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Fires, Burglaries & Pandemics: What Is & Isn’t Covered by Business Interruption Insurance

Businesses across the United States have had to close their doors in recent weeks due to government orders enacted in the hopes of slowing the spread of the coronavirus (COVID-19). These temporary closures have encouraged many business owners to file business interruption insurance claims in the hopes of protecting their companies during the shutdown. Yet, many of these claims have been denied.

This raises the question: What situations does business interruption insurance cover, and which will cause your claim to be denied? Our Houston business litigation lawyers explain some of the most common excuses for business interruption insurance claims and whether or not there are any exceptions for pandemics.

What is the Purpose of Business Interruption Insurance?

Business interruption insurance is designed to keep your business afloat if it is forced to temporarily shut down due to circumstances outside of your control. Your insurance policy should cover any income your business would have made had it remained open, the exact amount of which is determined by reviewing your financial records. Business interruption insurance can also cover costs such as rent and electricity that you are still obligated to pay even though your business has ceased operating as normal.

So, what situations will allow you to file a claim? Typically, there must be some event that causes physical damage to your place of business and/or the products you sell in order to receive insurance.

There are three major categories of reasonable business interruptions:

  • Criminal activities, such as burglary and arson, that force a temporary closure
  • Natural disasters, such as hurricanes and tornados, that damage your business
  • Structural failures, such as a burst pipe, that cause water damage to your venue or products

However, some policies might allow for other events to qualify your business to receive insurance money, such as a government-enforced closure.

Can I File a Claim for COVID-19?

It depends on your policy. With stay-at-home and social distancing orders currently active in most U.S. states, there is a good chance that your insurance claim will be approved if your policy includes language suggesting it will cover expenses lost during a temporary closure that was mandated by the government.

However, not all insurance policies cover this kind of scenario. If your COVID-19 related claim is denied, this is likely because your policy does not allow a pandemic or government order as a valid reason. Yet, because insurance companies sometimes choose their best interests over your business’, a denial could potentially be a sign of insurance bad faith.

If you believe your insurance company has wrongfully denied your business interruption insurance claim, the best course of action is to contact an attorney. During a free consultation, your attorney can review your policy details and figure out whether or not you have a case.

At Farah Law, we believe in holding insurance companies accountable for bad faith. If you have been wrongfully denied insurance that your business is entitled to, we will fight back on your behalf.

Call our Houston business litigation attorneys at (888) 481-9359 or contact us online to learn more.