Thousands of Atlantic Canadian businesses are suffering devastating financial losses due to business interruptions caused by COVID-19.
If you are a professional, commercial property owner, or business owner and suffered a loss of revenue due to the COVID Pandemic, you may be entitled to compensation..
Are COVID-19 Claims Covered? It Depends.
Insurance companies have already released statements that COVID-19 claims are not covered. This is not necessarily true. The real answer depends upon the coverage stated in your business policy.
Policies are different and are open to interpretation given the unique factual contexts of each claim. Whether a Business Interruption policy covers losses from COVID-19 needs to be assessed by a case-by-case basis.
At Cantini Law Group, our Business Interruption Insurance Legal Team will review your claim for free and advise you on your legal options for pursuing a claim. There is no obligation and you won’t pay any up front costs or lawyer fees unless we successfully recover compensation for you.
We opened a dedicated COVID-19 Helpline for Business Owners and offer free consultations for companies with questions about their Business Interruption Insurance Policies. 1-844-CANTINI (226-8464)
Types of Converage
There are two basic policy types:
- Named Perils – Covers only loss and/or damage caused by perils specifically listed in the policy, subject to exclusions.
- Comprehensive – Covers loss and/or damage caused by any peril, unless specifically excluded.
The COVID-19 disputes will center around two types of coverage: Business Interruption and Civil Authority.
What is Business Interruption Coverage?
Business Interruption Insurance is a contract between the Business and the Insurer. Business Interruption Insurance is not sold as an individual plan. It’s typically included in a Commercial Property Insurance Policy or as an add-on to a Comprehensive Policy package.
There are three types of Business Insurance Policies:
- Gross Earnings Policy – Which pays only until property or damages are replaced or repaired, or stock is replaced.
- Profits – From policy which continues to pay until a business resumes its pre-interruption level.
- Extra Expense Policy – Which is designated for businesses that remain operational during periods effected by loss and/or damage.
Business Interruption Insurance Policies are not standardized and contain many variants including whether the insurer will pay for the actual loss of “Business Income” due to the “necessary suspensions” of operations during the “period of restoration.”
The coverage is activated when a business experiences a loss of revenue or increased operating costs that results from physical damages to the property where the business operates. The issue that will arise is how “physical damage” is defined.
What Constitutes Physical Damage?
Business Interruption coverage is usually triggered if a loss of income is due to “physical damage” of the assets of the insured or to the assets of a key supplier of the insured. The definition of “physical damage” is ambiguous.
Courts have held that contamination may amount to physical damage to a property being unusable or uninhabitable. There is case law suggesting any physical alteration to the premises even at a microscopic level can constitute damage to the property.
The courts have provided a wide interpretation as to what factors constitute Business Interruption. Each case will be fact and policy specific. You will need to have your coverage reviewed by a Business Interruption Lawyer.
Contact Cantini Law Group’s team of Business Interruption lawyers today for a free analysis to determine if you are eligible for Business Interruption Insurance Coverage.
Civil Authority Converage
Businesses may also be covered for losses suffered as a result of Civil Authority. These policies include coverage for forced closures by government officials. Civil Authority Coverage often require a threshold determination that there be some sort of damage to adjacent property. Courts seem to be split on the issue of whether “physical loss” is required.
Courts have interpreted the Civil Authority Provision as not requiring physical damage to property in order to trigger coverage. Such coverage may instead be triggered by “stay-at-home” orders or curfew causing a Business Interruption, which in turn, resulted in financial loss.
Other Policy Considerations
- Extended Business Income – Additional Business Income Relief may be available if the necessary suspension of the business operation produces income loss under the policy. Financial coverage is provided for the period of time in which the cause of loss has been remedied and the operation is reasonably resumed.
- Extra Expense Coverage – Allows the business to recover the necessary expenses incurred during the period of restoration which would not have been incurred if there had been no direct physical loss or damage to the property.
- Event Cancellation – Businesses hosting events usually purchase event cancellation insurance. Typically, insurance covers cancellation fees, out of pocket expenses, and potential loss income anticipated from the event.
- Force Majeure – Many Insurers are stating the pandemic is a Force Majeure which is an unforeseeable circumstance that nullifies a contractual obligation. It is our position Pandemics are not unforeseen as we had recent health crisis’ such as SARS and the Asian Flu. In fact, insurance companies have included viruses and pandemics in some of their policies.
- Bad Faith – An insurance company may act in Bad Faith when it never intended to honour it’s agreement with the business owner.
What do Business Insurance Plans Cover?
Most business insurance plans cover more than loss of income. They typically cover the following:
- Fixed Costs;
- Employee Wages;
- Loan Payment Losses;
- Supply Chain Losses;
- Temporary Location or Re-Location;
- Training Costs;
- Additional Expenses such as Marketing Materials and New Supplies etc.
What Business Owners Should Do?
It is essential that business owners fully understand what they are entitled to under their business insurance policy.
Business owners should review their business insurance policy to ensure Business Interruption Insurance is included.
- You can access your policy by contacting your insurance agent or broker.
- Business owners must make sure they have documentation and proof they are the licenced business owner and have proper insurance coverage.
- Businesses should start to document the financial impacts of COVID-19.
- In determining the losses, business owners need to establish projected profits compared to profit/losses as a result of COVID-19.
- All costs should be tracked, including cleaning and premise disinfecting costs, communication campaigns to inform the public, overtime pay.
- Keeping clear records of costs and supporting information, to ensure the claims process runs as efficiently as possible.
Several US states have introduced legislation which require insurance companies to pay claims to small businesses. Most of the legislation would allow insurers to seek reimbursement from their respective states.
The legislation would force insurance carriers to cover COVID-19 business losses regardless of any exclusions stated in the policy. Therefore, legislation would override the exclusion and Business Disruption policies designed to preclude coverage for virus related losses.
It is still unknown whether the Canadian and Provincial governments will introduce similar legislation.
Payments are usually based on the Businesses past financial records.