Business Interruption Insurance Lawyers

In the face of the COVID-19 outbreak and issues, and resulting governmental action, a high percentage of business owners are struggling to maintain their businesses. Any event that forces a business to close down – for weeks, or months – is potentially catastrophic for a business owner. A forced closing with little notice is potentially catastrophic. The loss of steady income is only one problem. The loss of customer loyalty or the possibility that clients or patients may switch to another source is always on the business owner's mind. Getting through this period should be helped when insurance is there to cover a portion of the loss.

In the aftermath of Hurricane Sandy, many small to medium business owners believed that their business interruption insurance coverage would help them recover. All too often, they had to line up with other business owners to fight for any kind of coverage, regardless of the premiums they had paid for many years. Many were denied coverage on technical grounds within their coverage, and they had little knowledge of the terms of the policy, until they were told no.

If your business is currently suffering from the government-mandated shutdowns following the COVID-19 outbreak, you may be looking at your business interruption insurance policy for some support. We have heard from many about the exclusions which are contained in many coverages. The first and most important issue is going to be establishing coverage for the loss.

Business owners, insurance brokers and insurance company legal departments are reviewing their policies right now. What coverage will be paid, and what claims will be denied, and on what basis can the denial be considered legitimate or appropriate? How is the insurance sector preparing to respond to what will be an avalanche of claims? Surely, they are arming for battle.

As a business owner, or the owner of a professional practice, you are probably asking yourself these same questions. Will claims be paid based on who files a claim first, or is it better to wait until others have filed to see how the insurance sector responds? If you've called your broker, you have some answers, but they may not have been the answers you wanted. And many brokers will simply be dismissive and may not explore all potential avenues of coverage.

Even if the insurance company accepts that your loss is a covered loss, it will likely dispute the amount of the loss, or the period of time that your losses are covered. Insurance companies will closely scrutinize the claim for any evidence that may limit its own exposure. As a result, you can expect to need to present a great deal of information to prove the loss, including:

  • General ledger, financial statements, and tax returns dating back several years
  • Correspondence from vendors and suppliers
  • Customer orders, also dating back several years

With a huge number of claims being filed for business interruption insurance, it is safe to say that the length of time needed to review claims and make decisions will be far longer than ever before.

Several years ago, Frankel & Newfield faced a situation with an insured who was denied on the basis of an exclusion in his coverage. In Frankel & Newfield's published decision, Dream Spa v. Firemans Fund Insurance Company, in the US District Court for the Southern District of New York, the firm aggressively represented a business owner whose insurance company denied the business interruption insurance claim. The company refused to pay on the claim, based on an Act of God provision. Flooding had led to a sewage pipe breaking, which it said was not covered.  

Frankel & Newfield fought back, and won, getting the claim paid for our client. The Court found that the language of the policy supported the coverage for the insured, and that if there had been any policy ambiguity, it would be read in favor of the insured (emphasis provided). These same principles may be applied to our current dynamic.

Federal and state governments mandating that all non-essential businesses close is not an Act of God, but a public policy decision. Is a pandemic an Act of God? Is a virus exclusion going to overcome a forced closing of businesses by acts of government? The companies are going to be seeking to invoke a policy exclusion to avoid the scope of coverage. Our challenge on behalf of our clients will be to establish that the loss is a covered event under the terms of the governing policy.

If you are considering filing a claim for business interruption insurance coverage and would like to speak with an insurance attorney first, call our office at 877-583-2524. Understanding the issues before engaging in communications is a smart step to take in this important process.

Lastly, timely notification of a loss is an important condition in the policy, so please do not hesitate to protect your rights.

Clients Choose Us Because We:

  • Have recovered $200M+ for our clients.
  • Have seen your situation before.
  • Are aggressive in our approach.
  • Know the tactics used by the insurance companies.
  • Hold high AV Ratings & received the Super Lawyers designation each year.

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Justin C Frankel

Written By:

Justin C. Frankel

Disability Insurance Attorney