The global coronavirus pandemic has led many governments to close businesses deemed non-essential. As a result, many business owners have been left with income losses through no fault of their own that they may not be able to recover.
Most insurance policies that provide comprehensive coverage to businesses, provide coverage for income losses suffered when a business is unable to operate at its usual capacity because of a peril covered under the insurance policy. This type of insurance coverage is known as business interruption insurance.
Disputes that arise from business interruption claims between the business and the insurance company usually revolve around the amount of the loss, whether the loss was caused by a peril that was covered under the policy, and whether actual damage to the business’ property is required for a loss to be paid by the insurer.
Business interruption insurance claims, like most insurance claims, are heavily dependent upon the interpretation of the applicable insurance policy. As a result, businesses that suffer the same type of loss, from the same type of peril, may have different results with their insurance companies if the wording of the insurance policies are different.
The most likely reasons for the denial of a business interruption claim resulting from the coronavirus pandemic will be that the forced closure from the pandemic is not a covered peril, and/or the business interruption losses required physical damage to the business’ property to be compensable. These types of denials can only be challenged after a thorough review of the applicable insurance policy, the relevant case law, and the facts surrounding the loss.
It is important to remember that businesses can benefit from judicial precedent that requires judges to interpret insurance policies in a manner where provisions providing coverage are construed broadly, and exclusions and conditions are construed narrowly. As well, should the terms of the policy not be sufficiently clear, any ambiguity in the policy will be interpreted in favour of the business.
When faced with the denial of a business interruption claim, and to ensure its legal rights are protected, a business should have its insurance policy reviewed by a lawyer as soon as possible to determine whether the insurance company’s denial of the claim can be legitimately disputed.