Fight for COVID-19 Business Insurance Loss Coverage to be Respected by Insurance Carriers
Insurance companies continue to fight against providing insurance coverage for business interruption losses during the Coronavirus Epidemic. Battles are taking place in state and federal courtrooms, as well as in various government settings.
The insurance industry has made it clear that no business interruption claim will be paid without the carrier being forced to do so by law. Anyone who lost revenue or profits here in Indiana or Illinois can expect to have their business interruption claims disrespected and denied by their carrier.
Fortunately, in both Illinois and Indiana, there is longstanding legal precedent where insurance companies have been sued in order to make them honor their obligations to pay on a claim. The sad reality is that for many years, injured victims have been forced to go into court in order to make an insurance company do the right thing.
Today, unfortunately, a new wave of lawsuits will be filed in the aftermath of COVID-19 by policyholders seeking payment from their insurers on their business loss claims. For details, see our earlier discussion in “Coronavirus Lawsuits for Business Interruption Losses after Insurer Denial of COVID-19 Claims“.
Today, we provide an update of the business interruption loss battlefront:
1. State Insurance Commissioners of Indiana and Illinois
In several states around the country, heads of state insurance departments have issued formal notices to their residents about the issue of whether or not COVID-19 injury claims will be covered by business insurance policies.
Some of these insurance commissioners have taken the official position that policy exclusions are likely bars to being paid for Coronavirus business interruption losses. The State of Georgia, for instance, has taken the position that “[s]tandard business interruption policies typically exclude viruses and bacteria and/or communicable disease.”
Indiana and Illinois: Check Your Policy
The insurance departments of both Indiana and Illinois have released statements concerning business interruption insurance coverage. Each Insurance Commissioner refers the reader to specific policy language contained in his or her policy.
Indiana’s Department of Insurance provides the following:
“Business interruption insurance coverage may vary depending on the type of policy you have. Policyholders can contact their insurance agents, brokers, or carriers about their business interruption insurance coverage. Your policy should list or describe the types of events it covers. Events that are not listed on, or not described in, the policy are typically not covered. It is important to review the policy exclusions, coverage limits, and applicable deductibles.”
The Illinois Department of Insurance goes into more detail:
“Business interruption insurance coverage found in most policies require[s] that the interruption be a result of direct physical loss to the property and that the loss or damage must be a result of a covered peril. Insureds should review their policies for specific terms and conditions of their coverage.
“Most business interruption insurance coverage contains a virus and bacteria exclusion that specifically excludes losses that result from any virus, bacterium, or other microorganism that induces or is capable of inducing physical distress, illness or diseases. Please refer to your policy for your specific coverage and consult your agent or insurer if you have questions.
“It is possible to have business interruption coverage under another type of insurance policy. For example, there may be available coverage in policies that cover perils arising out of actions by civil authorities or interruption of your supply chain. You should review your policy and see if it is a covered cause of loss or if it is excluded.
“Some policies may provide coverage for “civil authority”, which addresses the situation when government prohibits access to your business. If your policy requires a “covered cause of loss” to be the reason why the civil authority restricted access to your business, coverage will depend on whether the COVID-19 outbreak is deemed a covered cause of loss. Some business policies do not have this requirement. Please read your policy carefully.”
2. Illinois State Legislature: Bill to Set Up Task Force to Investigate the Issue
Right now, there is a bill before the Illinois lawmakers that will create a task force to investigate the business interruption insurance coverage issue as it applies to COVID-19 losses. If it passes, then the result would be a study recommending legislation regarding Coronavirus business loss coverage.
For more, read amendment to Senate Bill 2135, filed by Illinois State Representative Kelly Burke on May 21, 2020.
Of note, several states already have pending legislation that, if passed into law, would void any policy exclusion defense of the insurance company and mandate that commercial policies covering loss or damage to property will cover COVID-19 business interruption claims. See, “Legislation Enabling Policyholders to Obtain Insurance Coverage for Coronavirus Claims is Constitutional Part 1“published in the National Law Review on May 26, 2020.
3. Illinois Governor’s Proclamation Language and Business Interruption Claims
Governor JB Pritzker issued his “Gubernatorial Disaster Proclamation” in response to the Coronavirus Pandemic on April 1, 2020. (Read it here.)
There is language within the Governor’s Proclamation that may apply to business interruption coverage claims in Illinois. Specifically, the following may be applicable to insurance provisions dealing with business interruption losses as well as civil authority interruption claims. The Proclamation states as follows (Proclamation page 2):
“… the circumstances surrounding COVID-19 have resulted in the occurrence and threat of widespread and severe damage, injury, and loss of life and property under Section 4 of the Illinois Emergency Management Agency Act.”
In the future, policyholders may be able to argue that insurance carriers must cover their injury claims because the Proclamation makes it clear that the Coronavirus has resulted in property loss. Other language in the Proclamation dealing with COVID-19 as a public health emergency may also provide a basis for coverage as a civil authority interruption.
4. Lawsuits Filed against Insurance Companies for Failing to Pay Business Interruption Claims
As we have warned, policyholders will be forced to file lawsuits against their insurance companies before their business interruption loss claims will be honored. Lawsuits against carriers are being filed all over the country in state courts for Coronavirus coverage denials.
These cases are new, filed within the past few weeks. Most are in state courts applying state law. However, there is precedent providing victory to the policyholder in an overseas jurisdiction.
Early Victory for Policyholder in French Court
In France, a business owner has already won his lawsuit against his insurance company for failing to cover business interruption losses due to COVID-19. The French judge has ordered AXA to pay the claim submitted by the owner of four Paris restaurants for all operating losses incurred after the restaurants were forced to close because of the Coronavirus Quarantine.
For details, read “Insurer AXA must pay restaurant’s COVID-19 losses, French court rules,” written by Elizabeth Pineau and Maya Nikolaeva and published by Reuters on May 22, 2020.
Filing Business Interruption Loss Claims in Indiana and Illinois
For anyone who has suffered significant revenue losses or may be facing closure due to the closing of business because of the COVID-19 Executive Orders, it is imperative that they investigate the possibility of forcing their carrier to honor their commercial insurance policy as soon as possible.
Each policy must be carefully reviewed for its specific language. The circumstances surrounding the business and the causes for its lost revenue must be explored. Actions by federal and state governments, as well as analogous jurisdictions, must be considered and compared.
There is no blanket response to coverage in these situations, no matter the cursory position taken by an insurance carrier.
For more on Coronavirus-related Lawsuits, read:
- “Coronavirus Lawsuits and COVID19 Legal Claims in Indiana and Illinois: Wrongful Death or Serious Injury;” and
- “Deadlines for Injury Victims to File Lawsuits: Statutes of Limitations.”
For more on Insurance Company Bad Faith, read:
- “Bad Faith: When an Accident Victim is Victimized a Second Time by the Insurance Company”;
- “Insurance Company Has Duty to Settle Your Claim: Bad Faith Lawsuits Against The Insurer”; and
- “The Law of Bad Faith Insurance Claims in Indiana and Illinois.”
There are avenues for justice in both Indiana and Illinois for businesses who have been denied commercial insurance coverage of COVID-19 business interruption losses by their insurer. Our courts exist as time-honored forums where wrongs can be righted. Please be careful out there!
