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Covid 19 Business Interruption Insurance

by John Gomez | Last Updated: March 31, 2020


The novel coronavirus, or COVID-19, has been reshaping the world we live in. As the pandemic spreads across the world, COVID-19 has affected not only the health and safety of millions, but their livelihood as well. COVID-19 has forced thousands of small businesses to shut their doors and caused substantial financial losses.

Many businesses have paid for insurance policies that would provide them coverage during this uncertain time. Some businesses may not even know if they have this coverage. Even worse, many insurance providers are simply refusing to pay out on these covered claims.

Companies who have invested their hard-earned money into insurance policies are entitled to the benefits of those policies. Gomez Trial Attorneys is investigating insurance providers who have wrongfully refused to honor these policies, and is working to assist businesses get back on their feet.  Learn what our Covid 19 attorneys can do for you.

Business interruption Insurance During pandemic

COVID-19 Has Changed Daily Life in The United States

After months of seeing COVID-19 steadily spread throughout the world, on March 11, 2020, the World Health Organization (“WHO”) declared COVID-19 a pandemic. By March 11, 2020, 114 countries had reported COVID-19 infections. Within those 114 countries, over 118,000 individuals had contracted COVID-19, and nearly 4,300 people had died.

Since the WHO declared COVID-19 a pandemic, the numbers of infections and deaths have skyrocketed. As of March 29, 2020, there have been over 700,000 cases and over 33,000 deaths worldwide. In the United States alone, there have been over 122,000 cases of COVID-19, and over 2,000 attributable deaths. Unfortunately, many experts believe the United States is far from seeing the peak of this pandemic.

COVID-19 Has Brought Drastic Changes in the Economy

While the human toll of COVID-19 is by far the most significant impact, COVID-19 has had a far-reaching impact on the economy as well. As an illustrative example, the Department of Labor has reported record-breaking numbers of Americans filing for unemployment benefits. In the week preceding this article, a record 3.3 million workers applied for unemployment benefits. This represents the largest increase in jobless claims in United States history. For reference, the previous record was set in 1982, which saw an increase of only 695,000 applications. Many economists believe this is only the start, and that unemployment will continue to rise as the pandemic continues.

Due to COVID-19, Government Officials Have Ordered Businesses to Close

The overwhelming speed of the spread of COVID-19 in the United States has required drastic changes in Americans’ daily lives. As of March 29, 2020, at least 215 million Americans were under various stay-at-home or shelter-in-place orders from their local or state governments.

According to CNN’s reporting, this number is expected to rise to 225 million shortly. This means more than two-thirds of Americans will be facing shelter-in-place orders. Only 33% of Americans are currently free to continue to work and travel normally, with that number likely to shrink in the coming days.

On March 28, 2020, the Centers for Disease Control and Prevention (“CDC”) issued a travel advisory urging residents of New York, New Jersey and Connecticut to “refrain from nonessential domestic travel for 14 days effective immediately.” These states have “full discretion” on implementing the advisory, which exempts employees in critical fields.

States and Counties Across The United States Have Issued Shelter In Place Orders

On March 16, 2020, six California Bay Area counties announced “shelter-in-place” orders for all residents. These orders directed all individuals not providing essential services to stay inside their own homes and away from others as much as possible for the next three (3) weeks. These included San Francisco, Santa Clara, San Mateo, Marin, Contra Costa, and Alameda counties. In total, these counties are home to 6.7 million. Shortly thereafter, Santa Cruz County, with its 275,000 residents, followed suit. In these counties, businesses that do not provide “essential services” were required to close and send workers home. Only a few businesses, such as grocery stores, pharmacies, restaurants (for delivery only) and hardware stores were authorized to stay open.

Just three days after these California Counties issued their own Shelter in Place orders, California Governor Gavin Newsom ordered all of California’s 40 million residents to stay home. Again, Governor Newsom’s order only carved out exceptions for “essential” work and workers. This executive order banned all nonessential gatherings of any number of people. Weddings, funerals, and church services all became instantly suspended. Governor Newsom’s order instructed all Californians to stay in their homes as much as possible, leaving only for “essential” reasons.

Interestingly, Governor Newsom’s order did not set an anticipated end date. Thus, the California order was not only the first state-wide order issued in the United States, but also intimated the lack of any foreseeable end date to this crisis. Instead, Newsom offered his own estimate that COVID- 19 could infect 56% of Californians, totaling nearly 26 million people, within the next 8 weeks. To learn more about remaining safe and avoiding spreading this disease learn what the Covid 19 symptoms are.

