In the wake of millions of businesses being forced by government order to temporarily shutter; and additional industries being hurt hard by their consumer base staying home, many business owners are turning to their insurance policy coverages for ‘business interruption’ clauses hoping for a pay-out.
The sheer volume is causing insurance companies to look at their fine print. Most policies limit payouts to business interruptions caused by ‘physical damage’ of property. This means that a business could have to prove that the virus was physically on their equipment or products in order to cash in. Just being affected by a shut down, or even a significant slow down in business due to a global pandemic may not be enough.
In response, a not for profit organization in Los Angeles, California typically focused on human rights, (The Simon Wiesenthal Center) sued Chubb Ltd insurance company om April 2020 to get clarity on the issue. It acknowledges that in response to a SARS outbreak in 2003, many insurance companies tightened up their fine print to specifically exclude pandemic or virus liability.
Thomas Nowland of Nowland Law, a California business litigation attorney said, “most businesses will face an uphill battle. They are not only dealing with a historic slow down in business, but also broken contracts and insurance policies that do not pay out on items like this. How many business owners do you think asked their insurance agent to include pandemic insurance in their property insurance policy during normal times?”
When asked what business owners should do, he responded “if you can, get in touch with a competent business attorney to review the contracts. You can explore whether involving a lawyer would be advantageous or not. Also, keep an eye out for this type of litigation; if a precedent is set in favor of the policy holder; you will be on stronger footing.”
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