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COVID-19 Business Interruption Claims in California

— January 14, 2022

Business interruption claims can be denied for several valid reasons.

The new surge of COVID-19 outbreaks is undeniable, and has particularly skyrocketed in San Diego recently. Over the last few months in California, there has already been a comeback of mask mandates, school closures, and of course, businesses closing their doors. Even if these business closures are temporary, it can be extremely detrimental for business owners to close, even for a few days. Any restaurant owner knows that margins are tight and every day that you can make a sale is crucial.

Luckily there is a type of insurance designed to help out business owners during a time like this: business interruption insurance. This type of insurance protects a business’ income if an emergency occurs such as a fire, theft, or natural disaster. However, this particular natural disaster – the COVID-19 pandemic – has created a unique situation in which many businesses are making their insurance claims at the same time. Insurance companies are naturally overwhelmed, and many questions about business interruption claims as they relate to COVID are arising.

Back in the spring of 2020, during one of the first surges, California put out a press release requiring insurance companies to investigate all claims fairly. The press release specifically calls for insurance companies to acknowledge all claims within 15 days, and to provide an approval or denial notice within 40 days. This came after public complaints from businesses who had their COVID-19 business interruption claims denied.

Business Interruption Claim Denials

Business interruption claims can be denied for several valid reasons. Some reasons why you might have your claim rightfully denied include failing to pay your monthly premiums or having no evidence that your business suffered a financial loss due to COVID-19.

Upclose shot of the Dow Jones performance in a financial newspaper; image by Markus Spiske,. Via
Upclose shot of the Dow Jones performance in a financial newspaper; image by Markus Spiske,. Via

However, these cases are fairly murky, and one has gone to court. The business, a lodging facility in Northern California, had their business interruption claim denied. The insurance company cited that the policy only covers direct physical damage or losses. The lodging business argued in court that the presence of COVID-19 being physically around their business is what led to the California shelter-in-place mandates, which in turn forced the business to close their doors. Unfortunately, the court ruled that it was the presence of COVID nationwide, not specifically on the premises of the businesses, that caused the order.

In fact, following the 2003 SARS outbreak, many insurance companies added a virus exclusion clause to their policies. Other insurance companies are just referring to their general pollution or contamination exclusion clause when denying claims. Whether or not these types of claims will be approved is going to come down to the specific wording of each individual policy.

How to Get Your Claim Approved in California

While it can be disheartening to see these business interruption claims being denied, and even held up in court, all is not lost. Businesses interruption lawyers in San Diego will continue to fight for their clients and argue that COVID-19 is a qualifying natural disaster. While COVID-19 is not causing physical damage to businesses, it is certainly causing nationwide mandates for businesses to close. If you are a California business owner who has had their claim denied, do not give up hope. Contact a bad faith insurance attorney and let them guide you through this unprecedented process.

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