COVID-19 Business Interruption Strategy Update 3-25-2020
We provided the original background for the coverage question on March 18 .
We are formulating a general strategy for our clients to pursue in order to obtain business interruption coverage (in one form or another). Each specific case will depend on individual circumstances, of course.
The situation is still extremely fluid, but it is starting to become a little clearer as to possible directions. Here are the factors that will determine strategy:
- Business Interruption insurance — this is carried by businesses to replace lost net income, to pay continuing expenses such as payroll, and to pay extra expenses necessary to try to stay in business. Insurers have said the Coronavirus does not trigger the coverage.
- State legislation — three state have bills in their legislature to invoke emergency powers to have insurers pay under Business Interruption: New Jersey, Ohio and Massachusetts. Pennsylvania is discussing such a position.
- The federal security/stimulus package — As of today at 3:00 pm it appears about to be signed into law. This will address payroll, the largest component of business interruption loss under commercial insurance. To the extent payroll is covered by the relief program, this assumes much of the loss which would have been insured. We wait to see the details and timing of the program.
- Other federal or state relief packages —- these will also factor in to the equation in a similar way.
- Insurance litigation — as mentioned in the March 18 post, litigation will ensue and the number of cases will be record setting. In the normal course, it would take years for this option to bear fruit. However, the enormous pressure being exerted against the industry from all sides may force settlements. Settlements would come much sooner.
The Evolving Outlook
What was completely murky a week ago, is becoming a bit more clear by the day. We will be in a position soon to advise on various routes to recovery. Stand by.
Mar 25, 2020