A local attorney is encouraging Mobile business owners to file insurance claims asking for relief due to a business interruption due to the COVID-19 pandemic.
With federal assistance through the Coronavirus Aid, Relief and Economic Security (CARES) Act currently unavailable for many businesses, Richard Taylor, of Taylor Martino, said owners should look to insurance for possible assistance in the meantime.
“Most businesses have commercial insurance policies and many have a clause for business interruption, in case of a hurricance, flood, or whatever,” he said. “Obviously business would be interrupted by COVID-19.”
Taylor cautioned that “all policies are different,” but he urged business owners to start looking at individual policies to see what is covered under the clause. Some, he said, might have a “virus exemption” or something similar. A “minority” of policies have coverage, Taylor said. In that instance, it’s important to find out how much is covered.
In some cases it will all depend on how a business interruption due to coronavirus is legally defined and that might have to be determined in court.
“One angle is to have courts decide it,” Taylor said. “Courts in other states have ruled that something invisible, like a virus, can be an interruption.”
Other state legislatures have also made COVID-19 a business interruption, Taylor said.
If court becomes an option for businesses, Taylor urges owners to go ahead and make a claim.
“File a claim and let the insurance company tell you that you have no coverage and explain why you have no coverage,” he said.
The National Associationn of Insurance Commissioners, in a statement, argued against this tactic. Most business interruption insurance does not cover communicable diseases, like COVID-19, according to the statement.
“Insurance works well and remains affordable when a relatively small number of claims are spread across a broader group, and therefore it is not typically well suited for a global pandemic where virtually every policyholder suffers significant losses at the same time for an extended period,” the statement reads. “While the U.S. insurance sector remains strong, if insurance companies are required to cover such claims, such an action would create substantial solvency risks for the sector, significantly undermine the ability of insurers to pay other types of claims, and potentially exacerbate the negative financial and economic impacts the country is currently experiencing.”
There is, of course, another avenue to travel when discussing business interruption claims, but Taylor said it “isn’t paved yet.”
On the political side of things, Taylor said, President Donald J. Trump has taken aim at the insurance industry over the pandemic and that could help get congress working on a solution.
“I don’t know if he’s going to tweet them into submission, but our president has it on his agenda,” Taylor said.
The unpaved road would require the government to back the insurance agency and help companies fulfill these business interruption claims. This idea would help the insurance industry from its insolvency risk and would help businesses stay afloat during the pandemic, Taylor said.
“Go ahead and file a claim because you’ll be first in line if this road becomes paved,” he said. “If it doesn’t, you’ll have options in the court system.”
Filing a claim is not a current requirement to apply for federal emergency disaster loans related to the pandemic, Small Business Administration spokeswoman Tiffani Clements wrote in an email.
This second avenue seems a bit more palatable for insurance agencies, according to the NAIC statement.
“Moving forward, if congress believes that the business interruption insurance sector can play a vital role in addressing the policy challenges of future pandemics, we stand ready to work with Congress on such solutions,” the statement read. “However, swift action by Congress to directly address the needs of citizens and our economy is the most effective and expedient means to addressing the devastating impact of COVID-19.”
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