Following California, nearly half of all governors in the United States have followed suit. While each state’s shelter-in-place order may differ slightly in the parameters or expected length, as of March 30, 2020, 26 states have issued some version of this order.

The Federal Government Has Issued Restrictions on Travel

Thus far, President Trump and the Federal Government have not issued a countrywide shelter-in- place order. However, President Trump has issued social distancing guidelines.

On March 15, 2020, just one day before California issued its shelter-in-place order, Trump announced social distancing guidelines. Trump outlined that these guidelines were to be in place for 15 days only. A few days before these guidelines were set to expire, Trump hinted that these guidelines might be lifted by Easter, April 12, 2020. However, on March 29, 2020, President Trump said he would extend nationwide social distancing guidelines for another 30 days. As of March 30, 2020, these guidelines are expected to be in place until April 30, 2020. President Trump also stated that the peak of the disease is expected to hit in two weeks, with the country on the way to recovery by June 1, 2020.

Prominent Businesses Have Been Forced to Close

Some of the earliest major closures in the United States included the NBA, NHL, and MLB’s decision to cancel and postpone their seasons in order to limit the spread and protect people from Covid 19.

Many nationwide retailers have also decided to temporarily close their doors during this crisis. Glossier, Patagonia, Abercrombie & Fitch, Urban Outfitters, Levis, Calvin Klein, Tommy Hilfiger, and Nike have all announced temporary closures nationwide. On March 19, 2020, Kohl’s announced a complete closure of all United States stores from March 19 through April 1, 2020. On March 22, 2020, Best Buy announced it would temporarily close all stores in the United States to customers, allowing only pick-up and deliveries.

Thousands of “Non-Essential” Business Remain Closed Indefinitely in California

Due to the broad nature of Governor Newsom’s order, thousands of California businesses have been forced to temporary close down, or severely scale back their operations. As the Governor provided no anticipated end date of the shelter-in-place order, this closure is indefinite for the time being.

The plain text of the Governor’s order is very broad. The Executive Order itself fails to state with specificity what businesses are, or are not “essential”.

Most Californians agree as to some of the businesses that qualify as “essential.” Medical personnel, grocery stories, police and fire departments are well established as essential critical infrastructure. However, for many other businesses the distinction is not as clear-cut. Out of an abundance of caution and concern of their employees’ safety, many employers have nonetheless scaled-back operations. Until the United States begins its recovery, (which takes time for many factors but a prominent one is the time associated with the incubation period) from this pandemic, these businesses must try to survive on reduced or non-existent revenue.

Insurance Companies May Be Required to Compensate Business Owners for Their Losses

Many insurance policies provide coverage in the event a business suffers an interruption in their operations. Businesses who have purchased these policies are entitled to compensation.

One of the most relevant policy types are those that cover losses attributable to government- ordered closures. Here, that could potentially cover anyone in any of the 26 states where the governor has issued a stay-in-place order, and was forced to close or reduce operations of their business as a result. These types of policies would also cover businesses located in counties who have issued similar orders.

While the exact form the policy might take can vary, most business should look for Business Interruption provisions, or Civil Authority Coverage in their policy.

What is Business Interruption Insurance?

Several different types of insurance providers and policies may compensate a business for interruption in their business operations due to COVID-19. These generally fall into the category of Business Interruption Insurance.

Business Interruption Insurance (also known as business income insurance) is a type of insurance that generally covers the loss of income that a business suffers after a disaster. The income loss covered may be due to disaster-related closing of the business facility or due to the rebuilding process after a disaster.

While every insurance provider drafts their own policies, COVID-19 could trigger several common policy types. These include policies that specifically include “All-Risk” provisions, as well as provisions expressly covering government orders, or infectious diseases.

Is Business Interruption Insurance the Same Thing as Property Insurance?

No. Business Interruption Insurance refers to a different type of insurance policy than what is normally referred to as Property Insurance. Property Insurance covers the physical damage to the business. For example, if a restaurant suffered physical damage because of an earthquake, the Property Insurance policy may pay out to provide repairs to the physical building.

On the other hand, Business Interruption Insurance provides additional coverage to compensate businesses for the profits that would have been earned, had the disaster not occurred. The purpose is to put the business in the same financial position had the disaster not occurred.

That said, many Business Interruption Insurance policies are included in Property Insurance policies. Thus, while not all Property Insurance Policies include a Business Interruption Insurance,

many Business Interruption Insurance Policies can be incorporated into, or are a part of Property Insurance.

