coronavirus pandemic may result in as many half of the 8 million workers in this industry being laid off or losing their jobs entirely.
  • Travel & Tourism: The COVID-19 outbreak brought travel to a halt. This slump in travel is projected to cause a $900 billion hit to the U.S. economy.  It is just not the airlines and cruise lines that have taken a toll, but all of the small businesses that depend on tourism and support the travel industry.
  • Food & Beverage: Small businesses in the food and beverage industry are among the hardest hit by the COVID-19 outbreak.  Fast food franchises, diners, caterers, bars, bakeries, and coffee shops have suffered significantly reduced business as well as disrupted supply chains.  COVID-19 and governmental restrictions brought “out-of-home” food consumption to a near standstill.  The virus outbreak may also bring about long-term and wide-spread changes in consumer interest and demand for such services.  Industry experts project that the effects of COVID-19 could eliminate 10-20% of restaurants by the end of the year.
  • Entertainment: Theme parks, movie theaters, casinos, and concert venues have been forced to close to the public.  Sports, at all levels, have been shut down due to COVID-19 impacts. Thousands of small businesses that either support or depend on this industry have suffered significant losses.
Service Industry
  • Therapists & Counselors: Governmental stay-at-home orders have limited the ability of therapists and counselors to conduct in person sessions.
  • Medical Care/Service Providers: While news media has focused on hospitals being overwhelmed by COVID-19, the reality is that the vast majority of healthcare providers have suffered tremendously by governmental restrictions on “non-essential” care.  Dentists, chiropractors, physical therapists, primary care physicians, and various specialists providing non-emergency care have been forced to close their practices.
  • Hair and Nail Salons & Barber Shops: Mandatory shutdowns and stay-at-home orders forced many personal care businesses such as hairstylists, manicurists and masseuses to close shop. Even when restrictions are lifted, these businesses are likely to continue to suffer financial losses as fewer people may seek out such services due to the threat and/or fear of COVID-19.
  • Veterinarians: Regulations and stay-at-home orders forced many veterinary clinics to eliminate non-emergency services, such as well checks, that typically make up the bulk of the practice’s revenue.
  • Landscaping: With the intention of ensuring safety of residents, many state governments issued “stay-at-home” orders and designated certain businesses as essential. In some states, such as Michigan, landscaping was left off the “essential business” list. The impact has been financially disastrous for many landscaping and property maintenance companies.
  • Construction Trades: The U.S. construction industry is a more than $1 trillion industry supported mostly by small businesses.  Government shutdowns and unemployment have had a tremendous impact on all construction trades engaged in new home construction and renovation.
  • Gyms, Health Clubs: Gyms, health clubs, and yoga studios are part of the $100 billion fitness industry.  COVID-19 forced  these small businesses, which are largely dependent on physical locations and on-site staff, to shut their doors and lay off employees.
  • Tow & Repair Shops: With the stay-at-home order in place, roadways have been almost empty. And with fewer cars on the road, there are fewer accidents and vehicle issues, so tow truck drivers and repair shops have been mostly sitting idle.
Manufacturing

The COVID-19 pandemic hit manufacturers in an unprecedented way. Across the world, demand, supply and workforce availability were all impacted at essentially the same time. Many manufacturers that supply personal care or medical products have experienced disruptions in supply chains. Manufacturers in other sectors have experienced dramatic drops in demand and have had to reduce or cease operations.

Retail

As quarantined consumers turn to online shopping, brick and mortar businesses that are dependent on foot traffic have been suffering a massive slump. Flower shops, car dealerships, clothing stores, bookstores, jewelers, greenhouses, and sporting goods stores have all been forced to close their doors. This has resulted in tremendous financial losses to these businesses and in turn, losses of important local and state tax revenues.

Real Estate Businesses

As businesses across all industries shutdown, commercial tenants struggle to pay rent which impacts a landlord’s financial ability to make mortgage payments. While mortgage interest rates have seen all-time lows, stay-at-home orders have negatively impacted many real estate companies.

How do you know if your COVID-19 business losses are covered by your insurance?

Unfortunately, despite insurance companies collecting more than $6 billion a month in premiums from small business for insurance coverage, they are now routinely denying these business claims – relying on the fact that most business will not challenge their denial.

Reviewing a business insurance policy can be a difficult and confusing task.  A policy may be 100 pages or more and filled with unfamiliar terms, definitions, and explanations. Language and coverage vary policy to policy, company to company, and state to state.  A detailed legal analysis is needed to evaluate a policy’s coverages and exclusions.

Our firm is currently reviewing insurance policies for small businesses to identify whether there may be any available coverage for COVID-19 related claims.  If we find that a policy provides coverage, we can help gather the necessary documentation needed to substantiate and submit the claim.

If an insurance claim has already been made and it was denied, we can review the policy and the insurance company’s response to ensure the insurance company’s denial is not wrongful.  If we find that a claim has been wrongfully denied, we can take appropriate legal action.

If you would like us to review a policy, or discuss a potential wrongful denial of a claim, contact our firm at: (419) 241-1395. There are absolutely no legal fees or expenses unless we recover from the insurance company for you.

Charles E. Boyk Law Offices, LLC