Many businesses throughout the country continue to lose income because of statewide quarantine orders that have been issued in response to COVID-19. Some have submitted business interruption claims to their insurance providers in an attempt to recover from losses, and a number of restaurants have filed lawsuits trying to confirm coverage under their policies. Bills have been introduced in several states, which, if passed, would require every policy insuring against loss or damage to property for small businesses 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.
Whatever the outcome of the lawsuits and potential legislation, all parties involved – businesses, insurance providers and state, local and federal governments – are strained as they struggle to deal with the negative economic impact of COVID-19. At this time, it’s unclear how the financial burden will be distributed among the parties involved.
In spite of this uncertainty, entities can immediately prepare for a potential business interruption claim by:
Reviewing existing insurance policies and coverage;
Contacting their independent accountant to assist in preparing a comprehensive claim;
Updating budgets and business plans to reflect current conditions and potential scenarios for operations during the upcoming six to nine months; and
Beginning to actively identify and track all areas of impact that may be included in any claim, such as:
Additional direct costs incurred as a result of dealing with the virus, including cleaning supplies, wage premiums, additional staffing, etc.
Ongoing or continuing costs
Lost business value
Detailed accounting information is key to any potential claim. Best practices include contemporaneous recordkeeping and documentation of impact, along with:
Creating separate cost centers to segregate COVID-19 expenses from normal operating expenses;
Tracking staffing changes and overtime; and
Issuing separate purchase orders for COVID-19 items.
Schneider Downs’ professionals are experienced in helping clients through difficult financial situations. We are at your disposal to assist during these unusual and trying times. Please contact us.
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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.