The impact of COVID-19 went far beyond the death toll and millions of individuals who fell ill to the virus. Government mandates and definitions of essential workers left many businesses unable to operate for lengthy periods, leading to significant financial losses for these companies. While business interruption insurance will typically address the loss of revenue and assist with the expenses incurred during an unforeseeable shutdown, many have found that it was the insurers who were protected during the pandemic and not the business owners.
What Does Business Interruption Insurance Cover?
Often included as a part of a property or casualty insurance policy or included with a more comprehensive package, business interruption coverage will replace the income a business loses as a result of a disaster. For most business owners, the primary concerns are fires or natural disasters, but as seen in the global pandemic, there are other risks to be addressed. Policies will often cover operating expenses during the shutdown period or the relocation costs for the company to restore normal operations. Here's a list of general inclusions:
- Fixed costs
- Profits
- Extra expenses
- Temporary location expenses
- Employee wages
- Taxes and loan payments
- Civil authority ingress or egress
What Happened During COVID-19?
Many governments took action to help slow the spread of the coronavirus by requiring closures and social distancing measures. For many businesses, these acts inhibited their ability to operate normally and, in some cases, were forced to shut down completely. To recoup their losses and pay their expenses, many of these companies turned to their insurers for help by filing claims under a business interruption coverage. However, there has been significant pushback from insurers and the legal system.
According to recent data, the judges have only allowed one out of every four business interruption lawsuits to continue through the court system. The arguments on either side turn to the exact language of the policy, arguing either that the terms explicitly stated virus coverage was not included while lawyers for the claimants maintain that the language was ambiguous and subject to a different interpretation. A large majority of the businesses that aren’t awarded or granted their business interruption claim face bankruptcy.
The leading argument supporting an insurer's right to deny paying the claim is the virus-exclusion clause. There are policies where such terminology hasn't been included, but the insurers argue that no physical damage has taken place to interrupt normal business operations and can deny based on that reason. Judges within the legal system are now the deciding opinion in what constitutes physical loss or damage, and in most cases, it's the claimants who are losing.
Don’t take chances with your company’s finances. In light of the past few months, review your business policies with a broker and know exactly what coverage you are eligible for in the event of an unforeseen disaster.
About Axis Insurance Services, LLC
At Axis Insurance Services, LLC, we aim to help our customers identify their exposures and protect themselves. Founded in 1999, we offer insurance programs to a wide variety of professionals and industries including attorneys, real estate, healthcare, architects, and more, and also have a wholesale division. We pride ourselves on offering flexible insurance coverage tailored specifically to each customer’s needs. To learn more about our solutions, contact us at (877) 787-5258 to speak with one of our professionals.
