Business Interruption Insurance - Episode 001

If your business has been struck by disaster, whether from the Derecho of August 2020 or forced closures due to Covid, business interruption insurance may be able to help you recover lost revenue. But what about when the insurance company denies your claim?

Transcript

Hi, I'm Dennis VanDerGinst. Being an attorney, I know that the law can get confusing. In Legal Squeaks we provide you with useful and easy to understand squeaks of information on legal and consumer issues that you can apply in your daily life.

Let's get started.

Hi, everyone, welcome to Legal Squeaks, I'm your host Dennis VanDerGinst.

Today, I'm going to talk a bit about something relevant to small businesses that may have suffered lost revenue due to catastrophic events.

The specific events I'm going to address are business closures related to storms and due to Covid. Most people who own and operate businesses are familiar with some of the insurances that are available to protect businesses and its employees from different losses. For instance, workers' compensation insurance to address claims of injured workers. There's liability insurance to protect and indemnify a business against claims for damages that are incurred because of negligence of a, of a business or its employees.

And, you know, there are lots of other types of insurance. There's malpractice or professional malpractice insurance. There's medical payment coverages. The list goes on. Some of you are probably going to want to check out some podcasts about insurances that are available, especially if you own a business.

But the focus today is on a type of coverage known as business interruption insurance.

This type of insurance is known by a number of other names, such as business income, and loss of profits insurance, they all mean the same thing, essentially. Basically, it's a clause or a coverage that's bundled together with a more general insurance policy, like a commercial policy or a general insurance policy, and basically it makes, it reimburses you for losses that you incur as a result of a shutdown of your business.

But because it's usually bundled with other insurances, a lot of people aren't even aware that they have the coverage.

And that's one of the reasons we want to talk about this today, because you as a business owner may have that coverage and not even be aware, or more importantly, if you have that coverage, whether you're aware or not, you may be entitled to compensation even though somebody is telling you differently.

So, as I said, it's meant to replace lost income and sometimes other losses that your business sustained if you were closed or restricted in some way due to a covered loss.

And that's kind of where it gets a little tricky. Determining what is a covered loss. The most common example of where it could be beneficial is when a natural disaster strikes and it causes your business to close for a while.

Maybe, maybe a tree falls on your, on your building and you can't access your building because it's being worked on. That, that might be a good example of a natural disaster where it might come into play. Another great example that is really relevant as far as recent events is the derecho, which hit much of Iowa, especially the Cedar Rapids area in the summer of 2020. There was so much destruction done to property and basic services like power and water that there were a lot of businesses that were forced to close for long periods of time.

Any storm like that, or a fire, flood, other natural disasters, they can trigger that business interruption coverage to apply if it's not specifically excluded. And what I mean by that is some policies will exclude coverage, for instance, for flood and earthquake damage, and they'll require you to actually have a separate policy for that type of loss.

But if you had to close or restrict your business operations, don't assume that you have nowhere to turn to recoup those losses, because if you have some type of business or commercial insurance, you may have that type of coverage. And you don't have to assume just because an insurance agent or adjuster told you you don't, or they've denied the claim, that that's the end all, be all.

Keep in mind, it's their job to collect the premiums, make the money, and avoid paying out the claims whenever possible. I'm not saying or suggesting that they're, they're crooked, but they're going to interpret their policies. They're going to interpret the circumstances in the way best suited to their needs and to the needs of that insurance carrier.

So if you have a question about whether you have the coverage and or whether or not it applies to get you compensation, make sure you're talking to an attorney who's willing and able to review your insurance policy. I'm not here to solicit cases, but my firm, our sponsor, VanDerGinst Law, is happy to do that. And I'll talk to you more about that at the end of the presentation. But most firms that that will do that will take a look at it for free and they won't charge you unless they get a recovery.

So anyway, another area which we have a lot that has a lot of recent relevance to these situations is related to covid and the closures and restrictions that have come about as a result of governmental, governmental orders.

There have been a lot of businesses that have been closed down or they had to restrict how many people could be, you know, in their location for some period of time. Obviously, there have been a lot of different types of businesses, but some of the ones that you're probably more aware of that have been particularly hard hit would be those restaurants, bars, hair salons, nail salons, gyms, et cetera.

Those businesses and others may have valid claims under business interruption coverages if they have that type of insurance to begin with.

But to be clear, a lot of those policies will have specific language which arguably excludes this type of coverage, or in the alternative alternative, it may provide defenses that they're going to rely on to make sure that, that there's either no coverage or they're going to limit the exposure of the insurance carrier as to how much money they may have to pay you.

Some of those are legit, so it does take some, some work to determine whether or not you have a policy that will offer you a recovery. Some policies clearly state that the only time it's going to apply, the only time they're going to apply this business interruption, is if your business was shut down due to physical damage to your business location. So I, you know, use that that example of a tree falling onto your business. Sometimes that, that's what it takes.

When we're talking about the trade show or storm damage, usually that does result in some type of physical damage. So you usually have a better argument with those types of, of business interruptions than you might have with the covid-related restrictions. But that's still something you're going to want to consider looking into if you had losses related to covid orders, covid restriction orders.

Another argument they can make is that the, they may have already excluded business shutdowns related to government orders. Well, that may be right on port, on point. And it may it, may be successful in, in shutting down any argument you may have for compensation under your insurance.

And there are other arguments and defenses they can present as well. Some, some of those will be valid. Some are not. The bottom line is, if you've got lost income due to those types of shutdowns, you should have that insurance policy reviewed by an attorney to determine whether or not you've got a valid claim.

You might ask, well, is it even worth pursuing a claim, given what I'm saying here?

