SPECIAL REPORT - What's Next for Insureds and Insurers?
As the economic pressures caused by COVID-19 rise, many are calling for legislation that would mandate insurance companies to pay for business losses incurred due to a pandemic, such as the current crisis, most specifically under business interruption coverage.
Business interruption coverage generally only applies to direct interruptions to a company’s operations caused by ‘direct physical loss or damage to the covered property”. Many insurance companies are arguing that the “direct physical loss” requirement has not been met in this situation. It is important to note, that courts across the country have varied on what constitutes “direct physical loss”, and under some court rulings a pandemic may actually be a covered cause of loss. However, in recent years, many insurers began including express exclusions for virus or pandemic related losses, so it is imperative to review your policy.
Property policies will also typically include civil authority insurance coverage. Civil authority insurance is generally intended to apply to situations where access to an insured’s property is prevented or prohibited by an order of civil authority issued as a direct result of “physical damage”. Typically, the coverage will have a geographic limitation, providing that the physical damage which triggered the civil authority order has to be property within a certain number of miles or feet from the insured location.
In response to the pressing need for economic relief, New Jersey lawmakers are considering a bill to force insurance companies to cover business interruption losses caused by COVID-19, and it appears that many states are following New Jersey’s lead. There is also consideration for Federal Legislation, the Pandemic Risk Insurance Act (“PRIA”) that would be modeled after the Terrorism Risk Insurance Act (“TRIA”), which was passed in the wake of 9/11. Although if cannot be known if any of these proposed bills will come to fruition, it is important for businesses to review their insurance policies now and identify every potential source for recovery.
It is also important to file any claims they may have immediately. Even if they are denied now, it will prevent insurance companies from later arguing that they were not given timely notice. Filing now is an effective way to secure an insured’s rights as circumstances and governing law continue to respond to the COVID-19 crisis.
CONTACT:
Andrew J. Annes, Esquire
aannes@satclaw.com
mobile: (312) 246-3110
John W. Campbell, Jr., Esquire
jcampbell@satclaw.com
mobile: (312) 391-3126