The COVID-19 pandemic has significantly affected the way of life of most people in the US and throughout California. While this has first and foremost been a health crisis, the coronavirus has significantly affected businesses in this state. Many business owners have turned to business interruption insurance policies to try to gain coverage of their losses. While this type of insurance coverage is typically used after interruptions caused by natural disasters, some policies have coverage for shutdowns caused by governmental authority orders.
However, many insurance carriers have pushed back against these claims and said they will not provide coverage for business owners concerning COVID-19-related losses.
Will insurance carriers be forced to provide coverage?
In response to receiving numerous complaints from businesses, government officials, and various insurance representatives, Insurance Commissioner Ricardo Lara and the Department of Insurance issued a notice requiring insurance carriers and other insurance Department licenses to “comply with their contractual, statutory, regulatory, and other legal obligations and fairly investigate all business interruption claims caused by COVID-19.”
In his statement, Commissioner Ricardo Lara said that “I want to be absolutely clear that insurance companies need to fairly investigate all business interruption claims as they would during any disaster.”
The Department of Insurance also encourages business owners to review their policies, specifically looking at exclusions, coverage limits, and applicable deductibles. When it comes to business interruption insurance, whether or not a claim is accepted will largely revolve around the specific language of each particular policy. Many business interruption insurance policies do include language specifically providing coverage for shutdowns related to government orders. However, policies may also have exclusions for losses related to viral outbreaks.
Business owners are encouraged to see if they already have insurance coverage that may cover losses related to COVID-19. This could include “event cancellation” policies.
Are lawmakers doing anything about business interruption insurance?
Members of Congress and legislators in many states across the country have asked insurance companies to cover COVID-19-related losses for businesses. However, they have stopped short of passing laws ordering insurance carriers to cover these claims. Again, insurance policies are contracts, and the specific wording of these contracts is important. Insurance carriers are not going to provide coverage for anything they are not specifically obligated to, and they are going to take steps to reduce their liability during this ongoing pandemic.
The order issued by Commissioner Lara simply asks that insurance carriers do what they should already be doing – comply with the agreements they make with policyholders.
What kind of coverage does business interruption insurance provide?
If a business does qualify for coverage under a business interruption policy, they could be entitled to receive various types of coverages designed to put the business in the same financial position it would have been in had this pandemic not occurred. This includes coverage of profits, fixed costs, costs related to training, as well as coverage of any adjustments that need to be made to the business in order to safely resume operations. Business interruption insurance typically only lasts for a specific amount of time, and will usually end when a business is returned to the same operating condition it was in before a shutdown occurred. The California business interruption insurance lawyers at Bentley & More LLP can help you if you have additional questions. Contact our experienced attorneys for a free case consultation.