Staking Your Insurance Claim

Filing a COVID-19 Business Claim? Good Luck!

Like hundreds of Coral Gables organizations, Actors’ Playhouse at the Miracle Theatre was forced to close its doors in March in response to the COVID-19 pandemic. Now, the nonprofit theater on Miracle Mile – a centerpiece in South Florida’s performing arts world – has filed an insurance claim for its lost revenues.

“We pay for business interruption insurance,” said Barbara Stein, executive director, Actors’ Playhouse. After the initial claim was denied, the nonprofit engaged an attorney to try to secure the insurance benefits, and the case is currently on hold. “These are very difficult times, and there is no telling when we can open our doors again,” added Stein. “Fortunately, we can sustain ourselves financially and have great support from the community.”

In the past six months, the economic shutdown due to the COVID-19 health threat has caused ongoing losses for Coral Gables restaurants, retailers, real estate companies, professional service firms and other types of businesses. However, it appears unlikely their insurance policies will support claims for compensation.

“Policyholders in Coral Gables would face uphill challenges under a typical business property policy that had business interruption coverage,” says attorney Ronald Kammer, partner, Hinshaw & Culbertson LLP in Coral Gables and co-chair of the national firm’s global insurance services practice. “These policies typically require a direct physical loss to the property in order to trigger coverage. Because a virus like COVID-19 does not cause physical damage, those claims would be dismissed by the courts.”

Other types of business policies contain “virus exclusion” wording that would preclude coverage, added Kammer. “If your business has suffered a loss, you should read your insurance policy, consult with your agent and perhaps a lawyer to determine if there might be some coverage,” he said. “If you have been paying for a policy with additional coverage, you might be able to file a business interruption claim for a short period. If you can get even two or three weeks of coverage, that would certainly be better than nothing.”

Coral Gables businesses should also look at their liability policies to identify potential COVID-19 risks, says Holly S. Harvey, a Hinshaw partner who serves as coverage counsel for insurers’ high-risk claims. “We have only seen the tip of the iceberg in regard to COVID insurance claims,” she says. “We expect to see workers’ compensation and employer liability claims in the months ahead. That is already occurring in the cruise lines and hospitality industries.”

Other types of potential lawsuits include shareholder claims against public companies’ directors and officers (D&O) liability policies for failing to prepare for a pandemic or not disclosing the risk, says Harvey. For local businesses, the best defense against COVID-19 liability claims is to follow the law and the science.

Consequently, more than 100 COVID-19 insurance lawsuits have been filed in Florida courts since March, almost all of the insurance cases having to do with business interruption. Multiple class action lawsuits were filed by Miami-based Podhurt Orseck, including the one against SCOR SE, the insurer of the Playhouse.

The lawsuits allege breach of contract for refusing to honor business interruption claims from South Florida business, including those in the Gables. “Your business should take reasonable steps to protect the public and employees,” says Kammer. “If you have deviated from those steps and someone gets sick, you may wind up being responsible for those claims. It’s much better to take a proactive approach to reduce those risks.”