Words Matter - COVID and Business Income Claims

Previously, we looked at the players involved, the nuance of a pollution exclusion, and in this post we will look at the questionnaire that has accompanied communications from insurance companies.  Before we get into the substance of this post, indulge me for one moment, to touch on an important topic that is connected.  The duty to cooperate.  Your insurance policy requires you to cooperate with the insurance company and their investigation into the claim.  Whether it is in the general conditions section or the coverage form itself the policy will clearly state “Cooperate with us in the investigation or settlement of the claim.” The easiest way to not cooperate is to fail to respond to letters, questions, or provide documents when requested.  Please cooperate to the best of your ability, even if it is to just ask for more time to respond.    

COVID shutdowns started around mid-March 2020 for most of the country and if you made a claim you probably received a coverage response by now.  Maybe it has been sitting on your desk out of your mind or maybe it’s the thing that has been keeping you up at night.  In either case, you need to respond.  I can tell you that you are not alone, but let’s rip this band-aid off.  Here are some hypothetical questions insurance companies may want you to answer, and one way to address these questions.

DISCLAIMER:  This example will feel real, but it is completely hypothetical.  The views and opinions expressed are not universally applicable and are meant for educational purposes only.  I reserve the right to change, modify, or reverse any views or opinions expressed.

Here are some possible questions:

Are you claiming loss of business income at your covered premises due to direct physical damage or loss of property caused by COVID-19?

Interestingly, this question changes the order of the wording of the insuring agreement.  To have the question phrasing match the insurance policy it should read … due to direct physical loss of or damage to property….  It seems like the drafter for this question wanted to reposition the readers comprehension of the word “of”.  If I were to ask you, “Are you claiming loss of business income at your covered premises due to directly physical loss of your premises due to COVID-19, how would you answer?  It could be reasonable to interpret the question in this fashion as the rephased question speaks more directly to the coverage terms under the policy, and it may feel easier to understand. 

Did you reduce and/or suspend your business operations as a result of an order of a civil authority resulting from damage to a nearby premises?

Civil Authority and civil authority mean two different things.  In an insurance policy Civil Authority is an additional coverage and it has meaning, and context provided by the policy. It’s not clear to me what the author of the question is looking to understand.  The rest of the question, asking about damage to a nearby premises infers that they are looking to explore Civil Authority coverage and not civil authority that you may conventionally understand.  Several options exist in responding, 1) seek clarity what they are asking. 2) take your best guess. 3) at is face value, answer honestly.  Telling an insurance company that you do not know if a neighbor has been shut down from damage nearby is an acceptable answer when it is the truth. 

Are you claiming direct physical damage or loss to any covered real property (i.e., building) or personal property (i.e., property located in the building) due to COVID-19?

So here we see the same tactic of changing the word order of the insuring agreement as well as a complete omission of the word “of.” As we saw above, “of” is a powerful word and it changes the meaning of the question.  What if this question said, “Are you claiming direct physical loss of covered property due to COVID-19?” I am often reminded, in these instances, that humans wrote these questions.  Human nature can cause someone to want to conceal things they view as weaknesses or subconsciously they shift wording to strengthen the side they are advocating on.  Digressing, the issue of direct physical loss of covered property can speak to the issue of function, use, merchantability.  The nature of the narrative can shift depending on how the potential for the presence of COVID to impact your business.    

Do you believe Covered Property at the Insured Location was contaminated by the SARS-CoV-2 virus (“coronavirus”)?

This one is interesting because it’s not asking about evidence or fact.  I am not sure why this insurance company cares what you believe.  Do you believe in Santa? Do you believe in unicorns?  Do you believe in aliens? I am curious to know what the relevance is of your belief.  Honestly answering this question to the extent of your belief would be appropriate.  It’s hard to say though, generically, if the presence or lack of presence of COVID on your premises would help or hurt you.  The reason it depends goes back to an issue discussed in a prior blog post, real life is complicated, insurance contacts are complicated.  One thing I know for certain, your belief will not change the facts.  A belief does not change the evidence.  Don’t be shy to share your honest belief, just be sure to mention that it is your belief

Please provide a brief discussion of how your business has been affected by the coronavirus, including what facts prompted you file a claim under the Policy?

Just a few things, grammatically I think the question should ask how your business has been effected by the coronavirus.  An affect is an action and must occur before you have a result aka the effect.  The rest of the question seems to care about the facts that motivated you to file a claim.  Nothing about this question seems to get into whether you have a covered loss. The highest level of inquiry is whether or not you have a covered loss.  My guess is that what facts prompted you to file a claim is that your business was closed (effect), income stopped (effect), but the bills kept coming (effect).  You probably bought insurance with a reasonable expectation, should your business suffer a loss through no fault of your own, that coverage should exist.  The answers here will vary because despite some common themes, the effect of COVID on your business is going to be your story.  The affect seems rather swift that out of an abundance of caution, in an effort to preserve human life, “essentially social” businesses were deem too risky to remain open.     

Was access to the Insured Location prohibited by an order or action of a civil authority?

Of the bunch, this one seems to be the most straight forward and objective.  Chances are you can find city, county, state, or federal orders that impacted the operations of your business.  At face value this question does not appear to be back loading Civil Authority but is simply trying to address conventionally understood civil authority. 

Words matter. As we saw above in these hypothetical questions that insurance companies could be asking, the words used should direct the response given.  Answer the question that is asked of you, nothing more, nothing less, but read the question carefully!  If you do not understand the question, ask them to clarify.  If you think you know the answer, write out the answer and then sleep on it.  Read it again the next day and see if you still like the response.  Ask a friend to read it and explain their understanding of the question and your answer. 

If you are looking for a convenient way to stay informed, then I welcome you to connect with me on Linkedin. I follow a lot of coverage attorneys on both sides (Insurance Coverage Litigation is my passion). I’ve seen some really cool arguments on both sides of the COVID business income issue and often like, tag, or share this content.


David R. Princeton - CPCU, AMIM, AIC, CSRP

Principal Consultant

Advocate Claim Service, LLC.

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