The majority of businesses in the United States buy insurance coverage to have peace of mind. They don’t do it, expecting the worst to happen. However, even though the businesses have trust in insurers, insurers have become adversaries by denying insurance claims. With the shutdown orders that have been issued after the Covid-19 outbreak, restaurants, event planners, tech companies, and other businesses are taking huge losses. So far, the businesses that have filed claims for damages caused during the Covid-19 pandemic have been denied coverage. At Stop Insurance Denial, we help policyholders in the U.S. force insurance companies to keep their promise and terms of the policy.
Why Doesn’t the Business Shutdown Order by the Government Trigger Coverage by Insurers?
The government order to have all businesses close was well-intended to reduce the spread of the coronavirus. Still, companies that have been affected by the shutdown order are the worst hit. They are all looking for fiscal support by turning to their policy carriers. An insurance firm like Breakwater Strategic Insurance Solutions is among the companies that have received many claims from their policyholders. The company has so far received 125 applications from its clients seeking coverage for losses they are incurring after closure. But all these claims have been denied. McGlinn, who owns Breakwater insurance agency together with her partner Ryan says she is filing these claims as fast as she can. The reason being most of her clients are eateries and bars, occasion organizers, and other local entities that have been worst hit by the pandemic. Unfortunately, all the responses she has filed to her clients are to deny coverage.
In the face of the pandemic financially destroying locally and nationwide, businesses realize that their protection policies, which consist of coverage against business interruption, do not apply during this time of the coronavirus pandemic.
In most of these denied claims, insurers claim that the policies held by businesses do not make available coverage for losses resulting from a virus. The idea is borrowed from what happened in the 2000s after the epidemic of SARS. The explanation from insurance adjusters on the reason for denying business coverage is the one that looks nuanced. They claim the closure of businesses because the coronavirus is not connected to, nor does it cause property damage like the one created by fire or hurricanes.
One of the companies that have been angered by the response they received from their insurer is Pacific Events Production. The firm is owned by Joanne Mera, who is an events planner. It specializes in event organizing for corporates, non-profit organizations, and local businesses. Since the outbreak of the pandemic, the company has been worst affected. Mera, who owns the firm, claims the losses she has incurred in the short period amount to 200,000 dollars. The amount covers things like rent, utilities, leases, and payroll.
When Mera claimed coverage for these losses, she figured that her insurance policy would easily offer coverage for the $200,000. But to her surprise, her insurance company sent a denial letter.
In the letter, the insurer cites the orders given by the government to have specific businesses shut down was not caused by physical loss, property loss and didn’t bar them from accessing the business premises in question. The insurer further advises that the reason for the shutdown order was to edge the blowout of coronavirus. For this reason, they denied coverage on the basis that the policy precisely rejects losses stemming from contamination or viruses. Denial of coverage by the insurer came as a surprise to Mera, who counted on her insurer at the time she needed help most.
Just as Mera has been paying her insurance premiums to the company for thirty years, she expected the insurer to be legally responsible by acting in good faith and taking the right actions. Mera wonders for heaven’s sake when her policy and policies of other businesses will help them if not at this time. She expresses her feelings after the denial letter as those of an individual in a boat during a tidal wave, pleading that when her boat tips because it is no longer a matter of if it capsizes, she will hold onto the little left in the rowboat to survive.
Fears of Insolvency in the Industry
In their defense for denying policyholders coverage, the insurance trade group has pointed out in columns, and printed communications addressed to lawmakers that if insurers payout claims to entities for coronavirus-linked losses, they will end up bankrupt. Lawmakers have been advocating for policy changes to accommodate coronavirus related losses after the outcry by business, but insurers have claimed the move would result in insolvency.
According to the loss estimations by the American Property Casualty Insurance group, which is a leading nationwide trade group for insurance companies, small entities with a maximum of 100 employees will be facing an astounding 383 billion dollars per month. The association also estimates the over-all excess by insurers in the U.S. at 800 billion dollars.
