Texas Border Business
As originally published in Texas Border Business newsprint edition May 2020.
As the coronavirus pandemic rages in New York, more and more businesses are shuttering, both temporarily and permanently. The federal government has been providing relief across multiple aid packages, but for some struggling small-business owners, it hasn’t been enough.
Some small-business owners are turning to their Business Interruption Insurance (BII), all called business income insurance, in their policy for a payout to help keep them afloat. This proved fruitless as many found out that type of insurance doesn’t always cover pandemics.
Businesses attempting to leverage insurance policies to cover pandemic losses are finding out the hard way that they don’t cover COVID-19. Companies are now suing insurers, arguing their policies don’t have pandemic exclusions, while providers say plans weren’t meant to cover the unprecedented pandemic, and forced payments could bankrupt the industry. Experts say it’s “uncharted territory” that will likely lead to big changes in insurance — providers will either innovate new forms of pandemic coverage or rewrite policies to explicitly exclude it.
Companies like Legal Sea Foods, the Boston restaurant chain, are suing their insurers, saying in some cases that their policies don’t have pandemic exclusions and thus should be honored.
“Everyone’s policy is a bit different, but we had negotiated an all-risk policy, and virus and COVID-19 were not excluded from that,” Roger Berkowitz, CEO of Legal Sea Foods, told Axios’ Dan Primack on Wednesday’s Pro Rata podcast.
At least one law firm, Jaszczuk P.C. — based in Chicago, specializing in business insurance recovery litigation — has set up a dedicated helpline for business owners.
Even President Trump weighed in on the topic, saying he “would like to see the insurance companies pay if they need to pay.”
“You have people that have never asked for business-interruption insurance, and they’ve been paying a lot of money for a lot of years for the privilege of having it,” Trump said at a White House briefing last month. “And then when they finally need it, the insurance company says, ‘We’re not going to give it.’ We can’t let that happen.”
Separately, a group of lawmakers wrote to insurance trade group leaders to ask them to urge their membership to cover COVID-19 under business interruption policies.
Between the Lines: Insurance is regulated at the state — not federal — level. “What happens in one state may not be what happens in another state, and underwriting rules can be different company by company,” Erin Ardleigh, founder and president of Dynama Insurance, an independent insurance broker, tells Axios.
Business owners would be wise to contact their insurance company for complete details regarding their own coverage.