Due to statewide closures, many Ohio businesses have faced devastating losses of revenue. Non-essential businesses have suffered greatly, and even essential businesses are seeing far less traffic than normal.
What matters in all of this is that as a business owner and policyholder, your insurance company has a duty to try and fulfill your claim. With the sheer volume of businesses filing claims and seeking coverage for COVID-19 related interruptions, insurance companies are more likely to deny legitimate claims and act in bad faith. The attorneys at Cooper Elliott can help you understand the extent and limitations of your commercial insurance policy, and what to do if you suspect your insurance company is acting in bad faith.
Business Interruption Policies and COVID-19
To set the backdrop, it’s important to note the distinction between first and third-party insurance. First-party insurance is insurance you’ve obtained to cover your business or yourself. Third-party insurance is insurance held by someone who has harmed you. The difference is significant because your insurance company has an obligation to put your interests ahead of its own.
With this in mind, business interruption insurance is first party insurance coverage.
When filing a business interruption insurance claim due to revenue loss caused by COVID-19 closures, there are a few things to know.
First, be sure to file in a timely manner, as many insurance companies require your claim to be filed within a certain time frame. Check your policy for any such requirements.
Second, while you likely have a duty to cooperate with your insurance company as it gathers information on your claim, be wary. The questions may seem innocuous or simple, but they are anything but. They are a minefield and must be navigated carefully to avoid inadvertently giving your insurance company a reason to deny your claim.
Remember that not all commercial insurance policies are the same. For example, some policies may cover repairs due to structural damage to a building without providing coverage for business interruption losses. Whether or not you have coverage due to the COVID-19 pandemic or the related shutdown orders may come down to how your policy is worded. For instance, “loss” and “damage” can mean two very different things.
All Risk Policies and Civil Authority Coverage
Most commercial insurance policies are what’s known as “all-risk” or “all peril” policies. This means they cover just that – all risks of harm to your business unless the policy contains a specific exclusion. Don’t be fooled by insurance company arguments that commercial policies were only intended to cover structural harm and not losses due to pandemics.
Many commercial insurance policies have an additional coverage called “civil authority coverage” or “governmental authority coverage.” In most cases, these are not intended to be an exception or replacement for all risk coverage; rather, an addition to it.
Dependent Property Business Interruption Coverage
Some business insurance policies also provide an additional type of coverage called “dependent” coverage. This covers losses that your business has incurred as a result of suppliers or shippers being shut down. For example, if your business’s supply chain depends on a delivery service that has been temporarily closed, and your business suffers a loss as a result, you may have a claim under the dependent property business coverage in your commercial policy.
Exceptions and Exclusions
Even though you’ve faithfully paid your commercial policy premiums year after year, your insurance company will search for ways to avoid paying your claim. Because the COVID-19 pandemic has caused huge business losses, insurance companies are doubling down on their search for ways to avoid payment. You may already have experienced this if you have submitted a COVID-19- related business interruption claim.
Some of the common insurance industry arguments we’ve seen so far include:
- “We never meant to provide coverage for pandemics” (even though pandemics have been foreseen by the insurance industry since at least 2006, when the SARS epidemic forced businesses to close).
- “A ‘virus exclusion’ in your policy requires us to deny your claim” (even though your losses occurred because your business was closed due to an order issued by the State, not because the virus was actually present in your building).
- And, “We only cover losses caused by a physical alteration to your property” (even though there’s no such language in your insurance policy).
Fighting Against Bad Faith
Despite having a clear, covered claim, some business owners are experiencing bad faith responses from insurers. This happens in first party insurance situations when the insurer looks for ways to avoid coverage rather than find coverage.
Bad faith insurance practices are more than just a frustration; they cause serious harm. A delay in payment by your insurance company could potentially lead to more damages—and without timely payment, some businesses may not survive a prolonged interruption. The good news is that if an insurance company is acting in bad faith, it is liable to pay for the extra damages as a result.
If you’re a business owner, and you suspect your insurance company is acting in bad faith, contact us. We’ll review your insurance policy and help you determine if your insurer is required to pay your business losses.
Connect with us – we’re here to help.