Unfortunately, it appears that the CARES Act loan program may not be enough to cover the tremendous losses businesses have suffered from home confinement and shelter in place orders mandated by states across the country.  

So, what can small businesses do?  Are there any other sources of untapped emergency income relief?  Can companies look to anywhere else for assistance? The answers to those questions may be “yes” if they have secured business interruption coverage through their first-party insurance coverage.  

Business interruption coverage provides businesses reimbursement for a direct loss or damage to their property.  Insurance companies will replace lost income if a business is halted, due to a fire, flood, or other natural disasters.  The objective behind this coverage is to “protect the earnings which the insured would have enjoyed had no interruption occurred.”  A Miller & Co v. Cincinnati Insurance Co.  217 Ill.App.3d 572, 577 N.E.2d 885, 887, 160 Ill.Dec. 560 (3rd Dist. 1991).  A common property insurance policy often comes with business interruption and extra expense coverage.  

More often than not, business interruption policy terms will require “direct physical loss or damage.”  However, once “direct physical loss or damage” is shown, most policies provide coverage for actual loss of business income, including during a suspension of operations to restore your property.  On-site contamination or impacts on property or customers can satisfy as “direct physical loss or damage.” Gregory Packaging, Inc. v. Travelers, 2014 U.S. Dist. LEXIS 165232 (D. N.J. 2014).  This determination will be fact-specific and subject to interpretation by each State's courts. 

In this author's opinion, the effects of this global pandemic on businesses have been no more manageable and, in many cases, exponentially worse than a fire or flood where stay at home orders have been decreed by governors across the United States.  This unique situation in time presents a case of first impression for Courts. Insurance Brokers, including mine, are predicting that insurers are likely to draw some firm lines against coverage for COVID-19 related losses. However, insurance companies don't have to look back too far in the past to know that those lines have been breached before – just look to terrorist attacks on 9-11.  In Broad Street, LLC v. Gulf Insurance Co., 37 A.D.3d 126, 832 N.Y.S.2d 1 (2006),the Court held that the “necessary suspension” after the terror attacks qualified as a total business interruption triggering insurance coverage under the business interruption policy.  

Strong arguments can be made that similar to the 9-11 situation, the invisible coronavirus contaminated and impacted property, employee workstations, and customers of businesses.  Certainly, hot-bed areas of the virus, including New York City, Chicago, Detroit, New Orleans, are looking at several more weeks or months before they can commence cleaning and reopening.  It will undoubtedly be interesting for insurance companies to argue that no direct physical loss or damage occurred during this period as they will be making these arguments to state and federal judges who just experienced having their courtrooms and court buildings shut down for weeks and presumably only reopened after they underwent thorough decontamination and cleaning of their courtrooms, chambers, offices, cafeterias, and lobbies.  

There are six things business owners can do right now to manage their insurance claims.  First, review your insurance policy with your broker, agent, or lawyer.  Second, know what your obligations are to provide notice to your insurance company when making a claim.  Third, document your losses and keep records of expenditures related to your claim. Fourth, be completely transparent with your claim's adjuster, ask for help, and conduct yourself like you expect the claim to be covered. Fifth, continue to keep up to date with regulatory and governmental announcements from city, county, state, and national governmental agencies.  Sixth, if you have any questions or are uncertain about what your policy provides, retain an insurance lawyer who can review the terms of your insurance policy and inform you whether coverage should be extended to the specific facts of your business loss.

At Kreamer Law Group we are experienced with taking on insurance companies that deny claims and we are now offering a complimentary review of your insurance contract. For a no-obligation free consultation, please call John Kreamer at 630-995-3668.  

This information is of a general, educational nature and should not be construed as legal advice pertaining to your specific circumstance, case or situation. Such advice must be sought from your own attorney pursuant to an attorney-client relationship, after consideration of your specific facts or questions.