Why are business owners being denied “business interruption” insurance due to Covid 19?


New Orleans – Food truck owner Eugene Lewis thought it made perfect sense. He would apply for the “business interruption” coverage that’s part of his insurance policy.

Lewis had been required to get that coverage in order to get a bank loan when he opened the food truck. Then, when he had to close for two months because of the government coronavirus shutdown in March and April, he was sure he’d qualify for the coverage.

Then he got the email from State Farm.

Since there was no “accidental direct physical loss” to the food truck, said State Farm, “we are unable to extend loss of income coverage at this time.”

Lewis is one of thousands of business owners nationwide who have been denied the “business interruption” coverage included in their insurance policies.

Local attorney Morris Bart represents dozens of those unhappy business owners across the state.

“It boils down to one key issue,” says Bart: “is ongoing contamination by the virus considered actual physical damage to the property, such that it triggers the insurance policy coverage?”

The “Insurance Information Institute” (Triple-I), a Washington-based organization that promotes the insurance industry, says no.

Triple- I CEO Sean Kevelighan released a statement on April 29, saying that “the threat of a virus is generally not considered physical damage to property.”

But Bart points to cruise ships in which surfaces have been found to be contaminated with coronavirus long after the passengers have gone and the ships have been idled. That’s one type of “damage” that Bart says “can’t be mitigated or controlled.”

Other examples, he says, are cases dealing with methane gas, microscopic asbestos particles, and “noxious gasses” that have been released in various businesses. Bart says that although the damage may not be visible, courts have held that business owners can claim physical damage in those cases and can file for business interruption coverage.

But Kevelighan, of Triple-I, calls the lawsuits against insurance companies “frivolous” and warns that “retroactive business interruption payouts would bankrupt (the industry).”

“Given the unpredictability and unimaginable potential for worldwide losses,” says Kevelighan, “insurance is simply unable to cover a global pandemic.”

Bart says that so many business owners across the nation are fighting their insurance companies, he expects the claims will be consolidated into a “multi-district litigation” in federal court.

In the meantime, Eugene Lewis’ advice to other frustrated business owners is to join the fight.

“Especially if you’ve been paying premiums for years,” says Lewis, “you should fight for it.”


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