How COVID-19 Turned Business Insurance into a Legal Battleground

The COVID-19 pandemic impacted the US economy in a way few would have thought possible going into the pandemic. At the time of this writing, more than 40 million US citizens have applied for unemployment benefits since the start of the pandemic. Federal Reserve Chair Jerome Powell warned that the unemployment rate could peak at 25%, rivaling Great Depression-era figures.

Unfortunately, small and medium-sized businesses across the US are bearing the brunt of the economic impact. As business owners attempt to rally, a spotlight has been shown on one unforeseen issue: whether businesses can rely on insurers to help them recover from COVID-19.

COVID-19, Insurance, and Small Businesses

Since the beginning of the COVID-19 pandemic, the US government has poured hundreds of billions of dollars into small businesses using the CARES Act and subsequent small business relief legislation.

It's still not enough. The recovery funds are quickly eaten up, and in a first-come-first-served system, many business owners are left frustrated by glitchy web portals and customer service lines that seem to be perpetually "on hold."

Business owners unable to attain government-subsidized loans now look towards insurers to recoup their losses, and it's got both business owners and insurers feeling nervous.

In states across the US, small businesses are already taking steps to litigate against their insurers. However, they face uncertainty. Most insurers only cover "direct physical loss" (such as damage caused by a hurricane), but the specific language of each policy will be key in determining whether COVID-19 related business closures might be covered.

For insurers, the fight against COVID-19 claims for businesses could be significant. Many insurance experts and lawyers speculate that, if businesses can successfully force insurers to pay out claims for COVID-19, the commercial insurance industry will be severely strained.

As a result, insurers are taking seriously any COVID-19 litigation that could be seen as precedent-setting. The stakes are just as high for small business owners who have paid insurance premiums for years and now face financial ruin from the COVID-19 pandemic.

How these cases play out remains to be seen, but expect business insurance to be a key battleground in the COVID-19 crisis before all is said and done.

At McIntyre Tate LLP, our attorneys have more than 150 years of combined experience navigating business and commercial litigation.

To learn more, contact us online or via phone at (401) 351-7700.