Insurance coverage for businesses amid COVID-19 has been and continues to be a major concern. As several businesses in Texas and Florida are forced to close their doors indefinitely for a second time as cases dramatically spike, it is likely that policyholders will continue to file business interruption claims. As these claims continue to rise, insurance carriers have been found using questionnaires and requests for further information from businesses that have been impacted by the pandemic, as a potential means to further deny claims.
While many businesses have received some form federal or state financial relief during the COVID-19 pandemic, no one knows for certain if that relief will prove adequate over time. Normally, business interruption insurance policies offer a means to recoup losses in the event of physical damage to the business or another adjacent storefront due to a fire or natural disaster. However, it’s become apparent to many business owners that COVID-19 does not qualify for coverage due to various provisions regarding the need for physical damage, time restrictions, and policy exclusions. Now, it appears insurers are utilizing questionnaires to find further information with which to exclude policyholders from their rightful coverage.
COVID-19 Insurance Questionnaires
Although filing a business interruption claim can appear to be as simple as making a phone call to an insurance broker or agent, COVID-19 related claims can make this process much more complex. Carriers and their adjusters may try to discourage business owners from filing claims pertaining to COVID-19 by saying there is no coverage available; however, it is ultimately up to the policyholder to decide whether to move forward.
Following the filing of a claim, an examiner will contact the business owner to ask questions over the phone or through a written questionnaire. This information gathering stage is incredibly important, as insurers are likely to ask questions that may seem simple, but mistaken wording in your responses can lead to immediate claim denial. This tactic is also used to undercut policyholder arguments in the event of litigation. Some of the questions that are most likely to be asked include:
Was physical damage caused on the premises?
A showing of direct physical loss of or damage to the covered property is usually necessary for filing a business interruption claim. For COVID-19, there often won’t be any apparent physical damage to the property; however, courts have previously found direct physical damage in situations where the damage is microscopic, hanging in the air within the premises and on its surfaces, and therefore making the premises unsafe to enter and use. These instances include ammonia, carbon monoxide, gas fumes, E. coli, and other anomalies. And recently, many businesses that reopened after closing due to government orders have had to shut down again because an employee tested positive for the coronavirus. Insurers are asking this question as a means to trick policyholders into admitting away coverage under their policies. Policyholders should carefully consider their answer to this question given the variety of scenarios cited above.
What resulted in the interruption of business?
It’s important for business owners to not solely state COVID-19 as the reason for the interruption of business. It should list all factors that led to the interruption, including the spread of COVID-19, any government-mandated shutdowns, the presence of any employees or customers who have tested positive for the virus, or any other factors that have contributed to the interruption.
Did the policyholder shut down the business as a precautionary measure?
Though the answer to this question may seem like an obvious ‘yes,’ it can actually result in a denial. If the policyholder answers yes, the insurer can point out analogous situations such as evacuation orders before a hurricane or other natural disaster made landfall. In instances like these, courts have held “precautionary” governmental orders are insufficient to form the basis for a valid business interruption claim. But in reality, many of the government shutdown orders were reactionary, not precautionary – the government order was reacting to the presence of COVID-19, often at a nearby location. Other potential questions
While the above three questions have been standard in most business interruption questionnaires for COVID-19 claims, there are other more nuanced questions that will likely come up related to the specifics of the business in question. Insurance company questions may be related to COVID-19 testing, cleaning and sanitation measures, as well as if and when there have been known instances of infection on the premises.
Coronavirus Litigation Concerns
When insurance litigation becomes necessary due to wrongfully denied or delayed claims, insurance policies require that a claim be filed “promptly.” As COVID-19 has ravaged many parts of the nation since late February, the window on “promptness” is likely beginning to close. Indeed, many policies contain 60-day or 90-day deadline by which to file a claim after the loss is first sustained. It is imperative to file a claim as soon as possible.
A policyholder’s chance of prevailing depends on:
The type of policy
The state (or states) in which the business is located
The type of business and whether social distancing is possible
Whether the business owner is a franchisee or franchisor
Because issues involving business interruption claims and COVID-19 are so complex, having the insight of an experienced insurance claims attorney can ensure all of these matters are addressed properly in order to secure proper coverage.
COVID-19 Business Interruption Insurance Attorneys
During the ongoing pandemic, many businesses have been left to fend for themselves or make the difficult decision to close their doors indefinitely. Now as operations are moving to shut their doors for a second time following a major spike in coronavirus cases, concerns over revenue losses remain a top priority. At Raizner Law, we work to hold insurers accountable when they wrongfully deny, delay, or grossly underpay claims. If your business suffered losses due to the pandemic and needs assistance, contact us today.