Fighting for Business Income Protection

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Against the backdrop of Covid-19, we’re going to witness one of the biggest legal battles in the insurance game as businesses nationwide look to their policies for such things as financial recovery from civic-mandated business shutdowns or lawsuits by the families of employees.

A tsunami of businesses hurt by forced pandemic shutdowns have already begun suing insurers to cover billions of dollars in losses. After all, millions of businesses across the nation carry business interruption insurance (business income protection), and they expect it to be honored. There’s no doubt the pandemic has financially damaged nearly every kind of business, including marine businesses.

For the most part, insurance companies are rejecting these claims, citing the need for physical damage as a standard requirement for paying out benefits. In addition, more than half of all policies held today specifically exclude viruses. Accordingly, most firms filing lawsuits are the ones with insurance policies that do not contain that exclusion. The argument for getting around the physical-damage requirement is that the coronavirus remains on surfaces and, therefore, renders workplaces physically unsafe.

But there are lawsuits of a totally different ilk you should be aware of: Employers are beginning to be sued by the families of employees who contend loved ones contracted lethal Covid-19 infections on the job. It’s a “new legal front,” say legal observers. And while big names such as Wal-Mart and Safeway, as well as many health-care facilities, are facing claims of gross negligence or wrongful death, it’s unknown whether any firms in the marine industry are getting hit with such legal action. However, it’s a developing liability threat that businesses in all industries face.

In cases where businesses expect an insurance company to honor claims for business-interruption compensation, there may be good news. According to Leslie Scism, reporting in The Wall Street Journal:

“Lawyers have found past rulings that say events rendering a property unusable may constitute property damage. In one case, a New Jersey manufacturer prevailed with its argument that an ammonia leak made its property unfit for use.”

Scism cites more examples. In an Oregon case, a policyholder obtained a favorable ruling when wildfire smoke led to canceled outdoor theater performances, and New Hampshire’s highest court ruled physical loss is not limited to changes that can be seen or touched. The case in point: cat-urine odor in a condo building.

If your dealership is making a claim for business interruption, it’s notable that, early on, researchers said the virus could stay on some surfaces for possibly weeks. However, the latest thinking is that it’s not common to contract Covid-19 from a contaminated surface. So that argument is weakened, though still a contention. Person-to-person transmission is considered No. 1.

That said, now in focus is one of the coverages that address orders from civil authorities, according to Scism’s report. Your policy may refer to prohibited access to facilities due to “physical loss of or damage to property away from the insured premises.” Does an order by civil authorities to shut down constitute prohibited access? One might successfully argue it does.

To the disappointment of businesses, insurance companies won a victory in an early coronavirus case when a Michigan circuit court judge ruled in favor of the insurer. In that case, a multiple restaurant owner was seeking coverage because of the government shutdowns. But the court ruled the policy is for actual loss of business income sustained by the direct physical loss of or damage to property.

The beat goes on. States are beginning to take action, according to the National Marine Manufacturers Association, which is closely monitoring business liability protection laws and efforts around the country. While primarily focused on issues related to manufacturing, NMMA reporting that nine states have passed or enacted executive orders that provide protection to businesses, including dealers, from Covid-19 civil suits: Alabama, Arkansas, Iowa, Kansas, Louisiana, North Carolina, Oklahoma, Utah and Wyoming.

Additionally, there is pending legislation in Delaware, Georgia, Mississippi, New Jersey, North Carolina, Ohio, Pennsylvania, and Tennessee.

If you are among the hundreds of retail businesses that have opted to file suit against your insurers for business interruption due to the pandemic, courts around the country are in extreme slow motion due to the continued pandemic. Favorable outcomes, however justified, won’t likely be coming fast.

With hundreds of cases just pending, immediate legislative action, on national or state levels, that would provide needed protections and fair restitution for businesses becomes more important than ever. NMMA is supporting bills that cover businesses from all Covid-19 related claims.


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