How Does Business Interruption Insurance in Canada Work?

Businesses in Canada have been hit hard by the COVID-19 pandemic. Many businesses have had to reduce the number of customers they can serve or shut down entirely due to government restrictions intended to limit the spread of the novel coronavirus.

Many businesses have insurance for business interruption to protect them in case they suffer a loss in revenue due to circumstances outside of their control. However, some insurance companies are reportedly refusing to pay business interruption insurance Canada claims for losses stemming from the COVID-19 pandemic. If this has happened to you, a lawyer can help fight for the compensation you deserve.

Business Interruption Insurance Canada

Insurance for business interruption is meant to offset losses when a business is unable to operate normally. This type of insurance also protects business owners from financial obligations such as bills and lease payments that must be paid even when the business is closed.

Business interruption insurance may also provide extra expense coverage to pay for relocation expenses if a temporary relocation is necessary.

It is a good idea for businesses big and small to purchase business interruption insurance to help any losses they may experience if covered circumstances prevent them from operating their business as usual. This will ensure that their financial obligations and earnings are covered while the business is closed or its services have been reduced.

How Does Business Interruption Insurance Work?

Business interruption insurance provides coverage for losses incurred due to the covered incident. If a business interruption claim is approved, the insurance company will provide coverage for loss of income, utility expense, fixed expenses and, if necessary, relocation expenses while your building undergoes repairs.

The types of business interruptions that are covered under an insurance policy depend on the specific policy terms. Business interruption coverage may apply to losses incurred due to natural disasters, fire claims, water damage claims, equipment breakdown, theft, security breach, or other types of unexpected events that can prevent a business from operating as usual.

Insurance companies may offer business interruption coverage for fixed costs, supply chain loss, payroll losses, revenue losses, loan payment losses, physical damage, relocation costs, and other incurred expenses.

Business Interruption Insurance Exclusions

It is important to read your policy carefully to determine what types of business interruptions are covered. During the COVID-19 pandemic, a growing number of businesses across a variety of industries have reported their insurance companies are refusing to provide coverage for business interruptions caused by shutdowns and other restrictions during the pandemic.

CBC News has reported on the controversy. The owner of a preschool says that her insurance company denied her business interruption insurance claim because the COVID-19 pandemic is not a “named peril” that is typically covered by insurance. She says she paid to have viruses included in her business interruption coverage, but that part of her policy was reportedly not triggered because no staff members contracted COVID-19.

Collectively, these denied business interruption insurance claims are worth billions of dollars.

How is Business Interruption Insurance Calculated?

To calculate how much business interruption insurance you need, you should set the indemnity period by determining how long it would likely take for you to reestablish your business during a worst-case scenario such as a natural disaster or fire. It is generally recommended to have a minimum indemnity period of 24 months.

Next, calculate the expected revenues and gross profits during the indemnity period, and the anticipated costs of operating your business from a different, temporary location. Talk to your insurance provider to make sure you are purchasing adequate coverage for your business’s specific needs.

Can I Claim Business Interruption for COVID-19 Impacts?

Check your policy terms to find out if you have business interruption insurance that covers events like COVID-19. However, even if the language of the policy seems to cover such losses, many insurance companies are refusing to cover business interruption losses from shutdowns intended to slow the spread of COVID-19.

Let your insurance company know that you intend to file a claim for business interruption losses due to the COVID-19 shutdowns. If the insurer says that your policy does not cover such losses or denies your insurance claim, it might be a good idea to talk to a lawyer to find out what options you have.

My Business Interruption Insurance Claim Was Denied. What Now?

If your business interruption insurance claim was denied, check your policy to find out the procedure for appealing the denial. You may also consider scheduling a case evaluation with a lawyer who can help you determine what steps to take.

Some business owners have already filed class action lawsuits against their insurance companies over their denied business interruption claims during the pandemic.

Given the large number of reports that business interruption insurance claims have been denied during the COVID-19 crisis, it is likely that many other lawsuits and class action lawsuits will be filed. It is possible that you may qualify to be a Class representative or a Class Member of a class action lawsuit Canada against your insurance company.

Submit your information now for a free case review.

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