Considering an Insurance Claim for Business Interruption Due to COVID-19?
Here’s What You Should Know
Throughout the United States, thousands of businesses have been forced to cease typical operations to quell the spread of COVID-19. Unfortunately, this virus has caused massive lost profits for these businesses. Does one of your business’s insurance policies provide coverage for this unprecedented business interruption?
If you’re considering an insurance claim for business interruption due to COVID-19, most policies covering business interruptions require physical damage to the property to trigger the coverage. While most policies contain their own similar definition, the phrase “physical damage” generally means “the actual loss, injury, or deterioration of the property itself.” Overton v. Consolidated Ins. Co., 145 Wn.2d 417, 428 (2002).
Washington courts have held that hazardous methamphetamine vapors damaged tangible property despite the lack of visible damages (Graff v. Allstate Ins. Co., 113 Wn. App. 799 (2002)), but they have also concluded that a landslide destabilizing the soil underneath a home did not trigger coverage under the insurance policy (Fujii v. State Farm Fire & Cas. Co., 71 Wn. App. 248 (1998)). Given the uncertainty of this issue, we can expect a jump in insurance coverage fights, including litigation. Courts will have to consider, and businesses will have to prove, that the existence of the virus and/or ramifications therefrom (or threat of existence) caused physical, tangible damage to the property.
Beginning in around 2006, many insurers began including language in their policies excluding damages for virus-related losses. However, some policies contain civil authority clauses. These clauses protect monetary losses when the orders of civil authorities make it impossible for business owners and employees to access their premises. In states like Washington, Oregon, and California, where the state governments have implemented stay-at-home orders for all non-essential businesses, these clauses may well offer insureds protection.
This COVID-19 pandemic is unprecedented, creating uncertainty and confusion on many levels and leaving businesses scrambling to stem their losses – including via the insurance policy for which you have surely paid a healthy amount. Please contact our office if you have questions about your insurance policy or are considering a business interruption claim.