Lawsuits have been filed against several insurance companies around the country for denying policy claims the plaintiffs had made to protect against business interruption losses due to COVID-19. According to news reports, these are claims specifically pertaining to the business closures that were mandated in the wake of the coronavirus pandemic.
Denial of Claims
Plaintiffs in these lawsuits include restaurateurs, bakers, and retailers as well as owners of businesses such as certain medical and dental practices. According to complaints and news reports, the businesses purchased special property insurance coverage to specifically protect themselves against business interruptions or disruptions that are beyond their control. These policies also included business income coverage to cover financial losses.
All of these coverage plans included or did not expressly exclude losses caused by viral infections such as COVID-19. But, despite these facts, more and more insurers are refusing to uphold their contractual responsibilities for the losses incurred by businesses that have suffered due to the pandemic, as well as losses caused by state and federal orders to suspend or minimize business operations.
Unfair and Unethical
For many years, businesses across the country have bought costly insurance policies with the goal of safeguarding from losses precisely like the one they are enduring. For many small business owners, adding this type of coverage was a burden, an expense they could have done without. But, they felt a responsibility to pay those premiums in order to protect their businesses and their employees. So, in these truly trying times, for insurers to turn around and tell these business owners that their policies had no value is unethical and simply wrong.
Setting ethics aside, from a legal perspective, what these insurers are doing amounts to bad faith breach of contract. These insurers agreed to protect these business owners when they took their money for these insurance policies. Not honoring a contract is illegal and doing so at a time when people are struggling to survive is unconscionable.