Most businesses have sustained losses during the COVID-19 outbreak. Some businesses closed and will not reopen. Other companies managed to survive mandatory shutdowns and loss of revenue as people stayed at home or cut expenses to make ends meet.

If you lost money during the pandemic, you may want to review your business insurance policies. You might receive some of the money you lost over the past few months by filing a COVID-19 business interruption insurance policy.

What is Business Interruption Insurance Coverage?

Business interruption (BI) insurance coverage reimburses a business owner for financial losses. The losses must have been incurred because of the suspension of business activities caused by a covered event. Covered events may include perils and natural disasters such as fires, floods, and hurricanes.

BI policies are not sold as standalone policies. The insurance is available as a rider to many business insurance policies. There is an extra cost to add business interruption coverage to a commercial insurance policy.

A company may also have extra expense coverage and civil authority coverage. Extra expense coverage compensates a company for certain expenses the company incurred as it tried to minimize the suspension of business activities. 

Civil authority coverage applies when a government entity forces the company to shut down. For example, Gov. Kay Ivey closed many non-essential businesses and restricted other business operations in response to the COVID-19 virus. Companies with civil authority coverage may have a claim for losses caused by the coronavirus shutdown.

What Losses Does Business Interruption Insurance Cover?

As with other insurance policies, the terms and conditions of your specific business interruption policy determine what losses are covered. However, most BI insurance policies compensate companies for losses and expenses such as:

  • Employee wages
  • Loss of revenues and profits
  • Costs of a temporary relocation
  • Fixed expenses, such as mortgage payments, rent payments, insurance, taxes, and other loan payments
  • Employee training related to new equipment or a new location

A company must have documentation of the business expenses and losses to recover money for a business interruption claim. 

Calculating Losses for a Business Interruption Claim

The first step is to gather the documents that are necessary for a business interruption claim for COVID-19. Documents that your insurance company may require include:

  • Federal and state tax returns
  • Profit and loss statements
  • Payroll reports
  • Bank statements
  • Loan and credit card statements
  • Invoices
  • Purchase orders 
  • Sales receipts
  • Projections and budgets

After gathering the necessary documentation, you need to calculate how much money your business has lost because of the COVID-19 outbreak. In most cases, the insurance company calculates business loss as the total of your:

  • Ongoing business expenses
  • Any added expenses related to the covered event
  • The projected net income your company would have received had there been no interruption to business.

As COVID-19 cases continue to increase, more companies may be impacted by the pandemic. If we have another shutdown because of the spread of the virus, some companies may not survive without business interruption coverage. Unfortunately, many insurance companies have denied claims based on several reasons.

Denials of Business Interruption Insurance Coverage

Businesses throughout Alabama and the country have filed COVID-19 business interruption insurance claims. Many of those claims have been denied. Some of the reasons that insurance companies give for denying COVID-19 BI claims include:

  • Infectious diseases are not covered events in insurance policies
  • There must be physical damage to the premises for the civil authority clause to apply

Policies have different terms and conditions. A careful review of your policy is necessary to determine whether a COVID-19 claim may be covered. 

Many companies have filed lawsuits against their insurance carriers, prompting the courts to decide whether COVID-19 is a covered event in some cases. Unfortunately, some of the cases that have already been decided have favored the insurance companies

State and federal lawmakers are also stepping in to try to force insurance companies to pay COVID-19 business interruption claims. Several bills have been introduced by lawmakers that would require insurance companies to include COVID-19 as a covered event. 

Do I Need a COVID-19 Insurance Claims Attorney?

Many business owners find that having an attorney involved in the case can be beneficial. An attorney reviews the insurance policy to interpret the complicated exclusions, conditions, and terms to determine if COVID-19 is a covered event. An insurance attorney also determines if civil authority applies when government entities have shut down businesses or restricted business operations.

An attorney can also help in calculating the value of the loss for a business interruption claim. When an insurance company denies the claim, an attorney can advise the business owner on other options to recover benefits, such as filing a bad faith insurance lawsuit.