COVID-19 Business Losses: Predictable Defenses by the Insurance Company
Thousands of businesses in Indiana and Illinois have been forced to shut their doors in compliance with government orders to protect the public during the Coronavirus Pandemic. Few, if any, industries have been spared. From sole proprietors to multi-national corporations, revenues slammed to a stop. Many have been forced to lay off workers, and many business owners are working hard trying to find ways to stay in business after the COVID-19 Orders end and the state economies re-open.
From hotels like the Sheraton and the Marriott in Indianapolis, to retail stores like Apple and Urban Outfitters in Chicago, to countless gas stations, barber shops and beauty salons, local markets, and more – business has come to a halt in order to “stop the spread.” See, e.g., “Coronavirus In Indiana: These Businesses Are Closing Or Laying Off Workers Because Of COVID-19,” written by Katie Cox and published by TheIndyChannel on March 25, 2020, and “Coronavirus in Illinois updates: Here’s what happened March 20 with COVID-19 in the Chicago area,” written by Chicago Tribune Staff and published by the Chicago Tribune on March 20, 2020.
For all these enterprises, the possibility that their commercial property insurance policy coverage will cover their business interruption losses is being considered. Claims will be filed. For details on this type of commercial coverage, read our discussion in “Coronavirus Insurance Claims: Denial of Coverage for Business Interruption Loss from COVID-19 Damages.”
Policyholders Are Being Forced Into Courtrooms to Get Their Business Interruption Loss Claims Paid
Insurance companies are not willing to cover Coronavirus claims – and they have made their position clear, both to Congress as well as in the national news media. Businesses in Illinois and Indiana, no matter their size, are being forced to fight for COVID-19 claims to be honored by their carriers.
Faced with claim denials, businesses will be filing lawsuits against their insurers in order to get their business interruption losses covered. The insurers are giving them no choice.
For experienced advocates of injury victims, the blanket refusal to pay these business loss claims is not surprising: the insurance industry is notoriously profit-driven.
Just as insurers delve into ways to deny claims after a widespread event like a hurricane, they are going to fight against paying COVID-19 claims, if for no other reason than there are so many of these claims they will themselves take a hard financial hit because of the Coronavirus Pandemic.
Nevermind the billion dollar windfalls the insurance companies are reaping during the national quarantine. See, “Auto insurers are collecting billions in extra profit as Americans shelter in place,” written by Justin Rohrlich and published by QuartzDailyBrief on April 1, 2020, and “Coronavirus could mean temporary windfall for health insurers in Michigan,” written by JC Reindl and Detroit Free Press and published by USA Today on April 22, 2020.
For victim’s advocates, it is also somewhat predictable to anticipate and plan for the defenses that these insurance companies will likely assert as justification for their denial of an Indiana or Illinois business interruption loss claim.
Expected Insurance Company Defenses Against Paying Business Interruption Claims
The insurance company’s only justification to deny an insurance claim is when the loss is not covered by the contract they have with their policyholder. Accordingly, these lawsuits will look to the policy language contained in each business’ individual commercial property insurance policy.
Here are just a few of the likely defenses that the insurers will assert to avoid paying a business interruption loss claim based upon policy language (this is far from an exhaustive list):
1. The Covered Losses: Different Interruptions
Within the commercial insurance policy, there may be business interruption coverage that protects against lost income when business operations are shut down through no fault of the business owner. Policy language may also provide coverage for lost revenue resulting when the business’ suppliers or distributors have their operations interrupted, as well as for lost revenue should customers or clients be unable to reach the business establishment.
The insurance company adjuster, as well as its defense attorneys, will be looking for ways to narrow this language as it applies to the particular claimant. There may be arguments based on the facts of the particular situation, involving things like whether or not the establishment had its operations disrupted because of a supplier’s own COVID-19 disruption. If not, then the insurer may argue the policy does not cover the claim.
The individual business policyholder may have to detail not only their own operations and resulting Coronavirus disruptions, but also those of third parties (like their suppliers) to counter these defense arguments.
2. Looking for a Physical Loss
Many of these commercial insurance policies provide coverage to the policyholder when the business is hit by “direct physical loss or damage” to its property. Given the unprecedented event of an extremely infectious virus permeating the community, insurers may try and argue that policyholders have not suffered a “physical loss.”
The facts of the particular business’ situation must be investigated and presented as evidence to support that there has, indeed, been physical harm covered by the policy after a carrier denies coverage based upon “no direct physical loss or damage” provisions.
3. COVID-19 Argued Not Covered as a Communicable or Infectious Disease
Some industries will include specific contractual language in their insurance policies to cover things that may happen because of their type of operations, where “communicable or infectious disease” is covered as part of a business interruption loss. These provisions are commonly found in commercial insurance policies for places like hotels as well as medical clinics or spas.
These provisions do not require “physical loss” to be shown before the provision applies to the claim. However, insurers will be arguing that COVID-19 and the Coronavirus can be distinguished from the anticipated diseases under these provisions, and denying business interruption loss claims.
Policyholders seeks business loss coverage under a “communicable or infectious disease” provision in their commercial insurance policy will have to demonstrate through the facts of their situation as well as expert testimony that the Coronavirus is within the diseases described in this contractual language.
Fighting For Justice after Denial of Business Interruption Loss Claims in Indiana and Illinois
Businesses are being forced to file lawsuits against their insurance companies in other parts of the country, and there will undoubtedly be numerous lawsuits filed here in Indiana and Illinois, as well.
Each of these lawsuits will move forward in the courts, where policyholders will ask judges to find not only that (1) their insurance policy does provide coverage for their business interruption losses, but that (2) the insurance company was wrong to deny coverage and (3) must pay their claim.
These businesses will be facing sophisticated defense lawyers and experienced insurance adjusters working not only within their own companies but with industry leaders in ways to succeed in any trial.
The COVID-19 business interruption loss victims will need experienced and aggressive advocates on their side, who are savvy about how insurance companies and their defense teams strategize on avoiding their responsibility for paying policyholders.
For more on Insurance Company Bad Faith, read:
- “Bad Faith: When an Accident Victim is Victimized a Second Time by the Insurance Company”;
- “Insurance Company Has Duty to Settle Your Claim: Bad Faith Lawsuits Against The Insurer”; and
- “The Law of Bad Faith Insurance Claims in Indiana and Illinois.”
For more on Coronavirus-related Lawsuits, read:
- “Coronavirus Lawsuits and COVID19 Legal Claims in Indiana and Illinois: Wrongful Death or Serious Injury;” and
- “Deadlines for Injury Victims to File Lawsuits: Statutes of Limitations.”
For the Coronavirus business victim suffering significant harm in the form of a COVID-19 business interruption loss, both Indiana and Illinois have established legal avenues and forums for wrongs to be righted when an insurer fails to pay a valid claim for coverage under their commercial insurance policy. Please be careful out there!
