Coronavirus Closures and Business Interruption Insurance

In the face of the COVID-19 coronavirus pandemic, stay at home orders were placed nationwide. Residents have been ordered to stay at home except for travel related to certain life-sustaining activities. Business patronage has dropped precipitously as a result.

As Florida has been grappling with when and how to allow businesses to reopen, a hole has formed in our economy. It appears that most states will follow guidance from the federal Centers for Disease Control (CDC) regarding “social distancing”. It is highly unlikely that income for businesses will return to pre-pandemic levels anytime soon.

Local business owners struggling to sustain their business have begun to sue their commercial insurance policy. Their suit seek a determination that the policy must cover the business’ revenue losses resulting from the state’s closure order. The claim is being pursued under the “business interruption” provision of the business’ commercial insurance policy. As income reductions from social distancing continue, these cases will be followed closely by attorneys for businesses nationwide with such coverage in their insurance policies. The issues, like the COVID-19 pandemic itself, appear to be novel. A Florida attorney experienced in handling claims against insurance companies is your best ally in pursuing a claim.

Business Interruption Insurance Explained

The typical business interruption clause provides that the insurer will cover the loss of business income due to the necessary suspension of operation during the period of restoration. To succeed, a claim typically must meet several items:

  • First, the cause of the damage must not be one that’s excluded by the policy.
  • Second, the amount of coverage is limited to the lower of the policy limit or the actual revenue losses suffered due to the closure.
  • Finally, the relevant cases have typically held that the interruption must be related to direct physical loss or damage to the insured’s property. Also typically covered are instances in which a “civil authority” prohibits the operation of a business.

Implications for Florida Businesses

Florida courts have held that when a term in an insurance policy is not otherwise defined it should be given its ordinary meaning. Civil authority provision is usually part of business coverage.

The Importance of Obtaining Experienced Legal Advice

Every insurance policy issued in Florida carries an implied duty of good faith. The failure of an insurer to pay per the policy terms can lead to liability for breach of this duty. The attorneys at Lucas & Magazine have many years of experience in litigating “bad faith” claims.

Whether or not you’ve made a business interruption claim, if you own a Florida business that has suffered a significant decline in revenue due to the state’s COVID-19 stay-at-home order, you owe it to yourself, your employees and your customers to find out if your losses may be covered by insurance.