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California Business Interruption Insurance Claims and COVID-19

Businesses and individuals will likely feel the social distancing and quarantine consequences of the COVID-19 pandemic for many months or years after restrictions are lifted. Some California businesses might have an opportunity to recover at least a portion of their lost revenues through their commercial insurance policies. Still, that recovery is by no means a certainty.

The Los Angeles business interruption lawyers at Salamati Law stand ready to help California businesses recoup their lost revenue through their business interruption insurance policies. We work to ensure that our clients can recover the full amount of insurance compensation that is owed to them— when those losses are covered by commercial and other insurance policies.

The insurance industry uses complex and often confusing language in its policies. However, we have the knowledge and experience to interpret business interruption insurance and coronavirus issues– and to verify that a business is receiving the full benefits of its commercial insurance policy.

What Has the California Department of Insurance Done to Address Business Interruption Insurance and COVID-19?

On April 14, the State’s insurance commissioner issued a notice to require issuers of commercial insurance policies to conduct full and fair investigations of all business interruption claims caused by the COVID-19 virus.

Among other obligations, California insurers must:

  • comply fully with their contractual, statutory, and regulatory obligations regarding business interruption and event cancellation claims;
  • acknowledge business interruption claims within 15 days of receiving them;
  • provide insured parties with all necessary forms and instructions to file notices of claims and to facilitate investigations;
  • accept or deny claims with clear documentation of the amount within 40 days after receipt of proof of a claim.

Providers of business interruption insurance that fail to comply with these requirements when presented with a claim for coronavirus lost income may be subject to regulatory actions and private lawsuits for bad faith denial of coverage.

What Should a California Business Do to File a Business Interruption Claim for Loss of Income Due to COVID-19?

Every insurance claim hinges on two things: the losses that are covered by the insurance policy, and the specific factual details about the loss. Businesses can take specific steps on both of these to improve the success of their California business interruption insurance claim.

The first step is for the business to read and understand the scope and extent of its coverage. Most policies cover casualty losses to property from fire damage and similar catastrophes. A company might also have coverage for lost income due to business interruptions. Depending on specific policy language, business interruption insurance might replace expenditures for utilities, payroll, taxes, and advertising. It could also include other continuing or extra expenses as well as unrealized net income.

An experienced business interruption lawyer can help an enterprise to understand what is covered under their commercial insurance policies.

The second step for a successful coronavirus business interuption claim is to collect and maintain thorough records of losses and expenses, including impairment of revenues, both before a catastrophic event and during the time of the interruption. Again, an experienced business interruption insurance attorney is a company’s best advocate. We can help provide the data and records that a commercial insurer will require to prove a business interruption loss.

When Should a Business File a COVID-19 Lost Income Claim?

Commercial insurance policies generally require an insured party to provide written notice of loss as soon as they become aware of it. In the current COVID-19 environment, a company might be struggling to maintain its operations, and in the process, they can easily overlook this notice requirement.

Regardless, any insurer in California that denies coverage for loss of income due to COVID-19, where the insured party did not provide immediate notice, is likely to come under increased regulatory scrutiny. Businesses can avoid this problem altogether by taking prompt and affirmative steps to comprehend the full scope of their commercial insurance coverage and to file and prosecute claims for the full amount that they are entitled to receive.

What Can a California Business Do if an Insurer Rejects a Coronavirus Business Continuity Claim?

Commercial insurers owe their clients a duty of good faith and fair dealing concerning all valid claims under an insurance policy. A California insurer that unreasonably or without proper cause deprives a business of the benefits of an insurance policy will be liable to that business for damages– for bad faith denial of coverage.

An insured party can demonstrate an insurance company’s bad faith with proof that the company unreasonably denied a claim, delayed the claims process, terminated the claim, or reimbursed an amount that was less than the actual value.

Insurers might also be liable for bad faith if they make unreasonable demands for proof of an insured party’s losses. The same follows if they compel the party to settle for a lower amount with threats to extend litigation if the insured party does not settle, or fail to investigate a claim as required by policy language and California insurance regulations.

What Damages Can an Insured Business Recover if an Insurer Denies a Valid Claim for COVID-19 Lost Income?

In addition to the total amount of the loss that a business has suffered as a result of COVID-19 business interruptions, including lost revenues, an insurer that denies a valid claim in bad faith may be liable for the insured party’s emotional distress, attorneys’ fees, and potentially punitive damages.

Any business that experiences this should immediately contact an experienced California business interruption insurance lawyer to file a lawsuit to recover the damages that it deserves.

Call the Salamati Law Firm for Assistance with Business Interruption Insurance and COVID-19 Claims

Please see our website or contact the business interruption lawyers at Salamati Law in Los Angeles for assistance in reviewing your insurance policies and in understanding the California business interruption coverage that may be available under those policies. We represent enterprises that realize average gross incomes of $200,000 per month or more.

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