April 10, 2020
On March 19, 2020, I wrote that many of our clients are turning to their insurers for coverage due to business interruption caused by the Coronavirus pandemic. The answer they are often receiving is that absent “direct physical loss or damage” they are not covered. Others are being told that their insurance policies contain a virus exclusion and that therefore they are not covered.
Insurers and their lawyers are doing a good job of promoting the conclusion, through articles, blogs, webpages and the like, that Coronavirus-related claims are not covered. But the truth is that many businesses may be covered and claims related to the Coronavirus pandemic may cost insurance carriers hundreds of billions of dollars.
Many new laws have been proposed that would compel insurance companies to cover claims for business interruption caused by the Coronavirus pandemic, even if no physical loss is suffered and even when a business interruption policy contains a virus exclusion. For instance, the New York Assembly introduced bill No. 10226 which, if passed, also would require insurers to pay claims made by businesses employing up to 100 employees who work at least 25 hours per week “for any loss of business or business interruption for the duration of a period of a declared state emergency” due to the Coronavirus pandemic. Similarly, a New Jersey legislator has introduced a bill (see Assembly Bill No. 3844) that would compel insurance companies to cover claims by businesses employing up to 100 employees who work 25 or more hours per week for damages resulting from business interruption due to Coronavirus.
Even in those jurisdictions where typically physical loss or damage is required for business interruption coverage, courts may now not require the presence of physical loss or damage if the covered property cannot be used as intended or is unsafe. Currently, there are already several milestone cases in some U.S. jurisdictions holding that, with respect to business interruption claims, “physical loss” is not required as long as the covered property cannot be used as intended or is unsafe. Under this interpretation, losses caused by Coronavirus may or should be covered. Other courts may now follow this interpretation.
Some insurance brokers and carriers are notifying insured businesses that their Coronavirus-related claims for business interruption will be denied. It is important to have your attorney review your business interruption policy and, if the policy can arguably cover Coronavirus-related claims under any reasonable interpretation, you are encouraged to file claims.
If you have any questions related to business interruption claims or otherwise, please contact me at (212) 554-7635 or firstname.lastname@example.org.