Businesses across Texas and the United States have been impacted by the coronavirus (COVID-19), causing business income losses and more due to all closures. So, what do businesses do now to rise up from such losses? During such a pandemic, businesses review their insurance coverage provisions regarding business losses, specifically those caused by closures due to infectious diseases. There are many types of business insurance coverage, including business interruption insurance coverage which is intended to make an insured 100% whole again as a result of income losses due to covered damages. However, the coverage must specifically include the type of damage covered and further, the business interruption claim must be supported with all facts, evidence, and all other supporting documentation.
The next question would be, does my business insurance policy specifically cover income losses due to COVID-19? This is a serious concern for many business owners. On the downside, many policies do not specifically cover infectious disease outbreaks or are ambiguous or no language at all. Policies that do have coverage for certain diseases may still exclude any contamination by virus, air, bacteria, or not specifically reference the disease. The problem with this vague language allows insurance companies to deny claims where they respond that the business premise was not physically damaged by the pathogen or other disease to support a claim under the policy. However, another argument or better argument to support a business interruption claim, would be to argue that the pathogenic disease caused the premises to be nonfunctional and unusable, creating the business loss damages. Although, this argument is not guaranteed depending on the type of policy you have and what the policy specifically says.
Thus, what type of coverage do I need? It is best to review your policy. ‘Contingent business interruption’ coverage protects from losses due to property damage owned by others such as if fire occurred nearby which prevented access to the business. However, it could possibly be an argument where due to COVID-19 created a loss to a major provider in your business supply chain, causing your business loss. Further, many insurance policies also have a ‘civil authority’ provision relating to actions of civil and/or military authorities where damage to your property caused by the civil authority regulations and rules would make your business interruption claim more easily supported for physical damage in order to recover. However, declarations of state emergencies are typically not covered.
Further, the ‘civil authority’ provision relates to actual direct physical damages or loss. The argument on what is direct physical loss is unsettled and so is the science behind it at this time. Thus, policyholders and insurance companies will continue to litigate over the specifics of the ‘civil authority’ language in policies and what is considered direct physical loss. Parties will attempt to have experts testify to COVID-19’s lifespan on different surfaces to relate this damage to the direct physical loss of a business to support the business interruption claim and also of re-contamination of buildings to support continued physical losses. Another argument is simply that the loss of building’s use is sufficient to sustain business interruption claim. However, the insurance companies would still argue specific language or restrictions in the policy. It is always best to get an attorney to review your policy and assist with your claim.
About the Author:
Mala Sharma has been practicing family law and personal injury with her family at the Law Offices of Sharma & Associates, founded in 1997. Mala has been appointed leadership roles for the American Bar Association GP Solo and GP Solo YLD division, is Board member of the Houston Trial Lawyers Association, Past President of the Houston Northwest Bar Association, and prior board member of the South Asian Bar Association. She is also a member of the Houston Bar Association. Mala Sharma has been selected to the 2019 Texas Rising Stars by Super Lawyers. Mala has also been selected as 10 Best Attorneys by the American Institute of Personal Injury Attorney for 2018-2019, Top 40 under 40 by the National Trial Lawyers for 2018-2019, and Texas Top 10 Personal Injury Attorney by Attorney and Practice Magazine for 2019.
This material is available for informational purposes only and not for the purpose of providing legal advice. If you require advice on any particular legal question, you may contact Sharma & Associates at 281-893-8644 or by email at firstname.lastname@example.org to schedule a free consultation to discuss your case.