Maine’s relatively low number of COVID-19 cases may have saved some business in Portland and throughout the state. But as cases look to be surging across the country and winter fast approaching, many businesses could be in for a challenging time.

Small businesses across the country have already lost billions of dollars during the pandemic. While some may have business interruption insurance, it’s not clear as to the extent it protects them from COVID-related business losses. Until the courts and lawmakers can address this issue, many business owners are likely to have their COVID-related business interruption claims denied.

Why Are Insurance Companies Denying Claims?

In denying COVID-related business interruption claims, some insurance companies are using the “force majeure” legal defense. This is a situation in which unexpected external conditions prevent a party in a contract — in this case, the insurance company — from fulfilling their legal obligations.

Furthermore, insurers are also saying that business interruption policies only provide coverage for loss of income due to physical loss or damage to property — for instance, a flood destroys your warehouse filled with inventory. According to some insurers, COVID-19 isn’t a physical loss. In their eyes, it’s a market condition, and their policies don’t cover government actions made to limit the spread of COVID.

Business Owners’ Argument

Business owners are filing an increasing amount of lawsuits against insurers who are denying these COVID-related business interruption claims. They, along with their attorneys, argue that previous pandemics such as SARS, MERS, and the Avian flu have provided insurers with ample opportunity to predict (and expect) another global pandemic.

They also counter the insurers’ argument that COVID is not a physical loss by arguing the virus can attach itself to physical surfaces. Therefore, viruses cause physical loss that requires cleaning to remove.

Stay Tuned

This is an issue that will likely be settled in the courts and through legislation. In the meantime, if you do have this coverage for your business, and you are planning on making a claim because of COVID-related losses, be aware that your insurer is likely to deny your claim. However, making a claim does establish your company’s rights to contest any denial should the legal landscape change.

Filing a business loss claim — whether COVID-related or not — is time consuming and takes precise accounting practices. Contact us at Filler if you need help in this area.