Indiana Business Interruption Claims
As the coronavirus pandemic continues to affect businesses throughout Indiana, many business owners are wondering if their business interruption insurance policy will cover their COVID-19-related losses. Most businesses in Indiana have been forced to close for months, and many have suffered devastating financial losses.
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What Is Business Interruption Insurance?
Business interruption insurance helps cover lost income and expenses after a disaster. This coverage is usually part of a broader insurance policy for business owners. You usually cannot buy business interruption insurance by itself.
Most business interruption policies require “named perils policies” that lay out the specific type of damage that is covered. Most plans cover disasters such as fires, hurricanes, tornadoes, and theft.
Business interruption insurance may reimburse a business owner in these areas:
- Lost revenue if you can’t serve customers, make sales, or conduct business with clients because of property damage.
- Rent or lease payments if you still have to make such payments on property or equipment that you don’t own.
- Relocation costs if your business has to temporarily relocate after damage. Insurance can help with moving costs, as well as rent in the new location.
- Employee wages so that you can keep your employees on the payroll while your business is closed. Business interruption policies usually cover one year of pay for each employee, although this will depend on your plan.
- Taxes, since even if your business has ceased to make any revenue, you may still owe property tax and other taxes.
Business interruption insurance does not pay for repairs to your damaged property. The property coverage policy of your overall business insurance plan should pay for that.
Does My Current Policy Cover the COVID-19 Pandemic?
Since the COVID-19 pandemic is a rapidly evolving situation, there are not yet definitive answers as to whether or not business interruption insurance will cover losses related to the pandemic. You should check if your policy has a specific exclusion for epidemics, pandemics, or infectious diseases that might disable coverage.
It may be an uphill battle for business owners to get their COVID-19-related losses covered. COVID-19 doesn’t cause physical damage to property in the way that events like fires and hurricanes do. However, if courts are convinced that COVID-19-related damages can be considered physical, it may be possible for business owners to qualify for coverage. Some jurisdictions have historically allowed for odors and vapors to be considered physical damage, and it’s possible that the same line of reasoning could apply to a virus.
Some business interruption policies include coverage in the case of “Acts of Civil or Government Authority,” which can apply if a government or agency prohibits access to your property. This could potentially apply in Indiana since the governor mandated the closure of non-essential businesses. However, these policies might require that the government’s prohibition was due to physical damage to the property or the area around it. If a court refuses to consider a virus as the cause of physical damage, you may not be covered.
How Do I File a Claim?
You file a claim with your insurance company. You will need to show the income that your business generated before the interruption and what it is generating now.
Keeping detailed records of your financial activity is important. You may also have to submit proof that your business was forced to close because of the coronavirus. This proof might be a copy of the governor’s order and a document establishing that your business falls into a category that was ordered to close.
Because coronavirus is a new phenomenon that insurance companies have not faced before, it’s a good idea to hire an Indiana insurance attorney before you file a claim. Your attorney can advise you on whether or not it is worth it to file a claim and, if necessary, help you pursue legal action if your claim is rejected or underpaid.
What Is the Likelihood That My Claim Will Be Paid?
So far, it appears that insurance companies are reluctant to pay business interruption claims due to the coronavirus.
The Wall Street Journal reports that insurance companies have already denied many coronavirus-related business interruption claims. However, there have also been reports that state and federal government authorities might take action to pressure insurance companies to include coronavirus damages under their business interruption coverage. Insurance companies argue that this could permanently damage the insurance industry.
Insurance companies generally look for ways to deny or minimize claims made by their policyholders, even before the coronavirus. It is unsurprising that insurance companies would deny claims, and a denied claim does not mean that you will never recover compensation. Courts may end up deciding whether insurance companies have to cover COVID-19-related business interruptions.
How Long Will the Claims Process and Any Subsequent Litigation Take?
Because the situation regarding COVID-19 is so changing so quickly, it’s very difficult to make a prediction about how long your insurance claim process will take.
Generally, it can take anywhere from weeks to months for an insurance company to approve a claim. Business insurance companies may be receiving an unusually high volume of COVID-19-related claims, which can slow down processing times. Insurance companies may also be scrambling to figure out how to operate if they are required to work from home, which could also slow down response times to your claim.
It is likely that your COVID-19 related claim will be initially denied unless governments act swiftly to force insurance companies to pay for COVID-19-related losses. In normal circumstances, litigating against insurance companies can take months or even years.
Are Law Firms Handling These Matters on Contingency?
Laws firms usually handle cases against insurance companies on a contingency-fee basis. That means that the law firm will only get paid if you win, and you won’t be required to make any fee payments if you lose. Lawyers who work on contingency generally only take on cases that they believe they can win.
If you have any additional questions, please do not hesitate to reach out to Truitt Law Offices. We are here for you during this difficult time.