Business Interruption Claims and COVID-19

Loss reimbursement from business interruption insurance could be an important source of continuing funds for many.

Does your business have business interruption insurance?  Do the business interruption provisions of your policy cover losses attributable to the COVID-19 virus?

The answers to those two questions are typically dependent on the unique facts and circumstances of a business, its insurance policy, and legal interpretations of policy language.

The purpose of this article is not to get into the details of business interruption coverage or the legal bases for coverage or claims.  However, recently bills were introduced in Ohio, New Jersey and Massachusetts that would require every policy of insurance insuring against loss or damage to property for small businesses, which includes the loss of use and occupancy and business interruption to be construed to include coverage for business interruption due to global virus transmission or pandemic, notwithstanding any law, rule or policy language to the contrary.

These bills are not law yet and they each have unique particulars.  As can be expected, the bills have generated significant push back from insurers.  Legislators are working with the insurance industry to address concerns with the goal to provide relief to small businesses.

How the issues of coverage and potential relief will be resolved is unknown at this time.  In spite of this uncertainty, businesses can immediately prepare for a potential business interruption claim by:

  • Reviewing their existing insurance policies and coverage;
  • Contacting their insurance carrier;
  • Contacting their legal counsel;
  • Reviewing previous budgets and business plans;
  • Updating budgets and business plans to reflect current conditions and potential scenarios for operations during the upcoming six to nine months;
  • Beginning to actively identify and track all impacts that may be included in any claim, such as:
    • Additional direct costs incurred as a result of dealing with the virus, such as cleaning supplies, wage premiums, additional staffing, etc.
    • Lost revenues
    • Lost profits
    • Ongoing or continuing costs

Best practices include contemporaneous record keeping and documentation of impacts.  Detailed accounting information is key to any potential claim.  Some additional best practices include:

  • Creating separate cost centers to segregate COVID-19 expenses from normal operating expenses
  • Tracking staffing changes and overtime
  • Issuing separate purchase orders for COVID-19 items. 

These best practices are relevant not only to potential business interruption insurance claims, but also to requests for funds from other Federal, State or Local sources as well.  For example, nonprofit healthcare organizations are eligible to request assistance from FEMA for the costs of emergency protective measures taken to respond to COVID-19 and should use these best practices as they seek recovery assistance.

The professionals at Schneider Downs are experienced at the preparation of business interruption and other damage claims.  We are at your disposal to assist during these unusual and trying times.  Please contact us.

Please visit our Coronavirus resource page at for related content.

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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