When you ensure your business, you expect your finances to be protected in the event that your structure and fixtures are damages in some form or fashion. While there might be limitations on your insurance policy, you probably have a general sense of what’s covered and what isn’t. Oftentimes, these policies include provisions that protect you from business interruptions, which can be a real lifesaver in the event that your business has to shut down for some reason.
Business interruption insurance allows you to recover lost income and operating expenses, and is generally utilized when a business is damaged as a result of some sort of natural disaster, like a hurricane or flood, or a fire. The recovered money can be immense and ensure that your business is able to weather the storm. With this insurance money, your business might be able to maintain profits, stay up-to-date on leases or mortgages, temporarily relocate, keep employees on the payroll, cover loan payments, and may even pay quarterly taxes as required by law.
But what if your business has been interrupted by a pandemic? Insurance companies surely won’t want to pay out a claim based on that. If they did, then almost every business in Texas with this type of insurance protection would seek compensation. Well, the truth of the matter is that these businesses should seek that relief, and here’s why.
An insurance policy is a contract
An insurance policy is an agreement between you and your insurance company. Therefore, you and the insurance company are bound to the terms of that contract. If either one of you fails to live up to the obligations and responsibilities contained within the contract, then legal action can be taken for a breach of that contract. So, if you’ve filed a business interruption claim with your insurer on account of closures due to a pandemic, and that claim was subsequently denied, then you probably have a legal basis to file a lawsuit.
Contract language is construed against the drafter of the contract
If your claim is denied and you bring legal action alleging that the claim was wrongful, then the court is going to analyze the language of the contract to see if, indeed, the insurance company violated the terms of the contract. Under contract law, the court generally applies a rule that renders all ambiguous language against the party who drafted the contract. The thought behind this rule is that those who draft contracts should be diligent in creating terms that are clear and easy to interpret. This rule also prevents contract drafters from trying to cheat those they bargain with by utilizing language that they can easily interpret in their favor.
What this means for you is that if your business was interrupted on account of a pandemic, then you might be able to argue that it should be covered by your insurance policy so long as the terms of your policy are ambiguous. First, though, you’ll have to prove that the clause in question is, in fact, ambiguous. This may require some lingual gymnastics on your part, but with a firm understanding of contract law and these types of cases, you very well might position yourself for success.
Recovering what you’re owed
If you can show that your claim was wrongfully denied and that the terms of your business interruption insurance were vague, then you can seek to recover the money you are owed. You’ll need to be prepared with evidence that shows what your actual losses were during the interruption, though, so don’t sleep on gathering that evidence.
Dealing with insurance companies isn’t pleasant. In fact, in some instances it can be downright nasty. But the truth of the matter is that if a force of nature or a pandemic has disrupted your business, then it’s not your fault that you’ve lost out financially. We understand this, which is why we stand ready to help people in our area fight for the compensation they deserve.