With the COVID-19 pandemic occurring, many states, including Wisconsin, have ordered all nonessential businesses, including restaurants and bars, to close their doors. Unfortunately, there will be a substantial amount of revenue lost by these businesses for as long as their businesses are required to remain closed. A significant question is whether these businesses will have any recourse under any of their business insurance policies to recoup lost revenue based upon the coronavirus and/or whether there is coverage triggered by government-mandated closures. The answers to these questions require a detailed analysis of each individual insurance policy, as well as the circumstances surrounding the losses of each business.
Coverage for business interruption is typically an endorsement to the insured’s property insurance policy and designed to protect the insured for losses of business income it sustains as a result of the direct loss, damage, or destruction to insured property by a covered peril. A typical clause in an insurance policy reads as follows (although there are variations to this depending on the insurance company):
“We will pay for the actual loss of business income you sustain due to the necessary suspension of your operations during the period of restoration. The suspension must be caused by the direct physical loss, damage, or destruction to property. The loss or damage must be caused by or result from a covered cause of loss.”
Usually, in order to recover under this policy provision, a business owner will need to demonstrate that (1) the business sustained physical damage to the insured property; (2) this damage was caused by a peril covered under the policy; (3) which resulted in quantifiable losses because of the business interruption, and (4) that these losses occurred during the time period needed to restore property that was damaged.
There are presently many lawsuits pending throughout this country in which businesses are attempting to enforce business interruption coverage under business insurance policies and to seek a determination by the courts of whether the coronavirus can be deemed to cause physical damage by infecting surfaces in the business, similar to gaseous fumes which have been found in some cases to constitute a physical loss.
In addition to determining whether the coronavirus may be deemed to be a physical loss under the business interruption policy, each insurance policy must be analyzed to determine whether any language provides coverage for business interruption due to civil authority – such as mandated closures by local, state, or the federal governments.
Each policy’s specific language and endorsements must be individually analyzed. These provisions must also be evaluated in light of any exclusions in the policy and within the specific context of each business owner’s circumstances. Business owners financially impacted by this unprecedented pandemic should timely consult with an experienced attorney to determine whether or not there may be a valid claim under their insurance policy to pursue significant losses of revenue. The attorneys at Anderson O’Brien are here to assist you with an insurance coverage analysis or other legal issues that may arise out of any business losses you sustain during these difficult times.