All of us at Tutwiler & Associates trust you and your families are staying well and safe in the midst of this dreadful Covid-19 (Coronavirus) pandemic. While our firm is doing our part to be “socially responsible” and keep our communities safe, many of our firm’s expert adjusters are actively working hard from the confines of their homes as we continue to field client inquiries and offer professional insurance claim assistance, guidance, and support.

A few clients have called and emailed to inquire if there is an option for them to file an insurance claim including Business Interruption. Understandably, many business owners are just now combing through their insurance policies as they continue to look for ways to offset business income and financial losses.

On Friday, March 20, 2020 at 1:22 pm Florida’s Governor Ron DeSantis issued Executive Order Number 20-71 requiring all gyms and fitness centers to close while requiring all restaurants and food establishments in Florida to suspend on-premises food and alcohol consumption, effective immediately. The order states that kitchens can remain open for delivery and take-out services, however Governor DeSantis advised that the Florida Department of Business and Professional Regulation will be directed to enforce the new requirements and limitations. Governor

DeSantis did activate The Florida Small Business Emergency Bridge Loan Program to provide short-term, interest free loans to small businesses feeling the economic turbulence from the new coronavirus. Here small business owners with two to 100 employees located in Florida affected by COVID-19 can apply for short-term loans up to $50,000.

These loans are interest-free for up to one year and are designed to “bridge the gap” to either federal SBA loans or commercially available loans. Florida’s Department of Economic Opportunity will work with every borrower to ensure that repayment of the loan is not an overwhelming burden, but to be eligible, a business must verify they were established prior to March 9, 2020 and prove economic impacts as a direct result of COVID-19. Elsewhere across Florida, chains of major restaurants, retailers, and venues have either closed their doors completely or have adjusted their hours in response to this most contagious and infectious disease.

Without government intervention, existing insurance coverage resulting from COVID-19 losses will be extremely difficult if at all available to policyholders for the following two reasons:

1.In order for insurance to kick in, the policies require direct physical loss to the insured premises.  As it stands now, most articles and opinions we have read, as well as our experience in dealing with insurance losses including business income claims, is that there has to be physical loss to the covered property such as a fire or other insured peril covered by the policy. So far, they seemingly are all in agreement that a virus does not cause physical damage. Unlike mold and other possible pollutants, I have not read or heard any credible person say that a virus on a physical object causes damage.

2. Likely most commercial policies will also include an exclusion for viruses and other forms of pollutants whether airborne or in some physical form.

As you can read, the insurance industry was on their game as they got ISO forms approved that made it very specific that overage for viruses was excluded.  “In 2006, the “International Organization for Standardization” (better known in the insurance industry as ISO), adopted an exclusion for its members to eliminate coverage for virus-related losses, including business interruption losses. That exclusion is often titled “Exclusion for Loss Due To Virus Or Bacteria” or something similar, and it typically reads as follows:  “We [the insurance company] will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.” These exclusions often specifically state that they apply to “business income” and other types of losses. Even further, some of the exclusions provide illustrative lists of viruses, such as rotavirus, SARS, avian flu, legionella, anthrax, etc. that are not covered.  You have to give the insurance industry credit on this one as they were proactive rather than their normal course of being reactive.

So, these are the two big hurdles to get a path to coverage for business income losses. But remember, insurance losses are fact specific as to location, cause, and policy wording. The nuance of reading insurance policy language is complex and requires a level of expertise that typically the insured does not have.  Having said that, there may be some specialized insurance policies that have coverage extensions (aka Endorsements) or manuscript policies that were negotiated by a broker for the specific needs of a unique client that may have coverage.

So, the take-away is that if you are dealing with loss of business income, the rule is to always read your policy. And remember there are often endorsements for things like shut downs that are required by CIVIL AUTHORITY which in many cases there is no damage to a building but LAW & ORDINANCE issues come into play and the local or state AUTHORITIES shut the area down. But remember Civil Authority claims have to fit into the box so to speak for coverage to apply. Again, read the policy and/or consult with an expert claim adjuster who has handled these matters and has the experience to guide you through the process.

So, with all the exclusions and limitations is there any hope for help to recover our losses? The answer is maybe. At least one state’s legislature is trying to force a rewrite of the policy or change policy forms going forward. On Monday, the New Jersey Legislature began considering a bill to force insurers to pay COVID-19 business interruption claims expressly excluded by ISO’s “virus” exclusion. Whether the bill will pass is unclear, and whether the law, in its ultimate form, will eliminate only the “virus” exclusion in the policies, or also the requirement for direct physical loss or damage to covered property is unknown. It is also unclear whether the proposed law will apply to currently existing insurance policies or merely renewals and new policies. If the intent is to apply the law to currently existing insurance policies, constitutional issues will likely arise. Our firm will be continuing to watch legislation closely to see if any other states follow New Jersey’s lead.

Finally, I have read some comments where the Federal government in the relief legislation may in fact fund loss of income claims provided they are presented in a format commonly used by the insurance industry. Over the years insurance forms and endorsements have evolved in a manner that explains what is covered, what is not covered, and details how data from past income is used.

Profit and loss statements as well as tax returns are commonly used to arrive at what the business would have done had no loss occurred. But there are means and methods as well as a great deal of subjectivity that goes in putting together a business income claim. As an example, extrapolation of data from past periods as well as using forward planning the business was doing that can be verified with a pro forma that can be supported with solid commitments made in place and not just a wish list.

In closing, if Congress does authorize some type of funding for business income loss and the mechanisms to be applied are the insurance industry model, give us a call. We have many years of successfully preparing business income loss for large commercial accounts to small sole proprietors.  As they say, the devil is in the details, and in the case of business income claims, how it’s calculated, presented and negotiated makes all the difference in the outcome. With all the coming legislation, this issue is bound to change rapidly. Let us know what you think and stay safe and healthy.

If you have questions regarding any property insurance claim related issues please call 866.296.1620 or contact us to submit a question to one of our public adjuster insurance claim experts.