It is a frequent customer complaint that insurance carriers are adamant about being paid, but then deny the claims after years of collecting premiums. The latest large-scale example is business interruption insurance, which is often part of commercial property coverage. The general assumption by policyholders was that it would apply to businesses shutdown by fire on the premises or earthquake damage to property. Others had language in the policy regarding viruses after the SARS outbreak in 2003 or other events.
Many business owners are filing claims in response to the shutdown and loss of business caused by the COVID-19 pandemic. Some soon found out that their carrier believes that the policy does not cover a virus pandemic because there was no physical damage to the property.
Many lawsuits in the works
This decision by carriers led to more than 100 (and counting) lawsuits filed in federal court with more in state courts where plaintiffs seek coverage from insurers for this shutdown, alleging that the carriers are in breach of contract and bad faith in denying claims. Some claim the carrier denied claims without the due process of investigating the claim, which is a violation of the agreement.
The cases will be handled by a U.S. Judicial Panel on Multidistrict Litigation in Chicago and Philadelphia, where a single judge will hear all COVID-19 business interruption lawsuits filed in federal courts. It is also likely that there will be a class action as many small businesses join together.
Pandemic Risk Insurance Act
There is already a federal bill getting unilateral support from both sides of the aisle. The Pandemic Risk Insurance Act will insert the government as a backstop if the insurance companies’ payments exceed $250 million. This is similar to the Terrorism Risk Insurance Act passed after the September 11 attacks.
Solution far from finalized
The bipartisan support of this bill should fast-track it into law. But there is still only guesswork about the scope of the damage to businesses even after they reopen. Those who filed a claim or have questions about filing a suit may want to speak with an attorney who handles disputes with insurance carriers. These legal professionals can provide insight and updated information regarding rulings and laws that could affect the client’s potential case.