Business interruption insurance is intended to replace lost income and other costs when the insured’s business can’t operate. Yet, in the midst of the new coronavirus pandemic, thousands of small business owners, who were forced to close their operations by government order or who have a substantial loss in business income, are being told by their insurers that COVID-related losses are not covered.
If you’re one of the thousands of businesses that the Ohio State government Order has affected and are now being denied business interruption coverage—even after paying costly premiums for years—read on. You may have legal options.
Small Business Survival Outlook
According to an April 3, 2020, MetLife & U.S. Chamber of Commerce Small Business Coronavirus Impact Poll, a total of 54 percent of all small businesses surveyed reported that they were temporarily closed or could close within the coming weeks. Forty-three percent believed they had less than six months (including one in ten that said they had less than one month) until a permanent shutdown was unavoidable.
The most recent poll of newly surveyed small businesses, published May 5, 2020, found that three in ten (29%) had temporarily closed in the last two weeks (24% said so last month). More than one in five (22%) said they are two months or less from closing permanently.
Business interruption coverage may be the only way that some businesses will be able to stay afloat and reopen once shutdown measures are relaxed. Even if your policy contains a virus exclusion, the actual wording of the policy can affect coverage. And if your policy includes losses caused by the action of civil authorities, you may have a strong case for receiving coverage.
Graham & Graham is partnering with two Cleveland area law firms, Rutter & Russin and Spangenberg Shibley & Liber, to investigate business interruption insurance denials. We will review your policy to determine what is covered, and whether you may qualify for a lawsuit against your insurer for an improper denial. Contact us for a free case review.
Ohio Could Expand Coronavirus Business Interruption Coverage
Business interruption coverage can pay for profit reimbursement, payroll costs, mortgage payments, rent and lease payments, loan payments, taxes, utilities, relocation costs, and more during the period when the policyholder’s operations are suspended (called the “period of restoration”). However, the severe acute respiratory syndrome, or SARS, pandemic of 2003 led to many insurance companies adding an exclusion clause for infectious diseases. But Ohio could pass legislation requiring insurers to cover losses arising from viruses and pandemics—regardless of whether the policy specifically excludes such risks.
Recently introduced, House Bill 589 proposes to reimburse insurers that pay claims for COVID-19 business interruption. It would apply to Ohio businesses with 100 or fewer employees and a business interruption insurance policy. It would also only apply to the period of the current state of emergency declared by Governor Mike DeWine on March 9, 2020. Any covered losses would be subject to applicable policy limits.
At this point, the proposed legislation looks like a long shot. The insurance industry is expected to lobby against its passage. Even if passed, experts believe the bill would likely face legal challenges that could take years to resolve, during which time coronavirus business interruption claims wouldn’t be paid.
Challenging a Denied Business Interruption Claim
To have your business interruption claim paid, the suspension of business operations must be caused by a “Covered Cause of Loss.” Most policies contain a viral and/or bacterial exclusion clause, but details matter. For example, if your policy only excludes coverage for bacteria, you might still have coverage for coronavirus. If your policy does exclude viruses, it’s unlikely that the insurer has specifically considered coronaviruses. Depending on exactly how the policy is written, there may be room for interpretation. It all comes down to the policy language.
Your policy may also cover acts of civil authority. As insurance company The Hartford explains, if you have to shut down because a government agency prevents access to your business, your policy can help replace business losses. Under Ohio’s March 9 Stay-At-Home Order, non-essential businesses and operations were required to cease all activities. Unless your business is a grocery store, pharmacy, gas station, food and beverage manufacturer, or another business designated as “essential,” you likely could not remain open due to the Order.
Policies that do not contain an exclusion for viruses or civil authorities should pay out for COVID-19 business interruption. However, some business owners with valid claims are being told that loses from COVID-19 are not covered and having their claims denied. They’re responding with lawsuits against their insurance companies seeking payouts. These cases include:
- Restaurants in Cleveland, New Orleans, and Chicago
- The J3 Clothing Company in Moreland Hills, Ohio
- A class action lawsuit on behalf of Ohio restaurants
- A beauty industry class action lawsuit
Dino Palmieri, who owns 10 Ohio salons and is filing a business interruption lawsuit, said, “Year after year we pay for business interruption insurance, but now, when we need the coverage, the insurance company says no. It’s infuriating.”
Let Graham & Graham Review Your Policy, Free of Charge
Graham & Graham’s business lawyers will review your business interruption policy to determine its coverage and exclusions. If your claim was already denied, we can discuss the validity of the denial and explain your legal options. Our consultations are 100% free.
From the firm’s beginning, we’ve had the privilege of helping Ohio businesses reach their potential and find success. We understand the difficulties company owners are facing and are there for you in this trying time. For questions about a business interruption claim, call 1-800-621-8585 or Contact Us.