Business Interruption Insurance Lawsuits Expected Over Denials of Coronavirus Loss Claims

Lawyers nationwide indicate that an influx of small business owners are planning to file lawsuits over business interruption insurance claim denials, as several insurance companies are attempting to exclude coverage for losses due to the coronavirus outbreak.

Many businesses are reporting they have experienced difficulties getting insurance companies to honor policies sold in recent years, claiming coverage for business interruptions caused by global pandemics are excluded. However, legal experts suggest many of these business interruption insurance denials may be improper.

Following the SARS outbreak in 2002 to 2003, many insurers placed exclusions in their coverage plans for damages resulting from pandemics, according to a recent report by The Washington Post.

The insurance companies are attempting to avoid covering large losses small business owners now face, even when the interruption is not a direct result of the virus or related illnesses, but may be the result of other factors, such as school closings, “stay home” orders or general economic fallout in recent weeks.

On April 7, the American Association for Justice hosted an online webinar to help educate lawyers nationwide who are navigating challenges to the first-party insurance claim denials following to coronavirus pandemic.

Lawyers are expected to challenge the business interruption claim denials based on the specific language of each policy, and how courts in different jurisdictions may interpret property damage and “direct physical loss” terminology in those policies, as they relate to the pandemic.

In the meantime, lawmakers in a number of states are trying to pressure insurance companies to voluntarily honor the coverage after collecting premiums from small business owners for years, indicating that legislation may clarify the issue and require insurers doing business in the state to cover pandemic business interruption losses.

According to a report this week in Wall Street Journal, legislation is on the table in at least three states, which would force insurance coverage for business losses that resulted from government-ordered shutdowns.

A number of insurance companies have suggested they would challenge such actions in court, indicating they will withhold the desperately needed coverage business owners need, until appears have been exhausted.

The rejection of the insurance claims has already caused a number of small businesses to close their doors, according to various media reports, with small business owners being particularly hard hit in recent weeks, and often unaware they did not have coverage for the interruptions caused by the virus and pandemic.

A number of business interruption insurance lawsuits have already been filed, according to the Washington Post, including a claim filed by the Chickasaw Nation over losses due to its casinos being forced closed, and a lawsuit filed by a popular California restaurant. Both say they were wrongfully denied “business interruption” reimbursements by their insurance carriers.