COVID-19: What You Need to Understand About Business Interruption Claims and the US Government Bailout

Part I: Understanding and Making COVID-19 Business Interruption Claims for You and Your Clients

Insurance is the method primarily used to shift risk of loss and damage. Most small businesses have some form of coverage for lost profits called Business Income or Business Interruption (BI) in their property insurance policies

Most property insurance policies cover all risks of direct physical loss of and damage to covered property unless the peril is excluded.

Since the 2006 MERS outbreak, some insurers have introduced a variety of virus exclusions in an attempt to avoid paying for loss and damage due to virus.

Whether there is a virus exclusion and will it actually prevent coverage is a matter of the wording of your policy and reasons for closing your business. Many insurers write their own policy provisions and they differ greatly.

Currently, insurer have predetermining the response by denying BI claims. This works 95% of the time. Insurers use brokers and agents as the first line of defense telling them to prevent claims from being filed. Your broker/agent has no duty to interpret the insurance policy and is not authorized to under the terms of their contracts.

In point of fact physical loss of use due to governmentally mandated closures are causing lots of damage. For the exclusion to apply, in most cases the insurer will have to prove that the virus existed in or around the business to deny coverage.

There is hope.


Part II: The US Government Bailout: A Summary of Benefits Available to Your Firm and Your Business

Paycheck Protection Program provides for business loans for businesses with 500 or less employees. Interest rates are capped at 4% and can be paid out over the period of ten years. Loan forgiveness also provided for under these loans for the first 8 weeks. Amount forgiven is not taxable.

$10 billion in Economic Injury Disaster Loans which allow small business to borrow $10,000 within three days to keep their businesses open

Refundable tax credits for 50% of compensation paid to each employee during business closure Enhancement of sick leave and family for employees suffering from sickness or childcare issues due to COVID-19. Refundable payroll tax credits to employers to cover 100 percent of cost of leave

Expansion of Unemployment benefits for employees who have exhausted their state and federal unemployment insurance due to COVID-19 pandemic. Unemployment available for up to 39 weeks.