The CEO of the association David Sampson notes that if insurers were to provide coverage for these losses, it would result in bankruptcy for their policyholders, especially this period when the country is entering the spring tempest scheme. It would be an unsustainable situation to order ex post facto coverage because many people are insured against property damage by hurricanes. During the season, losses are to be expected. He says that insurers will be facing insolvency if they deliver coverage for COVID-19 losses, hurricane season, and then the wildfires that follow after the hurricane season.
Sampson also says that only one-third of businesses have business interruption policies. This is a shudder to Breakwater owner McGlinn because 95% of her customers who hold property insurance have interruption policy. Based on her claim, it is challenging to enumerate the costs of additional coverage as it contrasts widely, contingent on the business premise occupied, the volume of sales, and the nature of business operations.
McGlinn’s insurance firm has an additional two dozen claims in the waiting and continues receiving requests to register new complaints daily. For her, it is stressful to deny coverage to businesses and people she has been in business with for years. The reason being with coronavirus related losses, there is no road map for estimating the limit of coverage as they do with fire or accident claims. She notes that most of her clients who are filing claims for coverage were very healthy entities not a while back, but today they are firing staff and trying to come up with ways to cover overhead costs.
McGlinn has, however, noted that her company had figured a short-term reprieve plan with the clients of her insurance agency. Also, she points out that other insurers are also doing the same by working out a payment plan for clients. On top of this, insurance firms are also making some changes to the policies to ease the premiums. One way they are lessening premiums is by eliminating protection for liquor obligation and assault for bars.
The trade group, to ease the burden on businesses, has waived late charges and put on hold personal auto omissions for restaurant workers who want to shift to meal distribution and want to rely on their own car insurance plan as coverage. The move to suspend personal auto exclusions is aimed at enabling restaurants that are closed to customers to continue doing business through meal deliveries.
Robert Gordon, a researcher in charge of inquiry and policy for property insurance groups, notes that there is a good reason why the insurance sector isn’t willing to afford coverage for the pandemic. He asserts that the basis of insurance is to create a pool of funds to compensate the few who are hit by catastrophic losses. But with the COVID-19 pandemic, every business is fighting with disastrous losses at once, making it impossible to provide coverage to all. He compared doing so with the insurance sector covering for all car accidents that occur at once.
Taking the Matter to Court
The discussion on insurance companies denying policyholders coverage will not be subdued quickly. The matter has already moved to court with many restaurant owners in Chicago, Napa Valley, and New Orleans registering lawsuits.
Recently, John Houghtaling registered a claim for Thomas Keller in New Orleans. Thomas is a much-admired restaurateur of French Laundry fame, which is among the entities the government ordered to shut down. Houghtaling’s lawsuit seeks to obtain a verdict stating that if a government forces business to shut down due to the unsafe condition of a property in an area, the move should prompt coverage.
John registered the suit after hearing Thomas Keller’s insurer, The Hartford, denied companies in California business intermission coverage. He is opposed to the industry’s viewpoint that the closure order on businesses by the government has zero reasons to do with worries about property damages to businesses. To support his argument, he refers to the rule that was issued in San Francisco. According to the order, the emergency statement was delivered because the virus tended to ascribe to exteriors for a long time causing physical property loss or damages.
John Houghtaling points out that insurance companies are afraid to speak on the threats the coronavirus pandemic subjects to property. By doing so, they will be forced to pay all their policyholders for the losses made in the duration of shut down. And to prevent that, businesses are being denied insurance coverage on the basis that if all companies are covered against losses during shut down, insurers will become insolvent. The policy carrier industry claims that it only has 822 billion dollars in cash for restaurants, and by paying out the claims, they would go bankrupt. But John Houghtaling thinks the statement by the trade group is a joke because if they continue holding the cash and the economy flops, it will amount to one trillion dollars just for restaurants.
