Let's be frank, these are uncertain and unprecedented times and your insurance company will likely deny your initial business interruption claim. Should you give up and just go (stay at) home? No. The Coronavirus has had a catastrophic economic impact on businesses of all sizes and it is not clear what will be covered under business interruption insurance policies. Payouts on business policies are often triggered by physical damage. There is mass confusion over how, and if, the COVID-19 pandemic or the resulting government shutdown orders qualify as "physical damage" and this issue is already being litigated across the country.
However courts or legislatures deal with these issues in the coming months or even years, there are certain things you, as business owner, should be doing right now to document and support your business interruption claim.
- Track state and local closure orders
Many insurance policies contain a "civil authority" provisions worded similar to this:
This insurance is extended to apply to the actual loss of Business Income you sustain when access to your premises is specifically prohibited by order of civil authority as the direct result of a covered loss to your property in the immediate area of your premises.
You should keep track of these civil authority orders to support your claim. These orders can be found at https://covid19.colorado.gov/covid-19-in-colorado/public-health-executive-orders-resource and your county or local health department website.
- Identify and track coronavirus-related expenses
Coronavirus-related expenses are expenses that fall outside normal business costs. These can include deep office cleaning, hiring extra building security, purchasing new hardware or software to facilitate work-from-home, purchasing personal protective equipment (PPE) for essential workers, and marketing and advertising expenses relating to product offerings changed as a result of the pandemic. Did you buy fourteen cases of Clorox wipes and industrial-sized hand sanitizer dispensers for every ingress and egress? Did you purchase a metric ton of takeout products when you transitioned your restaurant and what percentage of your profit now goes to Grub Hub and Door Dash? Keep meticulous track of these expenses.
- Catalog business loss and cancelled contracts/orders
Save all correspondence to and from suppliers and vendors. Keep copies of all contracts cancelled due to Covid-19. Perhaps increased supplier costs were passed along to you or you now pay more for a particular product wholesale due to supply shortages. Also, make sure you save all budget and income projections pre-Coronavirus to demonstrate typical business expectations.
- Track employee health and employment status
For your essential workers, make sure you are complying with all state and local health orders. Document the steps taken and equipment utilized to comply with health orders. In addition, keep track of employees' health for tracing purposes. An employees' health status may also impact whether the "physical damage" requirement of business interruption coverage is met. For example, if an employee contracts Covid-19, you may argue that your business closure or additional business expenses relate directly to physical damage on your business property caused by your employee's illness. Importantly, employees who allege they contracted the Coronavirus on-the-job, may make a workers' compensation claim. Your workers' compensation insurance carrier will have questions for you regarding your knowledge of the employee's health and his or her work environment.
If you have laid-off or furloughed workers, make sure to document dates and communications with the employees and maintain well-organized employee files to address unemployment claims.
For now it is uncertain how courts will navigate Coronavirus-related business interruption claims. However, if you have kept your claim well-documented, you are in a better position to support your claim going forward.