Business Interruption Insurance is added as a policy rider or add on to a property insurance policy and is meant to replace business income lost due to a natural disaster. Business Interruption Insurance can pay benefits for:
- Lost profits
- Fixed costs
- Temporary Location (if needed to continue operations)
- Sales Commission and Training Costs
- Civil Authority ingress/egress
- Employee Wages
- Loan payments
It can be a critical piece of insurance protection in case the business is required to close due to circumstances beyond the control of the business owner, to keep the business up and running. The premiums for Business interruption Insurance are not inexpensive and may be a significant element of a small business’s income.
While the above is true, business interruption insurance may be part of a matrix of protection which may keep many businesses in operation during difficult times. That’s why in the aftermath of the COVID-19 business closings, many business owners were unable to access benefits under their business interruption policies due to a Bacteria/Virus Exclusion. Many business owners have sought legal action against insurers due to these exclusions and are filing lawsuits in state and federal courts for failure to pay benefits.
Why a Bacteria/Virus Exclusion?
Any insurance agreement is made up a policy which sets forth basic coverages and a set of riders which expand coverage, and exclusions, which limit coverage. As insurance companies moved through the SARS outbreak in 2003, it became clear to insurance companies, many of which had lost billions due payouts made during that outbreak, that an exclusion was needed limiting the insurance companies’ payouts due to a future outbreak of either a bacteria, viral, or other microorganism capable of inducing physical stress, illness or disease.
Hence the Bacteria/Viral exclusion was written which excludes benefits to be paid under business interruption insurance when the cause of the business interruption is viral or bacterial. Not all policies contain this exclusion, and even the exclusion itself is under question under the current circumstances of the COVID-19 breakout. About 500 cases have been filed at the federal level and are in the process of working their way through the courts.
Will Cases be consolidated into a Multi-District Litigation?
It is unclear at this time these cases will be consolidated into a Multi-District Litigation (MDL). There are several on both sides of the debate who are both pro and anti-consolidation so it is unclear as to whether the MDL process will become a part of this litigation, however, the JPML has currently schedule arguments for late July 2020 to consider the question. After arguments, a decision will be made by the JPML and pretrial motions and discovery for cases at the federal level may be consolidated at that time.
The Richard Harris Law Firm represents Business Owners who incurred losses due to COVID-19
If you have suffered losses due to the COVID-19 pandemic and were covered by Business Interruption Insurance coverage, our firm is evaluating such cases currently. Please call our firm today for a no-cost consultation and evaluation of your case at (702) 444-4444.