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States and local governments have been forced to impose social distancing measures in an effort to halt the spread of COVID-19. Sadly, these social distancing limits have had a devastating impact on restaurants, bars and other business that rely on large public gatherings. As a consequence, thousands of these businesses have been forced to close and layoff staff. Many of these businesses carry liability insurance coverage that includes protection for loss of revenue due to a business interruption.

Business interruption insurance is generally intended to cover losses from direct interruptions to a company’s operations, such as a fire, natural disaster or other event.  Coverage may include lost revenues, rent, or utilities, among other things.  Contingent business interruption insurance policies generally provide coverage for a loss of income related to a problem associated with a supplier, vendor or major partner.

It has been widely reported that insurance carriers are denying business interruption claims citing that the COVID-19 shutdown does not cause a “dangerous condition” on the property as is required to recover under most business interruption policies. See https://www.cnn.com/2020/03/27/business/thomas-keller-lawsuit-coronavirus-losses/index.html. The theory for denying coverage being that the presence of a virulent and highly contagious virus at a restaurant for example, does not amount to a dangerous condition that would trigger an interruption in business. As a consequence, insurance companies are denying business owner claims based on the notion that the COVID-19 virus does not cause a dangerous condition to the property.

If COVID-19 claims were covered under the business interruption clause, then these businesses would be entitled to receive payment for actual loss of business income sustained due to government mandated stay-at-home orders as well as receive compensation for reopening operations during the business restoration period.  To prevail on these claims, an insured must establish that the suspension of business was caused by the direct physical loss, damage, or destruction to property as a result of the COVID-19 outbreak.

It’s critically important that business owners look at their policies and determine whether they may be entitled to recover for losses due to business interruption.   If your business interruption insurance claim was denied by your carrier, then you should seek out the advice of an attorney. A qualified attorney can potentially take on your case on a contingency fee basis—meaning they will only get paid if they are able to successfully recover money from the insurance carrier.

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