FAQ: New York Business Interruption Insurance

In an effort to slow the spread of the novel coronavirus (COVID-19), the government mandated shutdowns of all non-essential businesses. The shutdown crippled many businesses, causing them to turn to their insurance agents. Business owners are counting on their business interruption insurance to pay bills, replace lost income, and cover payroll. Unfortunately, most business owners are getting the same response from their insurance companies: the one disaster their policy does not cover is temporary closure due to a pandemic.

Although talking to an experienced NYC business interruption attorney is best, below are answers to some frequently asked questions that can provide you with background on this issue.

What is business interruption insurance?

With business closures resulting from the coronavirus pandemic, business owners are exploring the possibility of insurance coverage under their Business Owner’s Insurance Policies and Property Insurance Policies. Most of these policies contain business interruption insurance, also known as business income coverage, which helps replace lost income and pay for expenses when a business sustains damage or loss of property that results in total or partial closure and subsequent lost profits. 

What is covered by business interruption insurance?

Business interruption insurance covers a number of different things, including:

• Profits that would have been earned, based on prior months’ financial statements.
• Fixed costs like operating expenses, based on historical costs.
• Moving expenses if the business must be moved to a temporary location.
• Commission and training costs for operators of machinery replaced by the insurer.
• Reimbursement for reasonable expenses beyond fixed costs.
• Civil authority ingress/egress, meaning coverage is provided if direct loss of revenue is caused when a government authority orders the closure of business, such as in the event of a curfew.
• Expenses incurred as a result of the interruption of business activities including those for repair, maintenance, and cleaning.

How do you calculate business interruption insurance?

Business interruption insurance is calculated based on a formula that takes into account the following factors:

• The number of hours or days operations are shut down
• The quantity of goods normally produced or sold per unit of time used during the shutdown
• The value of each unit of production, generally expressed in profit
• Net Income before the interruption or loss

This formula can vary based on the specific language in your insurance policy.

Does business interruption insurance cover shutdowns due to COVID-19?

Whether your insurance policy provides business interruption coverage for the COVID-19 government mandated shutdowns depends on the specific language of your policy and its exclusions. Civil Authority, Ingress/Egress, Dependent Property, Food Contamination, are just some important coverages contained in many policies that may enable recovery for business interruption losses. 

Can I file a business interruption insurance claim for losses caused by civil authority closures?

Yes, but first you need to find out if your insurance policy includes language that covers losses resulting due to “actions of civil authority” – a special coverage for lost business income when access to your premises are denied due to nearby dangerous conditions at other properties. Court decisions make a strong case that business losses sustained as a result of government-ordered business closures due to the COVID-19 pandemic will be covered by civil authority coverage – especially since the current shutdowns are directed at the specific businesses. 

You Deserve More!

The bottom line is that whether your business losses would be covered by your business interruption coverage depends on the facts and the language of your insurance policy, which can be difficult to understand and interpret. 

If you have property damage or business interruption insurance and you own or operate any type of business, including the below examples:

• Car & Boat Dealerships
• Dental Practices
• Surgeon / Doctor Offices
• Dermatology Practices
• Law Firms
• Comedy Clubs
• Museums
• Concert Halls
• Sports Areas & Stadiums
• Retail Establishments
• Hotels / Lodging Medical Groups
• Theaters
• Travel Companies
• Film & Entertainment
• Shipping / Logistics
• Import / Export
• Restaurant & Chains
• Fitness Clubs & Gyms
• Bars & Night Clubs
• Other Similar Businesses

And have been adversely affected by the public closures due to COVID-19, it is important to have an insurance coverage attorney review the policy to determine if your carrier would likely approve a claim. Even if you received a denial from your insurance carrier or have a “pandemic” or “viral” exception, our legal team may be able to assist you.

The legal team at Gersowitz Libo & Korek, P.C. is dedicated to helping business owners fight for their rights and get the compensation they deserve under their insurance policies for loss of business resulting from the coronavirus pandemic.

Business Interruption by the Coronavirus Pandemic? Call Us Now!

If you have any questions about your business regarding COVID-19 or to see how we can help, please call Gersowitz Libo & Korek, P.C. at 1-646-798-1535.