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Everything You Need to Know About Business Interruption & Coronavirus

Brian Beckcom

Brian Beckcom


The COVID-19 (Coronavirus) outbreak has created financial woes across an enormous spectrum of businesses. The restaurant, travel, retail, and professional services industries have one thing in common: they are trying and failing to get their rightful insurance payouts for the damages caused by the pandemic. Insurers are claiming that this pandemic is either not covered or is actively excluded from their business interruption policies.

This article explains the two main types of arguments insurers are using and VB Attorneys’ plan for fighting back. See if the listed situations may apply to you and contact us now - we can help!

Insurance companies are pulling all the stops to ensure they will be on the hook for as little as possible. However, their arguments are likely to have varying degrees of effectiveness depending on the language of the insurance policy. The following are some common arguments insurance companies have used and will continue to use as the crisis evolves. 

Many Insurers Utilize Explicit Exclusion for Pandemics

Following the SARS outbreak in 2002-2003, many insurance companies saw the need to limit their coverage by explicitly excluding damages related to pandemics. An example of this kind of language looks like this:

“We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.”

The consensus among insurers is that this type of language is “airtight.” However, there is likely room to argue that the specific phrasing of the exclusion doesn’t apply to the current situation. How broad are the courts willing to interpret the phrase “caused by or resulting from”? While the virus may have started the chain of events, the more direct cause of the business interruptions is state and local orders requiring shutdowns. There may be some businesses that would not have been affected by the virus (provided certain safety precautions would have been provided) but were forced to shutter. Such losses may not be a direct result of the virus, meaning there's a bubble in the "airtight" argument insurers are likely to make. 

Correspondingly, these types of arguments saw success in early Hurricane Katrina litigation where insurers attempted to use flood exclusions to avoid paying for damages. Business counsel was able to successfully get coverage by digging deep into the policy language and the specific situation of each business. Businesses were able to get coverage when their counsel persuasively argued that the loss was not directly related to flooding. Although insurers fought tooth and nail to overturn many of these decisions on appeal, by getting into the insurance litigation early, many businesses were able to settle for substantial sums, as opposed to receiving nothing at all. 

Where there is no Explicit Exclusion, Insurers Turn to Public Policy

If you have a policy where pandemics are not explicitly excluded in the policy, it is absolutely critical to start litigation once your claim is refused. Right now there is enormous public sympathy towards the businesses being impacted and insurers know it. Getting an insurance case in front of the jury now is much more likely to succeed than years down the line when memories of quarantine are beginning to fade.

Additionally, insurance lobbyists and counsel are playing the “woe is me” card in an attempt to get legislators to protect the industry. Legislators in the pocket of these lobbyists are already working on ways to ensure that money will not be flowing to the businesses that are rightfully owed compensation. Insurers are making arguments that the industry could become insolvent if it were forced to pay out on its claims. It may even be the case that some insurance companies turn to bankruptcy if they pay out on enough claims. It is necessary to start the coverage litigation process before harmful legislative policy, unfavorable court rulings, or a lack of money to go around prevent your chance at recovery. 

How VB Attorneys Can Help Your Business

Insurance companies have armies of lawyers, If you are at risk for coverage denial or have already been denied coverage, time is of the essence in asserting your claim. It is important that you contact an experienced attorney who can legally assess your insurance policies to ensure that your business receives the proper coverage. Whether your insurance company has already denied coverage or if your policy simply excludes an explicit mention of pandemic coverage, a free consultation with our experienced insurance attorneys can provide you with a full assessment of your coverage. Call 713-224-7800 or click here to contact us today.