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COVID-19 and Commercial Property Insurance

COVID-19, also called the novel coronavirus, has had a substantial impact on the economy. With mandatory stay-at-home orders and closures of nonessential businesses, the US’s economy is reeling from the impact of the virus. The coronavirus is forcing many business owners to seek alternative means of revenue to stay in business—such as filing commercial property and business interruption insurance claims. Many insurance companies, however, are denying COVID-19 related business claims.

What Does Commercial Property Insurance Cover?

Commercial property insurance is an important type of coverage for business owners. It lends peace of mind by offering financial coverage for perils such as fires, pipe leaks, natural disasters, vandalism and theft. If a covered event adversely affects your business by forcing you to temporarily close down during repairs or relocate the company, commercial property insurance can help you cover related costs:

  • Property damage repairs
  • Building repairs
  • Landscaping and fencing
  • Lost property replacement
  • Inventory and equipment repairs
  • Money for damaged leased equipment
  • Business relocation

In many cases, the courts have found the presence of a hazardous substance, including germs or bacteria that could cause a virus, enough evidence to constitute property damage and fall under the umbrella of property insurance coverage. A claim may not always require the physical alteration of a property to make the policyholder eligible for benefits. Virus-related risks could be enough.

Is There Physical Damage?

The key to many commercial property insurance claims is the presence of physical damage. Lack of physical property damage has been a common reason for insurance claims denials in light of COVID-19. Many business owners are submitting claims through their commercial property insurance carriers only to receive rejections based on lack of physical damage, despite losing thousands of dollars due to the coronavirus.

Most insurance companies offer policies that require a physical loss to be eligible for benefits. COVID-19 has, in general, not caused physical property damage to businesses. Instead, companies are being forced to shut their doors or alter their services to accommodate social distancing rules, stay-at-home orders and other virus-related mandates. A lack of causal connections between the loss of income and physical damage is, unfortunately, interfering with the ability to obtain commercial property insurance settlements for many business owners

Connection Between Damage and Business Interruption

Business interruption insurance is another type of coverage that can offer benefits due to a temporary disruption in business. This type of insurance can pay for physical damage repairs and relocation expenses as well as costs such as overhead, lease and rent payments, employee wages, and lost revenue. Although many insurance companies are denying business interruption claims related to COVID-19, some of these denials are in bad faith.

Bad faith means the insurer is not treating the claim honestly or in good faith. In terms of business interruption insurance, the insurer may not have grounds to reject a claim based on lack of physical damage or virus exclusions, depending on the policy and the circumstances. An business interruption insurance attorney can help you review your policy, gather evidence supporting your claim, and fight back against unethical or illegal insurance practices during the COVID-19 pandemic.

Common Limitations on Coverage

Commercial property and business interruption insurance policies often have limitations on benefits. Limitations set rules on when and if a claimant can receive benefits, as well as the maximum amount available. Many policies, for example, have a rule that the coronavirus must physically impact the business for the policyholder to be eligible for benefits.

If a physical damage requirement is interfering with your ability to recover damages for COVID-19 related business losses, contact an insurance bad faith lawyer in Phoenix for free legal advice. Your insurance provider may not have the right to reject your claim. Federal and state governments are discussing the possibility of forcing insurance companies to pay for at least some COVID-19 losses. A lawyer can help you keep up with changes in legislation and protect your rights as a commercial property insurance policyholder in Arizona.