Business Interruption Insurance and Covid-19

To Our Fellow Business Owners,

First and foremost, please accept well-wishes from the entire Harry Levine Insurance family. I’d like to get right to the point: You have questions, and we’re fighting to make sure we have answers. Please see the FAQ below, and know that you can call us anytime with any questions. We’re working remotely, but our ENTIRE team is here for you. We have amended business hours to 9:30am – 4:30pm, Monday through Friday to help our team fulfill their childcare and other personal responsibilities as they work form home. We currently intend to resume our normal operations on Monday, March 30th only if it is safe to do so.

If you are open for business, let us know and we can spread the word via our social media sites! We are here to support you any way that we can. Be sure to follow us on Facebook.

Business FAQ:

Q: Will my business interruption/income coverage cover me for Coronavirus related interruptions?

A: To the best of our knowledge, NO insurance contracts currently cover business interruption for a viral pandemic. However, we expect there will be a plethora of claims adjuster and court opinions on this over the coming months and even years. There is currently a lawsuit being brought by a restaurant in Louisiana over this, and the state government in New Jersey is considering taking some sort of action related to insurance to support affected businesses. Additionally, there is unconfirmed rhetoric that filing a claim and having it denied may have advantages when certain assistance programs become available, if they become available.

Q: Why isn’t something like this generally covered? What do I have insurance for?
A: Insurance is designed to cover sudden and accidental events. Insurance prices are calculated based on being able to use past disasters to predict future costs of a given incident type. That’s why fires, hurricanes, water leaks, etc. are insurable. We know how likely they are to occur and how much they ought to cost to mitigate. However, events like the outbreak of a war or a nuclear explosion are generally excluded, or not insurable, because it is close to impossible to quantify and damage and the cost to fix such wide-scale catastrophic losses. Imagine if a Category 5 hurricane hit all 50 states all at once. In many ways, that is exactly what Coronavirus is doing.

Q: Doesn’t my coverage kick-in for closures ordered by the government?
A: Sometimes. Again, it’s all about the “proximate cause” (what caused the ordered closure) being an insurable event. If policies exclude viral pandemics, then a government ordered closure of businesses is likely still excluded if it is due to a viral pandemic. We are happy to help assist you in filing a claim, but we also want to create realistic expectations. We are NOT saying that you should not file a claim. There is nothing wrong with doing so, and depending on many unknowns it may be advantageous.

Q: Why didn’t you offer me an insurance product to protect against Coronavirus?
A: We, and everyone we’ve consulted, are unaware of the existence of any such product. Remember, this issue is being dealt with already in a Louisiana court and the New Jersey State Legislature because of the absence of coverage.

Q: I am paying for insurance based on sales and payrolls that are now not going to be anywhere near accurate. What can I do?
A: Our advice at the moment is not to act too quickly or too slowly. We advise waiting until around April 1, 2020 to reevaluate the situation. We anticipate having no issue in changing your sales projections and payroll projections as necessary so that you’re only paying for the insurance you’re using. Let’s say you had a revenue of $1,000,000 in 2019, and you originally expected to have the same in 2020. Now, let’s assume your business is down by 20% for March, April, and May. We can simply change your sales projection (and thus your insurance price) to reflect the new number – $800,000 – that the three month slow-down would cause. We also advise staying in touch with us monthly through the summer to make sure your numbers aren’t over- or understated. Again, we’re here to help you file a Business Income/Interruption claim if you desire to do so.

The Small Business Administration (SBA) provides low-interest disaster loans to help businesses recover from declared disasters. You can learn more at https://disasterloan.sba.gov/ela/.

We are all in this together. It is through perseverance, camaraderie, and our ability to work together that we’ll be looking back on surmounting this incredible world event in a few months with a somber sense of accomplishment. There will be hardship, but may this challenge bring out the best in us all.

Stay safe. Stay healthy.

Jason Levine, MS, CPCU
Vice President
Harry Levine Insurance
407-855-1000