Too Soon To Tell — But File Now Before Time Is Barred
Will business interruption insurance cover pandemic-related losses? That’s the $64,000 question. Many brokers and insurers have reflexively said there is no coverage and have discouraged policy holders from filing claims but doing so now could protect you down the road.
But filing a claim now may be advisable – – policies often have strict time limits for filing claims; with a timely claim now, policyholders preserve their rights as the insurance industry, courts and legislatures grapple with coronavirus coverage issues. Without a timely filing, policyholders might not have coverage later deemed applicable.
As a general matter, business interruption insurance applies to loss of revenue resulting from physical damage to a covered location. For example, during the time it takes for a business to remediate or relocate after an office flood, interruption insurance would cover the losses.
In addition to the coverage for damage at an insured’s own property, many policies also provide coverage for governmental closure orders related to physical damage at nearby properties.
But coronavirus does not fit neatly into this physical damage rubric and so, many insurers say their policies do not apply.
However, there is precedent that may support an interpretation of a policy as covering losses due to the presence of a virus.
For instance, in litigation after 9/11, in Schlamm Stone & Dolan, LLP v. Seneca Ins. Co. the New York Supreme Court held that “the presence of noxious particles, both in the air and on surfaces in plaintiff’s premises, would constitute property damage under the terms of the policy.” And in Port Auth. of N.Y. & N.J. v. Affiliated FM Ins. Co., the court found that “the presence . . . of [toxicity] in the air of a building,” rendering the property uninhabitable, constitutes “physical loss.”
Even with expansive interpretations of physical damage supporting arguments for coronavirus coverage, some insurance claims could be foiled by the post SARS epidemic “virus exclusion” that many New York carries put in place. These exclusions could bar claims for losses attributable to the coronavirus.
In the face of uncertainty over virus coverage under business interruption policies, both the New York and the New Jersey legislatures have proposed statutes that would mandate that insurers provide benefits under such policies. Whether the legislation passes, or is even constitutional, remains an open question.
That being said, business owners should carefully examine their policies, with counsel, before filing a timely claim for coverage for their coronavirus losses.
Legal Action Might Be The Salve
If the claim is denied, policy holders can evaluate whether there are avenues for litigation and legislation that may offer them redress. After all, if there is coverage available, even if it must be forced through lawsuits or otherwise, business owners must be able to access those benefits in these difficult times.
Judith Bachman is the founder and principal of The Bachman Law Firm PLLC in New City. firstname.lastname@example.org 845-639-3210