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Understanding the Limits of Business Interruption Insurance

Cranwell & Moore P.L.C. May 4, 2020

Business interruption insurance (also known as “loss of business income”) is usually attached to an insurance policy on a business or property as a separate coverage element, for which the business pays a premium. They set forth terms of reimbursement for the lost income that a business suffers during a covered loss event, which are typically defined elsewhere in the policy. Some provide additional coverage for the normal operating expenses of the business (like payroll). These policies, however, are often subject to broad exclusions. These often take the forms of limiting the definition of a “loss” to events of physical damage to structures or property by listed causes, or contain direct exclusions limiting coverage for certain forms of “bodily harm.”

The relevant coverage provisions often vary based upon the insurance company, the type of business being insured, and the type of coverage purchased. Attorneys who help businesses make such claims—and litigate about ambiguities in coverage provisions if necessary—first review each particular policy and the applicable state laws governing them. Considerations include:

  • Since the mid-2000s, many commercial insurers have made provision exclusions for infectious diseases, like the flu. But the language of each policy usually stands on its own, requiring careful analysis.

  • These exclusions are sometimes broad enough to exclude infections and diseases, but sometimes there is a good argument that these losses are covered.

  • Some states have passed legislation that creates an argument to overturn unfairly broad exclusions.

What to do when you are uncertain whether business losses are covered

It is essential to examine the scope of your entire insurance policy to determine how broad its exclusions are, and if there is any room to argue for coverage with the current event causing your losses. Often, your insurance provider may claim that its provisions do not include the loss or the event causing it, but the insurer’s opinion is not always the way a court would rule. Most states have rules that interpret ambiguities in language to the benefit of the covered person or business. In these circumstances, an attorney can examine your policy to help determine what options you may have for pursuing coverage.