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Business Interruption Insurance: The Coronavirus Question

Business interruption insurance has become one of the more controversial pieces of small business protection amid the coronavirus pandemic.

Business interruption insurance, in short, helps small businesses survive disaster. It’s effectively meant to help companies cover any losses that come as a result of events, such as an earthquake, fire or flood. But unlike property insurance, which covers actual damage from the disaster itself, business interruption insurance is meant to help you recoup what you might have earned had your business not been closed.

This type of insurance would seem to be a safety net against what clearly is a disaster: The Covid-19 coronavirus has forced businesses large and small across the country to close in an attempt to save lives.

Unfortunately, many companies trying to file business interruption claims are running up against a brick wall.

Insurers’ Case

The American Property Casualty Insurance Association estimates that in the U.S., small businesses with 100 or fewer employees could suffer business continuity losses of up to $431 billion a month. “These numbers dwarf the annual premiums for all commercial property risks in the key insurance lines of $71 billion per year, or about $6 billion a month,” the APCIA writes.

It’s difficult to say how much of the $431 billion would be insured, but it’s clear why insurance companies have drawn a hard line on paying out claims.

Many insurers likely have a case. Years ago, following the SARS and MERS outbreaks, insurers began changing their policies to either not include or specifically exclude diseases. While some insurers do offer that kind of specific coverage, it’s not typical, and thus it tends to be expensive.

Instead, most insurers’ policies tend to cover the fallout from primarily physical disasters.

A Growing Fight Against the Industry

As claims denials have piled up, there has been a swelling movement to put more pressure on the insurance industry.

At least eight states have proposed legislation connected to business interruption insurance. For instance, New York legislators in March introduced A. 10226 would require insurers to cover “business interruption during a period of declared state emergency due to the coronavirus disease 2019 (COVID-19) pandemic” applying to policies in force by March 7. And Ohio state representatives filed House Bill 589, which would require insurers to do the same — even if their policies excluded disease risks.

Meanwhile, businesses in numerous states, including Ohio, Wisconsin, New Jersey and Pennsylvania, are filing class-action lawsuits against insurers such as Chubb, Cincinnati Insurance and Society Insurance to press the point.

Even Congress is considering the issue. A draft of the proposed Business Interruption Insurance Coverage Act of 2020 that was circulating Congress would open up coverage for losses “due to viral pandemics, forced closures of businesses, mandatory evacuations, and public safety power shut-offs” and would void current disease exclusions.

What Should You Do?

This is a cloudy situation that’s changing by the day. At the moment, whether insurers will pay out claims related to the coronavirus isn’t on a state-by-state basis or even an insurer-by-insurer one, but a policy-by-policy basis. But depending on the success of these lawsuits and legislative actions, that could change.

If you’re unsure where you stand, talk to the experts at McManamon & Co., which offer assistance with business interruption claims. Even in normal circumstances, these cases can be complex, and they require a thorough, fair analysis that you and your insurer can agree upon.

McManamon & Co. can thoroughly and objectively address your business interruption losses and claims to get your business back up and running quickly. Give us a call at 440.892.9088 or contact us online today and see what we can do for you.

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