Businesses carry a range of different insurance policies that protect them from various issues—these range from worker’s compensation to flooding to fire. One unique to businesses is the business interruption insurance, which comes into play when a company incurs losses because it was forced to shut down for an extended period.
Insurers say they are not covering
Here in 2020, the cause would be COVID-19, even though there is no direct or physical loss as there would be with a tornado or flood. Moreover, some carriers included virus exclusions (prompted by the swine flu outbreak some years back) in their policies, which meant no coverage for the closed businesses’ losses.
Not so fast
Many insurance companies claim that they would have to go out of business if they had to pay these claims. However, hurting businesses argue that the carriers are in breach of contract or non-compliance under the Texas Insurance Code. Some go further, saying it is a breach of duty of good faith and fair dealing.
In late September, U.S. District Court Judge Stephen R. Bough ruled for the second time in favor of the policyholders on a pandemic-related case. While many cases favor the insurance carriers, Bough determined that government-ordered closings constituted a direct physical loss within the terms of the policy, which can mean payment of the claim or negotiate a settlement.
This issue far from resolved
There is no telling how long businesses will be impacted by this ongoing pandemic. So coverage for business interruption will likely remain a hot topic in the months to come.
Those interested in filing their business interruption claim with their insurance carrier will likely benefit from working with law firms used to handling disputes with insurance companies. Their knowledgeable legal guidance can make a real difference in the success of the claim.