Insurance coverage has been a major focus for businesses across the nation affected by COVID-19. As claims continue to pour in, confusion continues to grow as many are finding their business interruption policies do not cover viral or pandemic events. Now, several insurers have been found to be overestimating the cost to cover these events as a means to derail claims.
An Influx of Business Interruption Claims
By late May, an estimated 101 federal business interruption lawsuits had been filed, with that number continuing to grow as businesses grapple with the lasting effects of closures due to COVID-19. Lawsuits also continue to be filed due to the many difficulties businesses have encountered when attempting to file claims for coverage, only to find that more often than not there is none.
COVID-19 business interruption claims are incredibly complex.
Business interruption insurance provides protection against the loss of income and extra expense incurred when a business suffers physical loss of or damage to property caused by an insured peril or event that interrupts its operations. In order to trigger coverage, physical loss of or damage to property must be apparent during the applicable period of restoration, which sometimes includes a 72-hour waiting period before coverage will kick in. Another hurdle involves civil authority coverage, which requires the mandated closure of a business by government authorities in addition to proof of physical loss of or damage to the property or a property within relative proximity to the business.
Many business owners already face pressure to reopen safely while continuing to pay employees. In response to the pandemic’s barrage of insurance claims, carriers have released potentially overinflated estimates in order to further derail the recovery process.
Overinflated Estimates
Insurers have deemed the COVID-19 pandemic an unprecedented event, estimating they will not be able to cover the massive costs that have befallen businesses across the nation. In fact, estimates from the American Property Casualty Insurance Association (APCIA) have stated that if required to pay the claims in full, it could cost over $400 billion a month to compensate companies for lost income and accrued expenses due to mandated business closures.
The insurance industry has used this gigantic, inflated estimate to lobby against state and city lawmakers’ work towards requiring insurers to pay business interruption claims. These efforts come after a wave of such claims have been filed since mandated stay at home orders and business closures led to many companies being left without income or a means to recoup losses. Unfortunately, many claims have been marred by the requirement of physical loss of or damage to property in order to trigger coverage. This has discouraged some policyholders from filing claims at all.
A recent look at data by Reuters argues APCIA estimates are actually overinflated because the numbers refers to the industry’s worst-case scenario rather than actual current numbers. The estimate was based on all small businesses with business interruption coverage claims, assuming that between 60% and 90% of businesses with fewer than 100 employees would be exposed to or impacted by COVID-19. Insurance specialists estimate insurers would actually only be on the hook for $120 billion rather than $400 billion.
Businesses and States Work to Hold Insurers Accountable
Ongoing business interruption claims and overinflated estimates have left business owners unsure of where to turn. Seven states have had bills introduced in an attempt to hold insurers accountable for payments. New Jersey was the first state to propose a bill that would mandate insurers cover any COVID-19 related losses under business interruption policies. New York and Pennsylvania have since proposed their own COVID-19 business interruption bills. Similar to these states, legislation has been floated in Louisiana, Ohio, Massachusetts, and South Carolina as well. None of these bills have yet passed, as many fear they will lead to lengthy court battles.
Some businesses are being told that if they file a claim for business interruption coverage, the carrier will probably deny it. This sad reality has left businesses to seek legal counsel to ensure their concerns are heard and losses compensated.
Texas COVID-19 Insurance Claims Attorneys
Hundreds of thousands of businesses across the Lone Star State and the country continue to deal with the lasting effects of COVID-19 related closures and massive revenue losses. While business interruption policies are meant to provide a sense of relief, questions and frustrations have arisen instead with regard to COVID-19 claims. At Raizner Law, we hold insurance companies accountable for wrongfully delaying or denying rightful insurance coverage to business owners. If your business needs assistance with a COVID-19 related claim for loss, our experienced insurance coverage attorneys can help. Contact us today for more information.