What Does Business Interruption Insurance Cover?

Like all insurance policies, Business Interruption Insurance policies are often specific to the Business, or are individually negotiated. Exactly what a Business Interruption Insurance policy will cover can vary based on the terms of the agreement. However, below are some categories of injuries this type of insurance often covers:

  • Profits. Profits that would have been earned.
  • Fixed Costs. Operating expenses and other costs still being incurred by the property.
  • Temporary Location. Some policies cover the extra expenses for moving to, and operating from, a temporary location.
  • Commission & Training Cost. Business Interruption Insurance policies often cover the cost of providing training to the operators of the machinery replaced by the insurer following the insured events.
  • Extra Expenses. Reimbursement for reasonable expenses (beyond the fixed costs) that allow the business to continue operation while original property is not accessible.
  • Civil Authority Ingress / Egress. Government-mandated closure of business premises that directly causes loss of revenue. Examples include forced business closures because of government-issued curfews or street closures related to a covered event.

Are Losses Attributable to COVID-19 Covered?

For many policies, yes.

While many polices may differ in the exact language used, a typical Business Interruption Policy provides:

Loss of Ingress or Egress: This policy covers loss sustained during the period of time when, as a direct result of a peril not excluded, ingress to or egress from real and personal property not excluded hereunder, is thereby denied.

Thus the elements for coverage are:

Ingress to or egress from insured property is prevented, By a covered peril, and A direct loss results.

On its face, many Business owners would likely agree that they have been prevented for entering their business due to the ongoing shelter-in-place orders. An executive order instructing a business

to shut down, send home workers, unless the business is “essential”, prevented access, was due to the COVID-19 pandemic, and resulted in loss profits.

What is Civil Authority Coverage?

Civil Authority Coverage refers to insurance coverage for loss of income resulting from restrictions on access to a covered business due to a government or civil authority. Like Business Interruption Insurance, City Authority Coverage can be a provision hidden in, or added onto Property Insurance Policies. Similarly, like Business Interruption Insurance, county and statewide orders requiring business closures would likely qualify for coverage.

Are There Any Other Types of Insurance Policies that May Cover Losses due to COVID-19?

Yes. Policy provisions can go by many names and can sometimes be difficult to locate readily. If you have insurance for your business, but are not sure if you are covered for losses arising out of the COVID-19 pandemic, you must first obtain a copy of your insurance policy. An attorney can help you review you policy, and assist you in making an applicable claim.

If My Insurance Provider Denies May Claim, Do I have Any Legal Recourse?

Yes. Although people often turn to Insurance Companies in a time of crisis, Insurance Companies do not always honor the policies they have entered into. Historically, many Insurance Providers have refused to pay out on their Business Interruption Policies, only to be directed to do so by the Courts. Put simply, just because an Insurance Company denies the claim, does not necessarily mean the claim is not covered.

Indeed, many small businesses in California and throughout the United States have already brought suit against their insurance provider, alleging the insurance providers wrongfully denied their claim for coverage.

An Attorney Can Help You Determine Your Policy Coverage and Rights

Many businesses may not know whether they have coverage for loss of income due to COVID- 19. Insurance providers will also see a dramatic increase in insurance claims from COVID-19. As a result, many providers will have little motivation to provide any clarification. Even worse, many insurance providers may wrongfully try to evade coverage, even when their clients have paid for this coverage.

An experienced attorney can greatly assist you in determining what your rights are, and how to claim the benefits to which you are entitled. Insurance companies may attempt to wrongfully deny coverage, misrepresent the scope of coverage, or undervalue your losses. An experienced advocate can make a huge difference in pursuing a claim against an insurance company, and ensure the best possible result.

Gomez Trial Attorneys is a modern, fast-paced law firm that has the resources, staff, prestige, and reputation to provide you the best possible representation throughout California. Gomez Trial Attorneys works hard to reach positive resolutions for its clients, even if that requires bringing a case before a jury.

Gomez Trial Attorneys represents clients in San Diego, throughout the entire state of California, and nationwide. Our attorneys are leaders in the communities and on the frontlines of creative development of legal cases. If you have suffered losses or closure of your business, or know someone how has, please contact Gomez Trial Attorneys to discuss your rights today. Gomez Trial Attorneys are prepared to evaluate your situation and offer free legal consultations.

Gomez Trial Attorneys
655 West Broadway, Suite 1700
San Diego, CA 92101
Phone: (619)-237-3490

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