Aside from the health concerns of the COVID-19 pandemic, businesses across most industries have been heavily impacted by the virus and related government action.
Commercial property insurance policies frequently provide coverage for losses stemming from COVID-19. While the insurance industry has been outspoken about the fact that their policies have virus exclusions, or otherwise do not apply, there are a number of reasons why businesses in the District of Columbia, Virginia, and Maryland should not accept these arguments at face value.
If you have commercial property insurance coverage for business losses or business interruption, you should consider filing a claim.
Industry Background – What does commercial business insurance generally cover?
In 1971, the Insurance Services Office (ISO) was formed as an advisory and rating organization for the property/casualty insurance industry to assist insurance companies in meeting state regulatory requirements, and creating common approaches for underwriting risk through the use of standardized ISO forms. While some very large businesses may obtain specialized policies, smaller businesses typically rely on standard ISO forms which cover an insured for “an actual loss of business income” whenever an interruption of the insured’s commercial operations result from the “direct physical loss of or damage to property at the premises.”
Traditional commercial insurance packages include business interruption coverage. Benefits usually include coverage for first-party lost income, associated extra expense, slowdowns, or other “contingent business interruption” losses experienced by customers or suppliers. One of the common questions facing businesses in the wake of COVID-19 is whether they can utilize the benefits of such a policy to help support their business during government closures and other commercial slowdowns. The answer is frequently yes.
What types of policies might be implicated?
Many commercial property insurance policies cover business losses, and typically include one or more of the following:
- Traditional Business Loss Insurance – Typically business loss applies to physical damage to buildings, equipment, or inventory and requires a showing of “physical loss.”
- Business interruption Insurance – business interruption actions address time element coverage on business loss policies.
- Contingent Business Loss Insurance – Typically involving damage to the property of a critical supplier or customer, and are often specific to a given policyholder’s industry.
- Civil Authority Insurance – Generally covering losses when governmental or military authorities limit or prohibit access to insured property, suppliers, providers, or vendors because of damage to it or other property in the area.
- Ingress/Egress Insurance – where circumstances prevent ingress/egress to the property causing business losses, they are similar to CA actions but do not require government action.
- Service Interruption Insurance – traditionally involving losses stemming from lack of electricity, gas, water, sewage, etc.
- Profit and Commission Coverage – covering loss of revenue from damage or destruction to insured’s inventory
For more specific information on these policies and their common exclusions, consult our article on the legal landscape surrounding business interruption claims.
My insurance company has said that they would deny all claims – Should I still file?
A common question we see, particularly when a company has exclusions in their policy, is whether they should make a claim in the first place. Typically, the answer is yes, and for multiple reasons. First, the insurance industry has taken a hard, but legally questionable position, to deny nearly all claims made due to Covid-19. For more information on the legal framework surrounding these claims, see our coverage here.
Second, the claims process can be time-consuming, and this is anticipated to persist due to how widespread the impact has been on business.
Finally, although we are already seeing the insurance industry raise lobby efforts to prevent them, there is a strong push for legislation that would have the industry cover business interruption claims. If a company fails to file their claim in a timely manner, it is quite possible they will not be able to take advantage of the coverage they are paying for. Moreover, due to the financial realities facing nearly all businesses in the United States, the insurance industry understands that losses are occurring and is expecting large numbers of claims.
How do I file a claim?
Filing a claim is complicated, and timing is essential. Certain steps you can take that will make a successful outcome more likely.
- Read the complete policy carefully
Frequently, businesses will keep a cliff notes version of their policies on hand. You will want read through, in detail, your complete policy, determine what kinds of coverage you might have, whether any exclusions apply and whether the location and context of that exclusion will affect your claim.
Differences in policy coverage and exclusions will shape how you go about filing a claim.
- Develop your business loss claim
After you review the scope of your coverage, it is critical to review and quantify the loss. Past performance and continuing expenses are typically critical issues. You will want to take detailed, date-stamped notes on how the coronavirus is impacting your business as soon as possible, as this will help make your claim more persuasive and allow you to point to them when going through your losses with an appraiser.
In addition, you will want to begin to get together standard business documentation required for filing your claim. For a guide on how business losses are calculated, and what types of documentation you will need, you can consult our article here.
Most, if not all policies, will require a showing of “physical loss” to your business to qualify for business interruption coverage. Standard ISO policies often define loss as:
For more information on why COVID-19 qualifies as a physical loss, see our coverage on the legal landscape surrounding Business Interruption claims.
- Provide Notice
Timing is essential – Many policies contain trigger language that will require insureds to notify their insurer of losses that might trigger coverage immediately. Do not wait to file your claim to provide notice to your agent or broker, as you want to put your insurance company on notice of your losses as soon as possible.
Standard ISO policies often include the following or similar language:
- Mitigate your losses
Many policies contain conditions that require a business to mitigate their losses, either to trigger coverage or to offset what they will receive.
You must take reasonable steps to mitigate damage to your business. Often, this includes making every effort, where possible, to stay open. Offering deliveries, takeout, or curb side service are frequent examples of how a business can mitigate their losses in order to secure the highest possible recovery.
- When filing, the language you choose is essential
The most common mistake businesses make when filing claims on their own is to draft one that can be narrowly construed by the insurer reviewing the claim. A quick denial on these grounds can have broad repercussions for a business that wants to challenge such a denial. Either they will need to go to the back of the line to re-file claim more broadly, or they will initiate a legal challenge that is limited only to the specific grounds for the denial, greatly weakening the potential claim.
- Get Help!
The claims process can be time-consuming and the sooner a business files a claim, the sooner they may receive the insurance proceeds. In addition to acting quickly, the best way to hasten the process is to file a claim that is persuasive and well-documented. Some policies include coverage for “professional fees” and “claims preparation costs,” which make the decision to hire an expert to assist with your claim an easy one. The Cochran Firm has years of experience securing coverage from insurance companies. If you would like to read more on the legal landscape in the District of Columbia, Maryland, and Virginia, see our coverage here.
To get help filing your claim, contact our expert attorneys at The Cochran Firm, who can lead you step by step through the process.