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Business interruption (BI) coverage is an essential form of insurance that is meant to shield businesses from the inherent risks associated with a disruptive event (however that is defined by the policy). For example, if a natural disaster impacts your community’s economy, and as a consequence disrupts the business, then your BI coverage might pay out benefits to cover the associated losses.
Still, there are a number of challenges that policyholders face when attempting to secure a payout under their BI policy. In many cases, policyholders are led to believe that the insurance has broader coverage, when there are actually multiple exclusions (or the existence of policy language meant to be interpreted narrowly). This can be rather confusing for those policyholders who were not expecting a hostile claim process.
As BI insurance coverage can be quite complicated — and unintuitive — it’s worth exploring some of the more commonly-encountered complexities in more detail. This will hopefully give you a deeper appreciation of the issues, and insight into how your BI dispute is likely to develop.
Let’s take a closer look.
Frequently Asked Questions (FAQs)
Q: What is a covered peril, and how does it relate to my BI insurance coverage?
A: In Florida, and elsewhere, the typical BI insurance plan covers losses that occur due to a cessation in normal business operations. The cessation may require a complete shutdown, a partial shutdown, or may even only require a slowdown in business operations — depending on the language of the policy, benefits eligibility can vary quite significantly.
What is a covered peril? Plans often specify the covered perils, and these include natural disasters (i.e., hurricanes, flooding, earthquakes), viral pandemics, and other unexpected events.
Q: Is it possible to qualify for benefits under my BI insurance plan if the disruption impacted my business partners/customers, and not directly my business? The connection to my business operations is indirect, but significant.
A: It depends. Some BI insurance plans allow for indirect disruptions on one’s business (i.e., a natural disaster causes disruptions to your supply chain, preventing you from fulfilling orders and reducing your revenues over a period of time). Whether the disruption qualifies as a covered peril is highly fact-dependent, and the courts will look to determine how close the nexus of causation is between the disruptive event and your business operations. If it is not sufficiently linked, then the court may not find that the policy covers those losses.
Q: I was forced to close a portion of my business due to an unforeseen event but was able to keep part of my business up-and-running. Can I still secure benefits pursuant to my BI insurance plan?
A: Ultimately, it depends on the language of your particular BI insurance plan. Some BI insurance plans include language that allows for benefits when there has been a “partial shutdown” of business operations. When attempting to submit a claim under these plans, you will have to carefully monitor and record the lost revenues from the partial shutdown.
Q: What happens if my business slowed down (but was not “suspended”)? Can I still recover benefits under my BI insurance plan?
A: Though most BI insurance policies require a “complete cessation” in the operation of one’s business activities, in recent years, many newer (more expensive, but more comprehensive) policies have incorporated language that allows for benefits coverage when there has merely been a significant slowdown in business operations.
For example, if a disruptive event has not forced you to shut down your business but has caused a sustained 50 percent reduction in revenue (due to supply chain impacts), then that might be covered under your BI insurance plan.
Q: Some of the BI insurance plan language seems open to interpretation and ambiguous. The insurer insists that their interpretation is correct. What will the Florida courts think?
A: In Florida, ambiguous provisions of insurance contracts are interpreted in favor of the insured policyholder (assuming that such interpretation is reasonable and supported by the evidence). As such, unless the insurer can show that the language at-issue is not actually ambiguous, the court will lean towards your interpretation — absent some other problem preventing such an interpretation.
This puts insurance policyholders — including BI policyholders — in a position of negotiating strength that they can use to their advantage. If there is an ambiguous provision that could be interpreted in your favor, then you and your attorney can take a more aggressive stance towards the insurer and push for a settlement early on, as opposed to the case carrying on until court litigation.
Contact VPM Law for Help
If you are intending to submit a business interruption insurance claim — or have already submitted the claim and have had the application for benefits unreasonably denied by the insurer — then it’s important to contact a qualified attorney for guidance.
Insurance companies often deny otherwise reasonable claims in the hopes that the policyholder will be too busy, too anxious, and too overwhelmed by various other concerns (i.e., restarting their business after a disruptive event) to challenge the denial. In truth, a skillfully crafted challenge can secure the benefits that you’re owed.
Here at Ver Ploeg & Marino, P.A., our attorneys have decades of experience representing policyholders in insurance disputes, including those that center around a business interruption claim. We take great pride in our client-focused approach. Unlike many of our competitors, we engage closely with our clients from beginning-to-end with the goal of gaining a detailed understanding of their case (and thereby providing truly personalized advocacy).
Ready to speak to an experienced attorney at our Miami insurance law firm? Contact us today to request a consultation.Share