Why Was Your Pandemic Business Interruption Insurance Denied?

While hundreds of thousands of businesses in Canada have been forced to shut their doors amid COVID-19 restrictions, many felt comforted knowing they had business interruption insurance coverage. However, to many business owners’ dismay, insurance companies have been denying business interruption coverage resulting in a multitude of class action lawsuits.

Canadian business owners have the right to understand their business interruption insurance coverage and what they’re entitled to amid the coronavirus pandemic. If you have been denied for business interruption insurance, a lawyer can help you fight for the compensation you deserve.

Why is Business Interruption Insurance Coverage Necessary?

Business owners rely on business interruption insurance in Canada in case something goes wrong and they are in danger of losing revenues. 

Many business owners feel peace of mind having business interruption insurance because it can be their lifeline for instances of property damage, floods or health crises. 

Business interruption insurance covers a premise in the event of an incident that forces buildings to close. Sometimes, if a neighbouring premise suffered a fire or flood, and damages affected an insured business in close proximity, it can claim coverage. Closures are usually due to safety hazards of some sort, but the COVID-19 pandemic brought a wave of business interruption claims after forced shutdowns to stop the spread of the coronavirus were enforced. 

Scads of businesses have received “blanket denials” from their business interruption insurers. 

Almost every sector has felt the pressure of the COVID-19 pandemic, and businesses have been forced to either rely on their business interruption insurance coverage or shut their doors forever. Unfortunately, a slew of Canadian businesses have not been able to rely on their insurance companies during the pandemic.

What Are The Risks of Business Interruption?

Nearly all industries hold business interruption risks, because like we’ve seen, anything can happen. Business interruption risks typically relate to natural disasters like property destruction, fires or floods. Most policies ask insured businesses to show proof of “direct physical loss or damage to their premises.”

But, during the pandemic, it has been difficult to prove “direct physical loss or damage” to a business and because of this, claim denials have been common.

Some businesses, like dental offices or other health facilities, have additional business interruption coverage that can protect them in an outbreak of infectious disease. These businesses have paid higher premiums to have this kind of coverage, but even so, many Canadian business owners still faced denied claims.

Other businesses like retailers and restaurants might not have foreseen pandemic business interruption risks, so they may not have had a clause in their policy that expressly covers outbreaks of infectious diseases, but nonetheless, have endured pandemic business interruption and hoped to be covered for losses.

Are There Exclusions in My Insurance Policy?

Many insurance policies contain business interruption exclusions, but there have been many grey areas in Canada during the pandemic. 

While there may be no “physical property damage” business interruption, the coronavirus lockdowns have severely affected businesses’ revenue.

Many times, business interruption policies are open to vast interpretations because the wording is vague. Insurance companies may take advantage of this, especially during the pandemic. Some policies might not exclude infectious diseases, but they don’t say they include “coronavirus” specifically. 

Lawyers have argued that unless a policy specifically states a pandemic/contagious disease outbreak exclusion, insurers should be paying out for coronavirus business interruption insurance. And if there is a pandemic clause, the infectious/contagious outbreak or disease should also cover coronavirus, but insurance companies can see it differently. With so many class action lawsuits filed over denied insurance claims, it will ultimately come down to the courts’ decision. Retaining a lawyer or joining a class action lawsuit can help you get the compensation you deserve if your business interruption claim was unfairly denied.  

Is The Coronavirus Outbreak Considered a Pandemic Business Interruption?

With so many business interruption insurance denials you might be wondering why insurers aren’t paying out, especially in “all risk” policies that state infectious diseases are covered. 

Disease clauses provide business interruption coverage when there is an infectious disease near an insured business. Even policies with pandemic business interruption clauses have been denied during the coronavirus crisis, though. 

Then, there are Prevention of Access clauses that claim to provide business interruption insurance when local or national governments prevent access to businesses. Depending on the policy, the scope of coverage for Prevention of Access is limited or the wording can be vague.

Whether pandemic business interruption insurance claims will be covered is unknown because there has never been a precedent set for this type of global outbreak. During the pandemic, businesses have had to rely on business continuity and business interruption insurance, so there have been challenging balance acts, and getting denied for insurance coverage only complicates things.

There are debates over whether the pandemic is a covered risk or not, and the uncertainties of business interruption denials are prompting businesses to take legal action. 

If I Was Denied Business Interruption Coverage, Can I Seek Legal Action?

Yes, and many business owners have begun class action lawsuits against insurance companies over denied claims. The unresolved nature of the coronavirus pandemic and how it has hurt businesses has sparked a flurry of lawsuits. Legal disputes in virtually every industry have been brought to courts in Canada, the United States, and countries around the world.

The coronavirus pandemic has hit businesses in Canada hard. Businesses have turned to their business interruption insurance coverage for assistance only to be denied. In confusion and anger, knowing they have paid premiums for years, lawsuits have been almost inevitable. 

Whether or not pandemic business insurance coverage is going to help businesses right now is the source of theoretical debates over broad policy language and the nuances of contract wording. If insurers have sent a denial letter after your business has suffered clear losses from being forced to close during the pandemic, you should contact a lawyer for advice. A lawyer can help you understand your insurance policy and take legal action if necessary. 

There are many lawyers all across Canada who can help you navigate your business interruption insurance claim. If you are a business owner in British Columbia and your insurance company denied your business interruption claim, submit your information below and a lawyer will review your case. 

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