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How COVID-19 is Impacting Business Income Insurance Claims

Teknologize CEO, Byron Martin, sat down virtually with Jon Patterson, Co-Owner at Joe Peterson Insurance to discuss the impact of COVID-19 and Business Income Insurance.

Byron: There’s something you brought up the other day when we were talking around business income loss, and business income. And that’s something that maybe I, because I’m an essential business in IT, and we’ve still been operating, I didn’t think about as much. But I mean what should a business expect as far as income loss and insurance in this type of situation, whether it’s COVID or pandemic related? Can you elaborate on that, or maybe share some thoughts?

Jon: Yeah, so let’s just start with the basics. What is business income? There’s a line of coverage that you can purchase. It’s called Business Income. And what it does is, the intent of it is to cover your net losses and your ongoing expenses. And so, we get into a very confusing, gray area when it comes to this whole business income loss, when it comes to retail businesses that have been forced to shut down. They’re non-essential. And what do you do in that scenario? Is this covered? And so, there’s a couple things when it comes to the business income. There’s exclusions on that type of coverage. One of that being the virus exclusion. So you get into this whole COVID thing. Okay, well the virus is an exclusion. So therefor, there’s no coverage there because of the virus. That’s the reason why the business is shut down.

But then you have this other line of coverage in there, it’s called Civil Authority to where if a state or government entity shuts your business down, then there’s intended to be coverage for that business income. The challenging part with this whole COVID thing is the direct cause of loss to all these businesses was not the virus. The direct cause of loss was actually civil authority forcing you to close your doors and not allow access to your building. Under certain types of retail.

And so, I’ve got business owners saying, “Hey, I’ve got this coverage for civil authority. That’s the reason why I’m shut down. I’d like to make a claim, because the indirect cause of loss was the virus. That wasn’t what directly caused me to shut down.”

And so, so far it’s not looking good. I’ve received, 100% of claims that I’ve submitted, they’ve all been denied because they can’t prove that there is coverage because of the virus. And there isn’t a direct physical loss.

Byron: Well, I mean, that’s nuts. I guess there’s a lot of specifics there that I hadn’t even thought about around the business income and the impact. And what would be covered, what’s not covered. And then, the difference between the civil authority shutting down versus the virus, and then the gray area. So it sounds like even if it did go to some litigation, and lawsuits, and things like that, that if there was a payout, it would probably take a long time to even get. And by that time, I would imagine, those small businesses that really needed it are gonna be long gone already.

Jon: Yes. Yeah, it’s a challenging time. I don’t know how else to say that.


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