Can you file a lawsuit against your insurance company for business losses caused by the coronavirus shutdown?

  • April 29, 2020
  • Blog

A lawsuit was filed against Liberty Mutual seeking business losses caused by COVID-19 closures

Many business owners across the country have had to close their doors due to government orders in response to the coronavirus outbreak. In Pennsylvania and New Jersey, the governors have issued executive orders closing all non-essential businesses. As a result, many people are unable to earn money if their businesses cannot operate remotely.

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Lawsuit filed for business loss caused by coronavirus

Most businesses have an insurance policy with an insurance company. Often these policies will provide coverage for “business interruption” or “business loss” claims if the business is unable to operate. Since the shutdown, several businesses with this type of insurance coverage have made claims against their policies to reimburse them for their losses caused by government shutdowns.

There may be coverage under these policies for business losses caused by the coronavirus outbreak. This will depend on the terms of the insurance policy.

Suit has already been filed against insurance companies for refusing to pay for business losses suffered by its insureds. If you have any questions about these potential claims, contact our firm today for a free consultation.

Liberty Mutual has already been sued for failing to pay business losses caused by the coronavirus outbreak

A lawsuit was recently filed against an insurance company in the Eastern District of Pennsylvania. The suit was brought by a dental practice against its insurance company, Liberty Mutual. The claim states that Liberty Mutual breached its contract by refusing to cover business losses suffered by the dental practice when it was forced to close by order of the government.

The dental practice was forced to close its doors after Governor Tom Wolf of Pennsylvania issued an executive order closing non-essential businesses due to a public health emergency. The practice then made a claim under its business insurance policy with Liberty Mutual. The dental practice said that under its insurance policy, there is coverage for business losses caused by an “Order of Civil Authority.”

The lawsuit alleged that it was forced to close because the governor's executive order was an “Order of Civil Authority.” The practice said its insurance policy should pay for its losses under the policy.  

The dental practice formally made a claim under its policy for its losses suffered by the shutdown.

Liberty Mutual denied the claim

Liberty Mutual promptly denied the claim made by the dental practice. Liberty Mutual said that the policy would only cover business losses if there was physical damage to the dental practice’s building. Liberty Mutual issued a letter denying coverage and argued that because there was no physical damage to the insured’s office there would be no coverage.

The insurance company also refused coverage by saying there was a specific exclusion under the policy. An exclusion is a term in an insurance policy that states certain types of incidents will not be covered by the policy. Here, Liberty Mutual argued there was a “virus and bacteria” exclusion that conveniently allows them to avoid having to pay for the loss of business caused by the shutdown.

The dental practice filed its lawsuit shortly after Liberty Mutual’s denial of the claim.

The lawsuit demands that Liberty Mutual provide business loss coverage

The lawsuit aggressively argues that the business was shut down due to an order by a government, which is something that is specifically covered by the policy. The policy provides coverage for loss of use due to an “Order of Civil Authority.” The dental practice alleges that is exactly the situation here.

The lawsuit further said that under the terms of the policy there does not have to be direct physical damage to the property. The lawsuit says that there is a loss because the government order has “prohibited access” to the dental office. The dental practice's complaint states that being prohibited access qualifies as a physical loss under the policy's terms.

The dental practice further alleges that the exclusions being used by Liberty Mutual to avoid paying the claim are void because they violate Pennsylvania’s public policy. Public policy can sometimes be used to void a section of a contract that is contrary to the public good, breaks the law, or violates a constitutional right.

What kinds of damages are being sought in the lawsuit?

There are several types of damages that would be covered under the Liberty Mutual policy if the dental practice wins. Under the policy, business interruption losses include:

  • Net income – the net profit or loss that would have been earned if the property had not closed
  • Payroll – normal payroll expenses for up to 60 days
  • Employee benefits
  • FICA payments (“Federal Insurance Contributions Act” – these are the combined taxes withheld for federal benefits such as Social Security and Medicare)
  • Union dues
  • Worker’s compensation premiums

There are other potential damages that may be covered by business loss, including rent or other types of expenses.

Needless to say, recovering these types of benefits under the policy would be extremely helpful to a small business that is struggling to make ends meet when it is closed by government order.

Expect more lawsuits against insurance companies for business losses related to the coronavirus outbreak

People have insurance to protect themselves and their businesses. Many people pay premiums for years and never make a claim. People do so just in case they will ever need to bring a claim against their own policy, so that the coverage will be there when they need it. 

The coronavirus outbreak has caused an unprecedented shutdown of many business across the country. As businesses buckle under the financial pressure of being forced to close their businesses, they will look to their business insurance policies for any possible relief.

It is also likely that insurance companies, despite being paid insurance premiums for years, will do what they can to deny claims. When those denials occur, more people will file suit against their insurance companies for failing to pay benefits under their business loss policies.

People will likely have little issue with suing their insurance company if they believe they are being unfairly denied benefits for which they paid premiums.

Contact an attorney if you think you may have a potential claim against your insurance company

It is wise to contact an attorney if you think you may have a potential claim for business losses caused by the coronavirus shutdown. Usually these types of lawsuits are available only after an insurance company denies a claim that is made. Once a claim is made and is wrongly denied, there is an option of filing suit against the insurer.

Mattiacci Law is a civil litigation firm with offices in Pennsylvania and New Jersey. Our firm’s lawyers have years of experience handling civil cases and trials on behalf of clients who have suffered injuries or damages.

Contact our team today for a free consultation.

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