Coronavirus / COVID-19 Business Interruption and Loss of Business Income Insurance Claims: First Steps
A vital first step in making successful loss of business income based on the novel coronavirus is to notify your insurance company, and fully comply with all of your obligations under the policy. A common theme running through my advice is to carefully review your policy. Each insurance agreement is unique, and the language and terms of that policy will control whether or not you have a viable business interruption or loss of income claim.
Not understanding your obligations, however, can lead to a denial of even a valid and meritorious loss of business income claim.
An essential term of every commercial insurance policy is a duty after loss clause. If you do not fulfill your contractual obligations to your insurance company, they can use this as basis to deny or delay your business interruption claim. Make no mistake about this.
Insurance companies deny claims each and every day on the basis an insured's failure to perform each obligation.
The duty to cooperate clause in the most common commercial insurance policy provides:
‘Duties In The Event Of Loss a. You must see that the following are done in the event of loss:
(1) Notify the police if a law may have been broken.
(2) Give us prompt notice of the direct physical loss or damage. Include a description of the property involved.
(3) As soon as possible, give us a description of how, when and where the direct physical loss or damage occurred.
(4) Take all reasonable steps to protect the Covered Property from further damage, and keep a record of your expenses necessary to protect the Covered Property, for consideration in the settlement of the claim. This will not increase the Limit of Insurance. However, we will not pay for any subsequent loss or damage resulting from a cause of loss that is not a Covered Cause of Loss. Also, if feasible, set the damaged property aside and in the best possible order for examination.
(5) As often as may be reasonably required, permit us to inspect the property proving the loss or damage and examine your books and records. Also permit us to take samples of damaged and undamaged property for inspection, testing and analysis, and permit us to make copies from your books and records.
(6) Send us a signed, sworn proof of loss containing the information we request to investigate the claim. You must do this within 60 days after our request. We will supply you with the necessary forms.
(7) Cooperate with us in the investigation or settlement of the claim.
(8) If you intend to continue your business, you must resume all or part of your "operations" as quickly as possible.
b. We may examine any insured under oath, while not in the presence of any other insured and at such times as may be reasonably required, about any matter relating to this insurance or the claim, including an insured's books and records. In the event of an examination, an insured's answers must be signed.’
Source: CP 00 30 10 12 © Insurance Services Office, Inc., 2011
Every insured is under an obligation to notify their insurance company of their lost profit or income. I suggest doing so in writing, or in a manner that can later be documented. You have an obligation to mitigate your damages or losses. In this context, there may be an obligation to resume business operations promptly, or to keep limited business operation going to the extent permitted by the applicable closure order. The business owner must fully document the extent of the business interruption claim, and make their records available. Obviously, the business owner has to cooperate fully with the insurance company. I’ve handled thousands of insurance disputes. In many instances, these disputes require the insured person to give an “examination under oath” or EUO. I’ve attended countless such events, and the process can be grueling. Many individuals facing the examination under oath choose to employ experienced counsel.