Business Interruption Claims and COVID

When the pandemic and government shelter-at-home orders took effect in March 2020, many businesses in California and across the nation were forced to shut down as a precautionary measure to help check the spread of the virus. Some businesses were able to shift to remote work that enabled them to continue operating. Others that depended on a physical presence in the community they served faced devastating financial losses.

The response by the latter group often focused on seeking recompense from their commercial liability policies and their business interruption provisions. Pressed by policyholders for relief under business interruption protection, the insurers cited the standard policy clause that calls for actual “physical loss or damage” to justify claims for reimbursement.

What ensued were lawsuits here and across the nation by policyholders against insurance companies to force payment under business interruption protection. The results were often favorable to the insurance companies, especially on the federal level, but policyholders fared somewhat better in state courts.

Legal efforts are still ongoing for many businesses. If you were denied compensation under your business interruption or commercial liability policy in or around Irvine, California, or in the counties of Orange, Los Angeles, or San Diego, contact William B. Hanley, Attorney at Law. Bill can review your policy, assess your situation, and advise you of your best options going forward. You—and your business—deserve quality legal counsel every step of the way.

Overview of Business Interruption Insurance

Business interruption insurance can be purchased as a stand-alone multi-peril policy or as part of a commercial liability policy. In most of these policies, the insurance companies include language that there must be “direct physical loss” or “direct physical damage” to justify a claim.

These policies also often list the types of perils or causes (such as fire, structural damage, or theft) that can trigger a claim. For the most part, causes or perils not listed will not be covered. Some policies even specifically exclude certain perils such as viruses and communicable diseases.

Actions by civil authorities, such as the lockdowns issued in California, are also subject to the same “direct physical loss or damage” requirement.

Response by California Public Officials

The California Insurance Commissioner, Ricardo Lara, initially seemed to side with the insurance companies, advising policyholders that “any claim would still need to be related to your property damage for coverage to be triggered.” He later seemed to switch sides after admittedly “receiving numerous complaints from businesses, public officials, and other stakeholders.” 

Commissioner Lara then urged the insurance companies to “fairly investigate all business interruption claims as they would during any disaster” because policyholders “deserve all the services, coverage, and benefits they are due under their policy.”

The California Assembly even passed a bill that made it a rebuttable presumption that "COVID-19 was present on the property of a third party and caused physical damage to that property which was the direct cause that prevented the ingress and egress to the insured's property and resulted in the insured's business interruption." The bill has yet to make it past the Assembly, however.

How William B. Hanley Can Help

If your insurance company has denied your claim for business interruption coverage based on the virus and the resulting shutdowns, you’re not alone. Many individuals and businesses throughout Southern California and the rest of the state are experiencing similar denials. Contact William B. Hanley, Attorney at Law, if you’re in or around Irvine or in neighboring cities and counties in California. Attorney Hanley can review your policy and assess your options for recovering damages. Get in touch with the firm today to schedule a consultation with a skilled advocate.


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