Many physicians may not even know about business interruption coverage; multiple doctors affected by Hurricane Harvey told Texas Medicine they didn’t have it during that historic 2017 storm.
If your practice didn’t have business interruption insurance prior to COVID-19, the pandemic might be the impetus to look into it before the next disaster forces doctors’ offices to shut their doors again. And if you already had business interruption coverage and shut down or limited your practice as a result of the pandemic, don’t assume the extraordinary circumstances fall outside your coverage.
Business interruption insurance can help practices recover from the financial effects of hurricanes and other natural disasters by compensating for lost income and increased expenses.
In the case of COVID-19, Texas attorneys who represent people with business interruption claims believe those policies are broad enough to cover a pandemic, although courts were deliberating that question at press time.
Legal experts say that soon after the pandemic began, insurers and their advocates wrote and distributed articles promoting the idea that business interruption claims wouldn’t fly for COVID-19.
But that’s not necessarily true, Killeen attorney Craig Carlson told Texas Medicine. “In fact, I would say more likely than not, [those] claims are covered.”
While property insurance covers building damage, such as from a hurricane or other storm, business interruption insurance is meant to cover financial damage like lost revenue. The Texas Department of Insurance (TDI) notes on its website that some business interruption policies cover “civil authority” orders, such as when a government entity restricts access to a business.
Business interruption coverage cost insurers as a result of the devastation from Hurricane Harvey in 2017. According to TDI’s final compilation of data from that storm through the end of 2018, insurers received just under 5,000 business interruption claims and paid on 30% of them, to the tune of nearly $180 million.
Mr. Carlson and San Antonio attorney Chris Kridel say business interruption policies generally fall under what are known as “all-risk” policies.
“All-risk means when you buy a policy, it covers all risk of you losing the ability to use your property, unless [something is] specifically excluded,” Mr. Carlson said. “The courts, when they look at insurance policies and apply exclusions, they hold the language [to favor] … the people who are being insured. If they wanted to exclude pandemics … they should have written it in the policy like that. But they did not.”
But even that broad interpretation doesn’t necessarily mean your business interruption policy will cover coronavirus. The details of your actual policy are key, according to Mr. Kridel.
“Each policy is different,” he said. “Therefore, it is important to review and evaluate your policy because business interruption policies are not created in a one-size-fits-all fashion, and the addition or subtraction of a word can make the difference between coverage and non-coverage.”
One of several COVID-related business interruption cases across the nation is playing out in a federal district court in Houston. In SCGM, Inc. v. Certain Underwriters at Lloyd’s, Texas theater-owner SCGM sued underwriters at insurer Lloyd’s of London for preemptively refusing to cover COVID-19 losses after shutdowns mandated during the pandemic.
Lloyd’s claims the disease “is not covered under the Pandemic Event Endorsement” in SCGM’s policy “as it is not a named disease in that endorsement.” SCGM counters that its policy lists covered disease pathogens and “their mutations or variations.” That list includes “Severe Acute Respiratory Syndrome-associated coronavirus (SARS-CoV) disease,” according to the lawsuit. SCGM says statements from health agencies and “the scientific community at large” make it clear that COVID-19 is “a variation and/or mutation” of SARS-CoV.
Meanwhile, during the spring lawmakers in several states introduced legislation to require insurers to cover coronavirus under certain business interruption policies, either temporarily or permanently. Those states included Louisiana, New York, New Jersey, and Pennsylvania. Texas’ next legislative session convenes in 2021.
Now’s the time: File a claim
Even if you don’t think you have business interruption coverage, Mr. Kridel advises you to go back and check: If you bought your coverage years ago, it’s possible your insurance broker sold it to you as an add-on and you forgot.
If you have it, and have been affected by the pandemic, then it’s time to have an attorney review your policy to see if you have a claim, Mr. Carlson says. It’s not too late, but you don’t want to wait six months to a year to notify the insurer of your claim, he says, adding that the first piece of documentation you would send is a notice letting the insurer know you will file a claim.
“Most lawyers will review [physicians’] policies for them for free, and if they have a claim, they’ll help them. [Clients] don’t pay unless they recover. So there’s no downside for these docs,” Mr. Carlson said. “If they have a covered loss and they’ve lost a significant amount of money, this is the time to file your claim.”
Mr. Kridel says if the carrier denies your claim, save the written denial and other correspondence so you can pursue the claim later.
“While these cases are working their way through our legal system,” he said, “it is important to properly position yourself should your claim be initially denied but ultimately deemed eligible enough for coverage under these policies.”
Tex Med. 2020;116(7):20-21
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