Tag Archives: insurance coverage

Business Interruption Insurance for COVID-19

Work InterruptionWith the government shutdown of businesses due to the COVID-19 virus, many business owners are wondering if there is insurance coverage for their revenue losses. As an insurance coverage lawyer who deals with these types of policies, here are some of my thoughts:

  1. Property policies vary widely in their language, and can be tailored to different kinds of businesses. For example, our firm’s policy is written on a form that is said to be tailored to lawyers. What is provided in one policy may not be provided in another.
  2. In order to obtain coverage under these policies, you normally need to show that the loss was due to “direct physical loss or damage” to the property. States construe that differently, but in New Jersey there are cases holding that as long as the insured is unable to use property because of a condition, there is direct physical loss or damage to the property even if there is no visible damage. In cases where a civil authority prohibits the business from being open, the argument may be strengthened. The question here is whether the virus makes the property in question unusable.
  3. Some, but not all property policies contain “virus” exclusions. Others may try to include this in the pollution exclusion, but in one version reviewed, those efforts may have rendered the policy language ambiguous and therefore ineffective. The New Jersey Legislature, and now the legislatures of other states, are considering whether to make these virus exclusions unenforceable. If enacted, the question would then be whether such laws would be constitutionally infirm for existing policies.
  4. If there is coverage for business interruption, it may be subject to sub-limits which in one sense favor the insurer, but also make it easier to establish coverage. If the insurer’s exposure is less, a court is more likely to side with an insured in a close case if there is a suit filed.
  5. There have already been suits filed concerning this issue. By no means is it clear that coverage will be afforded, but my suggestion generally is that, if in doubt, a claim should be made because unlike liability policies written on an occurrence basis, first party claims need to be filed promptly and procedures in the policy need to be timely followed.

Mitchell Kizner of Flaster Greenberg

Mitchell Kizner focuses his practice on environmental and insurance litigation. He represents clients in environmental, insurance and other commercial matters as part of his active litigation and commercial law practice. For more details on the legalities of Business Interruption Insurance, contact Mitchell or any member of Flaster Greenberg’s Insurance Coverage Practice Group.

 

 

To serve as a central repository of information and contributions from Flaster Greenberg attorneys on legal developments during the COVID-19 crisis, we have launched a COVID-19 Resource Page on our website.  Feel free to check back frequently for Flaster Greenberg’s ongoing analyses of important legal updates that may affect you or your business. 

Ten Tips for Avoiding Litigation: Tip #3 – Check Your Insurance Coverage Frequently to be Sure it Protects Your Business from Exposure to Risk

umbrella 2Although having adequate insurance coverage is not necessarily a way to avoid litigation, I have included it on my list of litigation-avoidance tips because it is so important in protecting you and your business from financial disaster when litigation does occur. Despite the important role it plays in a business’s defenses to litigation, I can’t tell you how many times I have asked a business owner for details about his company’s insurance coverage, such as “Do you have coverage for X?,” only to be met with the response, “I don’t know.” Similarly, when I ask when was the last time you reviewed your coverage with your insurance agent, the response is frequently a blank stare. I get it; many of us would prefer a visit to the dentist to sitting with our insurance agent to discuss our coverage. But, unfortunately, your mother was right when she taught you that delaying doing something because it is unpleasant doesn’t make it go away; it only makes it worse.

First, you need to find a bright, industrious insurance agent, who has experience working with companies of your size and in your industry. You will know if your agent fits that description by the insightfulness of the questions she asks you when you meet to review your coverage. Your agent should want to know everything about your business, such as: what does it sell; how does it generate revenue; who are its customers; how many and what kind of employees and independent contractors does it use and for what purposes; does it own or lease vehicles for business use; what intellectual property does it own and does it license the use of any of that property; does it hold or invest money or other property for its customers; and numerous other similar questions about the company’s business. If your agent is not customizing your company’s coverage to your specific business needs, you should find someone else.

Second, you will know if your agent is the right agent for you if she insists on a meeting with you periodically to review your coverage and learn if there have been significant changes in your company since the last review. Your agent should also discuss with you at that meeting changes in the law that might create new risks or opportunities for your company, and that might require more or different coverage. Finally, your agent should discuss with you new types of insurance coverage (e.g., cyber security insurance) that are now available and might be appropriate for your company.

Third, you will also know if your insurance agent is right for you if she contacts you on a regular basis when there has been a change in the types of coverage available for companies like yours or a change in the law that potentially affects your company’s risk exposure. If those changes are significant, your agent should not wait until the next regular meeting to discuss them with you. You can reciprocate by letting your agent know when there has been a change in the company that might affect the amount or type of coverage you need.

If your agent does not fit the above description, then you should consider making a change. Ask competitors and your trusted business advisors whom they recommend. Or ask me. I know several insurance reps at different market levels who are on top of their game and will give you the service you deserve and get you the coverage you need.

Finally, it is an added bonus if your insurance agent is able to offer your company and its employees loss prevention training. A physician’s insurers, for example, frequently provide training on avoiding medical malpractice, wrongful discharge, sexual harassment, and hostile work environment claims. Many insurers offer this type of training free of charge to help their insured clients reduce their exposure to certain types of risks. Your agent should discuss these opportunities with you, but, if not, be sure to ask what is available.

Click here for Tip #1: Always Have a Strong Written Agreement to Govern Your Business
Click here for Tip #2: Avoid Doing Business with Members of your Family

Phil Kirchner of Flaster Greenberg
Philip Kirchner is a member of Flaster Greenberg’s Litigation Department headquartered in Cherry Hill, NJ. He concentrates his practice on resolving business disputes, including complex litigation of all types of business issues in both the federal and state courts of New Jersey and Pennsylvania. He can be reached at 856.661.2268 or phil.kirchner@flastergreenberg.com.

 

 

 

 

 

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