But the short answer is still probably, yes. It's probably at least worth exploring whether it's due to a natural disaster like derecho show or a government mandated shutdown. If you've got a valid claim, you can recover a lot of money under the policy. And even though there might be defenses available, a good lawyer might be able to uncover legal arguments that will apply to your situation to get you that money. And as we mentioned, many attorneys do that on a contingent fee basis, so they won't charge a fee unless they get your money for your claim.

So for that reason alone, it's usually going to be at least worth exploring. The other reason is worth exploring, like I alluded to, is it might mean a lot of money back in your pocket. If you've got a covered loss and it forced your business to shut down, this type of insurance actually can do a lot to reimburse and help you cover a lot of expenses.

For instance, the revenue that you normally would make if your business was open, you can get that back. Payroll for your employees. Taxes, regardless of whether you're paying them monthly or quarterly. Your, your mortgage or if you've got rent or lease payments for your business, that can be paid back. Any loan payments that you need to make while you're out of business.

Relocation costs. Maybe you had to move to a temporary location because it's going to take so long to address the damages to your building. That can be covered under this type of insurance coverage. Or even training costs. If you had to get employees to learn a new way to do things because they don't have access to machinery or equipment that was at the old building. And other expenses, too, that, you know, maybe you have to rent a new place, you never know.

There's just so many, so many things that you can recoup if you have business interruption insurance. So you don't want to overlook that. It can add up to a lot of money. In some instances, it's tens or even hundreds of thousands of dollars. It can even be it can exceed millions of dollars.

So I'd submit that it's well worth you're looking into. If your claim is related to damage from something like a natural disaster, then that coverage usually covers a restoration period which won't kick in right away. There's there's typically a 48 to 72 hour waiting period. But if you're going to be out of business beyond that, it's still going to be worth, worth looking into. Whatever that period is, by the way, it's laid out in your insurance policy.

Now, the amount of money that you might be entitled to is also going to be limited by the type of coverage that you paid for.

So it doesn't mean that you're going to automatically get that. So, for instance, if you've got a million dollars in coverage, and that's your your limit, that doesn't mean you're going to get a million dollars. You will get up to a million dollars if you can prove losses up to a million dollars.

If you, if your limits are higher, you could get more as long as you can prove that your losses warrant the recovery.

But you're always going to be limited on the high end to whatever the, the insurance coverage limits are that you have paid for.

So how do you prove whatever those losses are? That's obviously, you know, what a good attorney is there for. They can make a huge difference, because you're going to be required to show the financial documentation, like profit and loss statements, taxes, you know, other financial records, in order to show what those losses are.

And unfortunately, those documents don't always paint the full picture. Let's say that you're a newer business, for instance, and your financials from last year aren't going to be near what they are this year. So you can't really compare apples to apples and expect to get a full recovery simply by providing financials that are not showing the trajectory that you've been on in recent months. So you have to really be able to discern what financials are going to show the loss more accurately.

Another example would be if you're a seasonal business, like an accounting business or you have a landscaping business, obviously you're making most of your money during tax time if you're an accountant, or during the summer months if you're into landscaping. If the insurance company is trying to compare your losses to, you know, the money that you were earning during a non-high time, you know, in a seasonal business, that's that's not fair and that's not accurate.

So you have to have an attorney who's going to know what it is that they're going to need to see to maximize the amount that you're entitled to for the loss of income that you sustained as a result of this business interruption. The bottom line is you always are going to have the burden of proving those losses.

By the way, if you don't currently have business interruption coverage, you should probably look into getting it. It's, it's really crucial and essential if you have a business. Now, the amount of the coverage you need is obviously going to depend on the type of business you have and what losses you might anticipate if you ever did sustain a business interruption.

The, the amount of that coverage and in the nature of your business and other considerations are also going to determine what that cost would be for that coverage. But generally it's not too expensive and it's, it's certainly well worth considering.

So you should probably reach out to an insurance agent and coordinate that, at least get some sense of what it would cost you to have it.

If you're interested in pursuing a claim for these losses, you know, losses that you sustained due to business interruption, please reach out to an attorney right away. Don't just assume because your agent says you didn't have the coverage that well, that's it. Or don't assume because an adjuster denied a claim that that's it.

Good lawyers might be able to find some good legal arguments to rely on. I can't speak for other attorneys, but my firm tries to make it as simple as possible in you know, like I said before, there's there's no risk. You can go to Vlaw.com. And all you need do then is give us some basic info, sign that contingent fee agreement and we'll review your policy to see if we think that there are valid, legal arguments in order to pursue a claim.

If we do find legal arguments to pursue the claim, the next step is to get that relevant financial information, to find out, to determine what the proper amount of compensation should be.

Then we present the demand to the insurance company to try to get the case resolved and negotiate it in order to get your claim settled.

And if for whatever reason, we can't agree, you know, we and you cannot agree with them, then we'll make a decision as to whether a lawsuit is warranted.

I know a lot of people will wonder if if making a claim under your insurance is going to impact your insurance premium. Well, that's certainly a possibility. So obviously, if you think that your loss is only a few hundred dollars, it's probably not going to be worth your while because it will potentially hike your premium and it's not going to be worth it.

But if you lost thousands, tens of thousands of dollars or more. Well, that's why you have the coverage in the first place. So I would certainly encourage you to look into it under those circumstances.

So I hope this information was helpful. If you have questions, feel free to reach out to me at Vlaw.com. Thank you again for tuning in. Be sure to like us and subscribe if you haven't already done so. If you're listening to the audio only, you can also catch the corresponding video at vlaw.com.

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