David Sampson, the CEO of the national insurer's trade group while responding to the allegations, accused John Houghtaling and other lawyers who are going after policy carriers of developing strategies like working with local authorities, building their cases. He claims they are doing so by laying a foundation in their guidelines to increase the coverage that isn’t provided under the typical business disruption coverage.
Although the insurance trade is unperturbed on their viewpoint on coverage, four primary insurance groups in a letter addressed to the California congressional delegation encourage COVID-19 Recovery Fund. The fund will be funded by the federal administration and could be among the successive incentive packages to help businesses in times of catastrophic losses. The Recovery Fund will be under the authority of a national administrator with the capacity to agree with interested companies to administer the fund and facilitate distribution of the national funds to the businesses that affected by a catastrophic emergency in future
But despite the funds being set aside, a cafe and bar owner in San Diego by the name Darren Moore will not benefit from it because he has already laid off 80 workers who helped her run the businesses. Moore, who owns La Jolla restaurants, Shore Rider, and Cordova bar, is among the people who have registered a claim over Breakwater insurance. He claims the insurer has denied him business disruption coverage without a proper explanation. His Shore Rider and Cove House have shifted into a terminus for carryout food and household provision.
All Moore hopes for is the intervention of the federal government and support for Thomas Keller’s lawsuit. He points out that he is ready to use all his capitals to sue Breakwater insurance. If not, he will join a class action against the company or take any legal move that comes his way. However, for the moment, he chooses to keep calm, grin, and move on as he tries to return to business and hire back the employees he has laid off.
Pacific Events owner Mera is another person saying that she is willing to join a class action litigation. She is still whirling from the annulment of a big biotech convention set for June but has since been canceled. Her firm was set to produce two events that would quarter thousands of visitors, but the opportunity is long gone.
She is among the businesses that are fighting for the insurance issue because she has been forced to fire over 100 workers. She wonders when the federal government will intervene on the matter because it is a natural disaster. For the moment, her energy is focused on keeping her business afloat and not to go through million-page insurance paperwork. However, she has requested her insurer to reopen the claim that had been denied formally.
Appeals for Denied Insurance During Covid-19 Pandemic
Every day, millions of businesses turn to their insurers for coverage upon property damages or losses. Regrettably, it is common for insurers to deny these claims. The majority of insurers are mainly concerned about their bottom line, which is making a profit. It is for this reason that they are always eager to accept premiums from policyholders but avoid paying claims. They will come up with various excuses for denying claims like fear of insolvency when they pay for claims from policyholders who are making Covid-19 related losses and possess business intermission coverage.
Take note that insurance companies have a responsibility to give an explanation or reasons for denying a claim or providing coverage. Additionally, they should make available information to businesses that they have denied coverage on how to appeal the denial. But in cases where they deny you coverage unjustly, they may not give reasons for their actions. Small businesses are greatly affected by this because some have no means or resources to fight large insurance policy carriers.
Denying businesses coverage at such a time when they need it most threatens their overall financial security. Many workers are losing jobs as society lacks the essential services provided by the businesses that close down due to losses from the pandemic. Therefore, when an insurer denies you coverage at this challenging time, and you have a business interruption policy, it should not be the end of the road for you. You cannot allow what you have been building for years to go to waste in a short period. There is a possibility of reopening the claim and reviewing it or appealing the decision.
The rate of insurers turning down appeals is also high, which means you may need assistance from an insurance denial appeals lawyer. When filing a petition, you must prove that you are entitled to the coverage. This is the hardest part of the appeal, and it’s where your insurance denial lawyer comes in handy.
Find an Insurance Denial Appeals Attorney Near Me
If you are a business owner or a policyholder and your business has been denied insurance coverage during the Covid-19 pandemic, we invite you to contact Stop Insurance Denial at 310-695-5241. Our lawyers will help you understand how to fight insurers who unjustly deny your claim.