Irate business owners are finding out the hard way that their insurance policies don't cover coronavirus — and they're suing, Axios' Jennifer Kingson reports.
Why it matters: No matter how big a premium a company might pay for business interruption insurance, most policies only cover physical damage to a property, not the loss of use of a hotel, restaurant or other building from a stubborn new virus.
Companies 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 the 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.”
Between the lines: Insurance is regulated at the state — not the 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.
In a typical business interruption insurance claim, "a hurricane comes through and destroys your Walmart," said Alexandra Roje, a partner in law firm Lathrop GPM’s insurance recovery practice.
- "Not only is there property damage, but it's also the fact that your business is down for a certain amount of time."
- "We don't have a hurricane, we don't have a tornado or a fire — but we have a virus."
What's next: Look for innovation among insurers to offer various forms of coverage against COVID-19 — at a price — or to specifically write policies that exclude it, to hedge against giant payouts.
The bottom line: Even with the spate of disputed claims from business owners, big insurance companies are taking huge hits to their bottom lines.