New Orleans COVID-19 Business Interruption Claims

Filing Covid-19 Business Interruption Claims

The Covid-19 pandemic affected every facet of society, from healthcare to education. At the onset of the outbreak, many countries closed down to minimize the spread of disease.

The U.S. was no different. The federal government issued a nationwide mandate to shut down all non-essential businesses, such as restaurants, bars, daycare centers, fitness clubs, and movie theaters.

Because of these shutdowns, companies experienced business interruption losses. Without the ability to sell their goods or services, sales plummeted or stopped altogether. Some companies had to let go of employees because they didn't have enough money to pay everyone's salary. 

Businesses with the right insurance policies are now allowed to file business interruption insurance claims to help make up for Covid-related losses. Insurance coverage can also help with keeping staff employed.

If you are one of the businesses that experienced business losses or direct physical loss because of the pandemic, here's what you need to know about business interruption insurance policies and how you can benefit from having coverage.

What Are Covid-19 Business Interruption Claims?

When a company experiences an event that interrupts normal business operations and causes losses, the business owner might file a business interruption claim. These events can include natural disasters, fires, power outages, and riots.

An impacted business can file a claim to gain reimbursement for lost revenue or profit and to cover staff wages, losses in equipment, property damage, and other losses. Covid-19 business interruption claims are claims that revolve around losses brought on by the pandemic. 

While investigating your rights as a business interruption insurance policyholder, you might have come across something called civil authority coverage. This type of insurance coverage is also relevant to the pandemic.

Civil authority coverage claims are used to reimburse companies that have experienced an inability to access their insured property due to government mandates.

Many policyholders have argued that the shutdowns caused by the Covid-19 pandemic should fall within business interruption policies, and insurance companies should provide coverage.

However, businesses that have valid insurance policies have tried to file claims for losses sustained during shutdowns, and many insurers have denied coverage for these claims.

This doesn't mean your claim won't work. What it does mean is that this is an unprecedented situation, and the rules surrounding what insurers have to cover isn't clear yet. 

As the situation continues to unfold, the federal court and state courts are trying to determine the next steps in terms of business interruption coverage related to the Covid-19 pandemic.

What Is Business Interruption Insurance?

Business interruption insurance is commercial property insurance that aims to cover the losses from business income that a company experiences due to a suspension of operations or an economic slowdown.

This insurance policy you have will specify the type of losses that are covered, and not all policies cover every type of loss.

Most of these policies cover direct physical loss or damage of the insured property or business premises for various reasons, including government mandates or natural disasters. Other reasons could be theft, falling objects, lightning, wind, and fire.

An example of business interruption policies in action would be if your company experienced a fire. In this case, insurance claims could help you cover the following:

  • Lost income due to destroyed products or merchandise
  • Pre-loss earnings or actual loss sustained, which insurance policies define as revenue minus ongoing expenses
  • Additional expenses you incurred to relocate your business, such as renting a new location

A business interruption policy will not help you cover the expenses of repairing the damaged property or replacing equipment. These expenses are more likely to be covered by a business owner's property insurance policy.

Business Interruption Claims and Covid-19

Many businesses — from bookstores that couldn't let customers in their doors to nightclubs that had to shut down — have made their case that their business interruption insurance policy should cover their losses due to Covid-19. But most policy holders have encountered coverage denials.

Insurance companies have made several arguments to deny coverage to businesses. They have argued that pandemics are uninsurable because it's difficult to price the risk and the losses.

Another point insurers make is that because a business interruption insurance policy applies to losses from damaged property, it cannot apply to Covid-19 losses. Businesses have not experienced a fire or another incident inducing physical distress, and as such, insurance companies cannot provide coverage.

Currently, there are many cases open in federal and state courts that relate to coverage applying to Covid-19 pandemic business losses.

Businesses argue that insurance companies must cover their losses under the business interruption policy because a “physical loss” also means the inability to utilize and access their business properties. And that's exactly what has happened during the pandemic. 

Cases are still ongoing as the situation continues to unfold. Meanwhile, the federal government and state governments are trying to pass legislation that can protect businesses in the wake of the Covid-19 situation and any other future pandemics.

Available Legislation on Covid-19 Business Interruption Coverage

The pandemic caught all federal and state institutions unprepared for such an event. As such, many courts are now considering legislative changes that would help policyholders get retroactive coverage for the losses sustained by the Covid-19 pandemic and gain coverage for any future pandemics.

Currently, there are three proposals related to Covid-19 business interruption claims:

  1. The Pandemic Risk Insurance Act (PRIA) was introduced by Congress. This act would invite insurance companies to participate and cover a portion of pandemic losses. If a business incurs losses over $750 billion, the government would also have to step in and provide coverage. The risk with this act is that only a handful of insurance companies would participate.
  2. The Business Continuity Protection Program (BCPP) was proposed by the insurance industry and is modeled similarly to the federal flood insurance policies. The program states that the federal government should cover business losses related to the pandemic. The government should then seek reinsurance from capital markets.
  3. The Pandemic Business Interruption Program (PBIP) was introduced by the Chubb insurance company. This program is similar to PRIA but provides less coverage.

