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SS+D COVID-19 Response Team: Are Businesses Missing Out On Insurance Coverage for COVID-19?

April 15, 2020 | Sebaly Shillito + Dyer

As the economic impact of the COVID-19 Pandemic deepens and business losses reach staggering, even catastrophic highs, business owners and executives are considering every option available to survive this unprecedented time. One source of assistance may be through company insurance assets. Despite popular belief, there are insurance policies in the market that undeniably cover losses resulting from businesses being forced to shut down due to various government orders. Along with these policies that clearly provide coverage, other policies and riders may also provide protection.

Business insurance programs often contain business interruption coverage. Look for this protection in commercial property policies. Business interruption insurance protects against lost income and extra expenses caused by a fire, natural disaster, or other event immediately, but temporarily, disrupting normal business operations. In the last two months, stay-at-home type orders due to the COVID-19 crisis have disrupted business operations for a record number of businesses in every state, district, and territory in the country. Insurance carriers and their industry associations quickly staked out a position that suspension of business operations attributable to a stay-at-home order seldom trigger business interruption coverage because they contend there is no “physical” loss or damage to insured property. Insurers are already denying claims and instructing their affiliated brokers and agents to advise policyholders there is no coverage for business interruptions resulting from Covid-19 stay-at-home orders. But, depending upon the precise contents of individual policies, government orders to cease operations or bar access to a policyholder’s property can trigger business interruption coverage.

Carriers also sometimes deny coverage if policies contain an exclusion for losses arising from communicable diseases. But a recent analysis of a cross-section of policies concluded that up to 80% of commercial insurance policies do not contain an exclusion on that basis.

In short, policyholders should not just take “no” for an answer if coverage is denied. In fact, lawsuits have already been filed in federal and state courts around the country challenging the denials of coverage under cover of these so-called “ironclad” defenses. Lawsuits are pending in at least Alabama, California, the District of Columbia, Florida, Illinois, Indiana, Louisiana, New York, Oklahoma, Pennsylvania, and Texas. And not just big businesses are pushing back against the insurers. Policyholders challenging denial of coverage include chefs, a barbershop, restaurants, a sports bar, Native American Tribes, a movie theater operator, a theater company, a dive shop, a dental office, a law firm, a wig shop, event planners, contractors, manufacturers, suppliers, and vendors, among others.

The most important step in determining whether a business may be entitled to coverage is to have insurance policies reviewed by an attorney knowledgeable about policyholder rights. Many policies are standardized, but only to a point. And just like with buying a car, insurers often add “bells and whistles” to standard policies at different price points. Brokers also often recommend various riders which change the standard terms. Given this process, policies sometimes even contain conflicting terms. Simply put, the facts and policy provisions underlying each loss vary from policyholder to policyholder and can cause different coverage outcomes.

Even if questions arise about coverage under the business interruption provision, many policies include a companion rider for “contingent business interruption” coverage. This coverage protects against business losses due to problems involving the supply chain or other disruptions to a business caused by events taking place beyond the walls of the covered business. Policyholders and their counsel should also analyze potential coverage under riders for civil authority coverage, pandemic coverage, or other forms or riders included within the company insurance program. Policyholders must scrutinize each policy and rider potentially providing coverage and consider the nuances of the state law that will be applied to its interpretation and construction.

Businesses should act quickly to get a coverage analysis from their counsel. Insurance policies often require submission of a claim within a short time from the event (e.g., government shutdown) causing the loss. Insurance carriers often tuck short notice provisions into policies and then contend denial is proper even if they would otherwise be obligated to pay.

SS+D’s experienced crisis management professionals continue to monitor the pandemic closely, as well as the regulatory and insurance responses to COVID-19. Drawing on SS+D’s longstanding capabilities in insurance, we are helping policyholder clients in not only analyzing insurance policies but in providing guidance to obtain critical urgent relief available under recently enacted legislation. In the coming days, we will share our views on proposed state and federal legislation that may impact insurance coverage for COVID-19.

If you have questions regarding this update, please contact the SS+D lawyer with whom you usually work or Toby Henderson, Leader of SS+D’s Insurance Claims Practice, at 937- 222-2508 or

The SS+D COVID-19 Response Team was formed to provide clients, colleagues, and friends of the Firm updates for the foreseeable future on COVID-19 issues facing businesses, executives, and employees. Please let us know if there are any items/issues you would like for us to track or summarize.

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Sebaly Shillito + Dyer