This past week we saw a continuation of COVID-19 specific rulings in favor of Business Interruption coverage. In North State Deli, LLC v. Cincinnati Insurance Co., No. 20-CVS-02569, the court rejected the insurer’s argument that “physical loss” requires physical alteration to the property and absent such physical alteration, the policies do not cover “pure economic harm”.

Other recent cases rendered similar favorable judgements where COVID-19 deprived the insured’s access to their property, rising to a direct physical loss to their property (Studio 417, Inc. v. Cincinnati Insurance Co., No. 20-cv-03127-SRB.

In Florida, the governor of the state of business issued executive orders forcing businesses to close their doors resulting in applicable Business Interruption coverage (Urogynecology Specialist of Florida, LLC v. Sentinel Insurance Company, Ltd., No. 6:20-cv-1174-Orl-22EJK) and another case where the court rejected the insurer’s claim that COVID-19 related losses do not quality as covered losses (Optical Services USA/JCI v. Franklin Mutual Insurance Co., No. BER-L-3681-20).

These rulings are at the trial level and subject to appeal…but they are in stark contrast to the initial narrative that insurance carriers provided. That said, we encourage you to seek the guidance of competent legal counsel when pursuing these matters.

In attempting to think this through, it begs to ask the questions:

Does it make sense to submit a claim? What documentation is needed to submit a claim? How do I substantiate my loss? How will submitting a claim impact my future premiums and insurability?

As always, the answer is …”it depends”.

Before you make any decision, you need to develop an estimate of what your potential loss is. There are two buckets where potential coverage exists: Extra Expense and Business Interruption (aka Business Income). Tracking or building either of these claims takes time and financial resources. However, the low hanging fruit is an Extra Expense loss; what extra cost(s) did your organization incur as a result of addressing COVID-19 interruptions. A Business Income claim is much more complex to develop as you have to demonstrate your financial loss.

Yes, a claim history that involves a high claim frequency is not something that any carrier wants to see. The uninsurability issue can always occur when a carrier gets a burr in their saddle because they believe they have been treated unjustly. My guess is that as this progresses, the entire insurance industry is going to feel the pain of this pandemic.

Most of the insurance industry was already in a hard market condition prior to the pandemic arising out of the sheer increases in loss caused by wildfires, hurricanes and other severe weather events. On top of that, carriers have their own COVID-19 issues to sort out. But as the industry responds and raises premiums, it will be across the board and not specific to any one company – it generally hits by industry and region.

Underwriters usually look at the loss experience over a five-year period to see if the account has been profitable or not. So, any COVID-19 payout will hang around for at least that long. To file a claim or not to file a claim all depends on a variety of factors: your COVID-19 loss analysis, your company’s financial position, loss history, etc.

Whichever path you take, you don’t want to wait until one of the carrier’s defenses becomes “Late Notice” or some other type of prejudice. In some states that is really hard to prove, but it is always easy to allege. We are certainly here to assist you as you look at options, but as mentioned earlier this coverage issue will be evolving for some time.