Business Interruption Insurance: Denying Claims During a Pandemic

Insurance companies are at it again – denying claims.

This time it’s with business interruption insurance.

For years, businesses of all kinds purchase expensive insurance policies to protect them from the unexpected.  Most businesses would prefer not to carry these additional costs.  But they do it anyway because they are cautious and responsible.  They do what’s right – just in case things go bad.

Among the insurance products that businesses routinely buy are all-risk property damage policies, sometimes known as business interruption insurance.  As the name suggests, these policies cover ALL risks of property loss (ranging from interruptions to disruptions), except for those risks that are expressly and specifically excluded. The exclusions can differ from insurer to insurer. These policies usually also include business income coverage, which pays for losses as a result of necessary business operation suspensions, such as when the government orders non-essential businesses to temporarily stop operations.

Most importantly, these policies either include or do not expressly or effectively exclude losses caused by viruses such as the Coronavirus, which caused many state and local governments to order widespread business closures.

Even though the current pandemic is exactly the type of risk these policies cover and exactly why business owners buy these types of policies in the first place, some insurance companies have started to refuse to honor their contractual obligations to pay for losses due to the COVID-19 pandemic, as well as losses caused by closures ordered by civil authorities.

Businesses hurt by the current pandemic have started suing their carriers for denying claims of loss arising from business interruptions. Some of these cases are being filed as class action lawsuits. These suits represent a broad effort to hold insurance companies accountable to the thousands of businesses that purchased coverage from them to protect them at times like these.

Insurers did well selling these policies.  Indeed, insurance companies earn money by selling protection against risks and possible losses of all kinds.  They pocket enormous profits when times are good.  On the rare occasion when risks materialize and losses are incurred, they should bear the responsibility of honoring their commitments.

Many businesses that have had to close and lay off staff are now pinning their hopes of reopening and rehiring employees on the proceeds they receive from the insurance policies they’ve been paying for.  As the country emerges from this terrible pandemic, businesses of all types will play a vital role in resuming and repairing not just our economy, but the every-day aspect of our lives.  The unfortunate claim-denial games that some insurers are playing are threatening the welfare of not only business owners and their families, but the entire national economy.

So far, it has been reported that the following business interruption insurers have allegedly denied claims filed by some of their policy holders and have been named in lawsuits as a result:

  • Aspen American Insurance
  • Auto-Owners Insurance
  • Lloyd’s of London
  • Society Insurance
  • Oregon Mutual Insurance
  • Topa Insurance Company

Many other insurance companies have issued or are preparing similar denials. Additional lawsuits are expected.

If you have a business interruption policy and submitted a claim that has been denied, please let us know.

All consultations are free and confidential.