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Matthew McCarley Answers Questions on Business Interruption Insurance

As COVID-19 continues to spread, leaving businesses all over the country in jeopardy, Fears Nachawati partner Matthew McCarley sat down to answer some questions for those who may be filing business interruption claims with their insurance providers.

What can a business do if an insurance company refuses to pay a business interruption claim?

Unfortunately, people have come to believe that when an insurance company denies a claim, that’s the end of the road. They don’t push back because they don’t think they can. The money insurance companies bring in year after year depends on that. Policy holders need to know they don’t have to take no for an answer. When a claim is denied, they can and should challenge it.

What can you do if you discover that the fine print in your policy carves out coverage for pandemic claims?

Challenge it. Some policies have what are called “virus exclusions,” but even a denial based on that can be challenged. If your business is on the line, if you’re faced with letting people who depend on you go, the smart move is to do your due diligence. Insurance companies have been caught more than once trying to trick their customers out of coverage they’re entitled to, and this may be no different.

If an insurance company offers you less than you think you deserve, what should you do?

The insurance industry relies on the fact that most policy holders accept without question the first settlement they’re offered. But if you believe an offer is too low, you have a right to challenge it. The law allows juries to award triple punitive damages when they determine that insurance companies are operating in bad faith. What this means is, if you counteroffer, insurance companies have a reason to listen to you.

Does a declaration of a state of emergency or shelter-in-place order affect my business insurance?

It shouldn’t, as that’s what’s triggering the damages. That is, those directives from government agencies or officials are creating the business interruption, which has led to a loss of business income. Business insurance is designed to protect against that. It’s exactly the type of claim your policy is meant to cover.

If insurance companies are facing legal action for failure to pay business interruption claims, should I wait until that’s resolved before I file my own claim?

No. Because the longer you wait, the longer it’s going to be before you receive the recovery you need to get your business back up and running.

Will my workers’ compensation, general liability, or property insurance policies cover losses my business suffers due to COVID-19?

If you believe there’s something in your policy that will offer you coverage, you should file the claim. Again, these are policies you’ve paid premiums on year after year, so filing the claim is your right. And waiting to file is just going to put you further back in a line that’s only getting longer.

There’s talk that some states have proposed legislation that would require insurance companies to cover these kinds of business interruption claims. Should Texas be doing the same?

I haven’t heard any talk about Texas doing that, but it’s a good idea and the state should definitely be considering it.