Business Owners Bleeding Money During the Coronavirus Shutdown May Expect Insurance to Cover Their Losses. But Often They’re in for a Shock.
Partner Tom Bentz was quoted in a Chicago Tribune article about disputes between business owners and insurance companies regarding business interruption insurance claims amid the COVID-19 pandemic. Business interruption insurance is part of a property insurance policy and is normally used to cover property damage sustained from a fire or natural disaster. Some policies also include a civil authority clause to cover income loss when a government entity closes or denies access to a business, which might occur if an event at a neighboring property renders the area unsafe. However, many policies exclude coverage for viruses, and insurance companies have said that the industry would crumble if forced to cover every claim. The central question is whether the presence of the virus and state-mandated business closures can be considered the necessary property damage that would trigger coverage. Mr. Bentz, a co-chair of Holland & Knight's Insurance Industry Team, was one of several attorneys who offered his input on the situation, explaining that part of the issue stems from the fact that policies were not designed with losses from a pandemic in mind.
"Insurance works really well when you have a small localized loss and you spread it out," he said. "Insurance doesn't work where everyone has the same loss at the same time. If you have 100% loss across your portfolio, it's not sustainable."