The Importance of Business Interruption Insurance

What Is Business Interruption Insurance?

Business interruption insurance (or business income insurance) is a type of coverage designed to help minimize losses associated with a disruption to your business and the subsequent loss of revenue. However, for business interruption insurance to pay out, the reason your business is disrupted must be included in your policy’s covered losses.

For example, if a fire damages part of your establishment, causing you to close during repairs, and that fire damage is included as a covered loss, your business interruption insurance will kick in and help supplement your income during that repair period.

Types of businesses that frequently hold business interruption insurance:

  • Restaurants, bars, cafes, and other food service businesses
  • Hotels, motels, and other hospitality industry businesses
  • Retail stores and businesses that operate out of brick-and-mortar establishments
  • Shopping centers and commercial property management companies

Many businesses have submitted insurance claims in the wake of the COVID-19 pandemic and other recent natural disasters. Unfortunately, insurance companies are notorious for finding excuses to avoid paying out, and countless business owners are struggling.

Why Insurance Companies Deny Business Interruption Claims

One of the primary reasons insurance companies deny COVID-19 and similar business interruption claims is that the business incurred no physical damage. Many insurance policies note that covered causes of loss are tied to situations in which a policyholder’s business suffers direct, physical damage or loss, such as when a tree falls on their business. Similarly, it is not uncommon for insurance policies to exclude “losses due to viruses or bacteria.” As such, insurance companies frequently argue that losses associated with the COVID-19 pandemic do not qualify.

Dealing with Virus Exclusion Clauses

If you are a business dealing with a COVID-related business interruption (or similar situation), you may assume that the virus and bacteria exclusion clauses in your insurance policy preclude you from filing a business interruption claim. This is only sometimes the case. When determining if your situation is covered, looking at the precise language of any exclusion clauses and the covered losses is crucial.

Additionally, some states have enacted legislation that prohibits and/or limits insurance companies from denying business interruption claims related to COVID-19 closures and interruptions.

Will I Need to File a Lawsuit

Depending on your situation, if you have been denied a claim that you believe should have been accepted, you may have to sue your insurance company. This can be stressful, and you may be wondering if you even have a case. If you believe you have a claim for business interruption coverage, it is worth speaking with an experienced attorney about it, like ours at Golomb Legal. Our law firm has already helped many business owners, including restaurant and hospitality business owners, bring successful actions against their insurers. We are prepared to help you with your case, too.

To schedule a consultation with our team, contact us online today.