All these options are still under consideration. If passed, they will apply to future pandemics, but whether they will be retroactively applied to the current Covid-19 pandemic is still under debate.

Covid-19 Business Interruption Claims Legislation in Louisiana

The Louisiana Department of Insurance (LDI) has provided guidance for businesses seeking coverage for their losses during the pandemic. Business interruption coverage is optional, and the advice and legislation covering Covid-19 losses apply only to companies that have already purchased a policy.

Although business policyholders have made many good arguments as to why insurance companies should cover Covid-19 losses under business interruption claims, most claims have been denied. The reasons are numerous but mostly boil down to how the current legislation is worded.

Business interruption claims traditionally revolve around damage caused to the covered property by natural disasters or other perils, but they do not cover damage or losses by viruses or any other microorganism.

The same holds for civil authority coverage, even though the government mandated the closures. As such, policyholders cannot get coverage for Covid-19 losses.

Another point made by the National Association of Insurance Commissioners (NAIC) is that business interruption policies were made to cover small-scale losses for a few select businesses.

If insurance companies have to cover Covid-19 losses incurred by almost every policyholder, they will have a problem maintaining solvency. The reality is that they might not be able to afford the payment of thousands of claims.

So, currently, very little legislation allows policyholders to gain coverage for Covid-19 business losses, but the LDI still encourages businesses to file claims.

To ensure the best outcome, all business policyholders should get help from a law firm to claim pandemic losses with their business interruption coverage. If an insurance company denies the claim, companies can still file complaints through the LDI.

What to Do if You Want to File a Covid-19 Business Interruption Claim

Like most non-essential businesses globally, your company might have also suffered significant losses during the government-mandated shutdowns related to Covid-19. By the end of April 2020, small businesses in the US had suffered an overall decline in revenue of 38% due to shutdowns.

If the shutdowns were hard on your business, you might want to file a business interruption claim with your insurance provider. This is where Schwartz Law can help you gain a significant advantage in the claims and compensation process!

You can claim that any government action prohibiting access to your property might be related to a civil authority action or that Covid-19 damaged your business operations significantly. As you work with our team of compassionate and experienced attorneys, you'll likely go through the following steps:

1. Check if You Have Business Interruption Insurance

Your first step is to review your available insurance. You might have a variety of insurance policies, but if you aren't covered by business interruption insurance, you will not be able to file a claim. Only policyholders with business interruption policies can file a claim with their insurers.

2. Review Your Coverage

Our attorneys can help you carefully analyze all the provisions within your business interruption insurance. These provisions specify what events qualify you for coverage.

Your business interruption insurance must specify the types of events it covers, including natural disasters, power outages, and similar perils. Most insurers do not have a provision protecting you from viruses or pandemic-like events. In this case, we will provide legal advice and a more accurate analysis, so we can make the case on whether Covid-19 business losses should be covered. 

3. Prepare Your Claim

Next, your assigned attorney can help you prepare a claim document to file in court or with your insurers. The claim should explain why you are entitled to coverage under your business interruption policy.

3. Collect Supporting Evidence

In addition to your claim, we encourage you to try to submit as much supporting evidence as possible to strengthen your case. If you choose to have legal help from an experienced law firm, such as Schwartz Law, your attorneys can guide you on what supporting evidence you need to have. Examples of supporting proof include:

  • Documents proving lost revenue, canceled orders, contracts, or refunds
  • Data that supports changes in your business activity
  • Data that provides information on what your revenue should have been if the pandemic had not happened, including forecasted revenue plans for 2020
  • Payroll records before and during the pandemic to prove any cost changes related to staff
  • Notices for you to cease business operations

4. Don't Delay Your Claim

Because this is an evolving situation, you should make sure to file your claim as soon as possible. You might be one of the lucky businesses that gets compensation from your insurance before any legislation is passed that says otherwise.

Currently, only 2% of claims have been accepted. This might change for the better or the worse, depending on the summary judgment of the courts with business interruption claims related to Covid-19.

5. Consider Getting Legal Help

Attorneys can provide experienced opinions and help you get your arguments and language right in your claim. If you take your case to court, an attorney from a reputable law firm, such as Schwartz Law, can help you with the litigation and appeals process.

Let Schwartz Law Help You File Your Business Interruption Claims Today

Right now, few legal cases exist to help business policyholders make their claims — so hiring the right attorneys is an essential next step if you plan to win your case for Covid-19 business interruption claims. Legislation is in the works, but it could take time to implement. It's possible any new laws will be valid for future pandemics rather than retroactively apply to the current one.

If your business is looking to make a business interruption claim, you should have an experienced law firm help you prepare. For personalized service from attorneys with more than 20 years of experience, get in touch with Schwartz Law Firm.
Request a free consultation today and let us help you get the business interruption coverage you deserve.

Schwartz Law Firm

Schwartz Law Firm LLC attorneys bring over 25 years of combined experience securing personal injury recoveries and workers’ compensation successes in New Orleans and southeast Louisiana.