In our last blog post, we talked about the various court cases looking at business interruption insurance policies and the pandemic, including the Supreme Court’s recent ruling on a test case that aimed to offer some clarity for insurers and policyholders. Though their ruling placed some additional burden on landlords and other policyholders, it cleared up several points of contention and offered a better sense of what is and is not covered by most policies.
However, there will still be some inevitable pushback from insurance companies, so it important to know what to look for when looking over your insurance policy. To close out this series, let’s go over some general tips and strategies going forward.
Important Questions About Your Insurance
When looking to determine if you have insurance coverage and the types of losses that it might cover, ask yourself the following questions:1
- Do you have a business interruption policy?
- If so, is it a standard ISO policy?
- What exclusions are there in your policy?
- What other policies may address losses from the COVID-19 pandemic?
- Has there been any known or suspected coronavirus contamination in your business premises, in other tenants’ spaces, or in the common areas of your building?
- Have the premises upon which you rely to remain in business closed because of COVID-19 contamination?
- Have you been ordered to close your business by local, state, or federal authority?
- Have you incurred expenses in setting up a temporary business location?
- Did you obtain coverage from a broker, and, if so, what representations did the broker make in regard to what the policy would cover?
- Are there any potential errors or omissions claim against your insurance broker?
All of these questions are vital to determining whether or not you are protected from the impacts of COVID-19.2 You will need to be able to answer any of these questions if you intend on receiving any assistance from your insurance policy. Additionally, it is important to have any insurance or financial information in a safe yet easily accessible location. Either way, it is crucial for landlords to understand what insurance they have, what it can provide for them, the uncertainty of such provisions, and what they can do in the event that their insurance does not cover them for COVID-19 losses.
The Importance of Working With Tenants
During this period where many insurers have not paid out, even tenants that have the benefit of coverage have suffered severe financial hardships, which in some cases have led to their insolvency ahead of receiving any insurance payouts. Rather than legal challenges over business interruption coverage, tenants are more often in property disputes and wrapped up in bankruptcy cases.3 It is easy for landlords to end up in conflict with their tenants due to the various effects of the pandemic, but landlords should instead try to work with their tenants to get through these difficult times.
Many landlords and tenants are insured in respect of rent not paid or an inability to pay under policies containing Disease Clauses or Denial of Access Clauses, along with some similar provisions.4 Insurers receiving claims from landlords and tenants with regard to non-payment or inability to pay rent have often raised similar arguments to those raised by the insurers in the test case to justify the non-payment of claims.5 With this is in mind, many of the points made in the Supreme Court’s test case could prove helpful for tenants with business interruption insurance who are facing increased rent.6 Ultimately, landlords should communicate with and try to work with their lenders and tenants, addressing their mutual burdens in the process.7
Planning For The Future:
With all of the confusion and general lack of federal support at the moment, looking into insurance policies remains a wise route for landlords and property managers to take. While it still presents challenges thanks to insurers playing hardball, some real estate professionals have found success through this avenue. Going forward, property managers should review their current insurance policies and explore recent court cases related to their particular policy and its coverage for the pandemic. In the event that a property manager does not have a policy that could cover COVID-19 losses, they should look into adopting one (perhaps business interruption insurance).
And of course, if you need any legal assistance or support, the professionals at CCSK Law, LLC are here to help!
1. Novak, T. S., &; Glasband, E. J. (2020, April 3). Business Interruption Insurance Coverage Issues Arising from the COVID-19 Pandemic. The National Law Review. https://www.natlawreview.com/article/business-interruption-insurance-coverage-issues-arising-covid-19-pandemic.
2. Novak, T. S., &; Glasband, E. J.
3. Egan, J.
4. Mines, L., &; Shah, C. (2020, November 18). COVID 19 – Business Interruption Insurance Test Case – Coronavirus (COVID-19) – United States. Mondaq. https://www.mondaq.com/unitedstates/insurance-claims/1006868/covid-19-business-interruption-insurance-test-case.
5. Mines, L., &; Shah, C.
6. Mines, L., &; Shah, C.
7. Egan, J.