Written by Taher Kameli & Julie Seong
The long-term effects of the Coronavirus pandemic continue to reveal themselves in various ways. A United States Chamber of Commerce report shows that more than eight in ten small businesses have had to plan for changes made in response to the pandemic. The June report also shows that business owners’ negative sentiments toward the U.S. economy are slowly changing. However, the financial hit the majority of businesses took since March remains a reality. Although there have been multiple legislative proposals, bills, acts, and grants made available to both individuals and businesses in the United States since the outbreak, there have also been disappointments in what some thought would provide alternative assistance.
Several of the previous acts that students, parents, and business owners depended on over the past few months have expired or are due to expire shortly. The Payroll Protection Program, for instance, is a loan program that aided small businesses by granting loans to them when they first encountered the repercussions of the pandemic. However, the assistance from that program for any new loans expired on August 8, 2020. Some businesses are still in need of financial assistance to get back on their feet and find a way to stay in business after other programs expire. The original CARES Act also aided many people, including renters from evictions. Now, it seems that there are disagreements among the extensions proposed in the Democratic and Republican proposals. It is unclear exactly what the future aid for some will look like.
According to the New York Times, business owners admittedly presumed that the business interruption insurance they had paid for prior to the COVID-19 outbreak would cover some losses when a disaster halted their operations. Business interruption insurance typically covers and replaces part of the company’s lost revenue when this happens. Many businesses had paid thousands of dollars annually for the coverage, but found that the insurers will not pay for the losses.
A New York Times article explained that the economic damage from the 2003 Severe Acute Respiratory Syndrome (SARS) outbreak in Asia inspired many insurance companies to specify exclusions for interruptions resulting from viral epidemics. For example, one business owner’s policy states that they are not responsible for loss that results from any virus, bacterium, illness, or disease. However, it does not appear that most business owners were aware of these exclusions. Various policies specified that the business interruptions have to be “direct physical damage” for the claim to be paid out, and other specific language restricts the compensation.
The lack of protection devastated business owners in what they consider to be the most harmful business interruption they have and may ever experience. Small businesses, high-profile restaurant owners, and even the Houston Rockets of the National Basketball Association have decided to sue the insurance companies in hopes of receiving some of the coverage they had expected to get. They argue that, simply put, the claims should be paid when businesses are interrupted. Now, there is debate about the interpretation of phrases in the insurance policies such as “direct physical damage.”
Over 400 business interruption lawsuits have already been filed, and it seems that there may be more filed as businesses try to recover from the impact of COVID-19. Currently, it does not appear that plaintiffs have had much success in their cases. Several programs and alternatives have been proposed as solutions to these discrepancies – some with federal involvement and some suggesting policies grouped by the size of each business. Litigation is likely to continue in this area.
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Written by Taher Kameli & Julie Seong
The long-term effects of the Coronavirus pandemic continue to reveal themselves in various ways. A United States Chamber of Commerce report shows that more than eight in ten small businesses have had to plan for changes made in response to the pandemic. The June report also shows that business owners’ negative sentiments toward the U.S. economy are slowly changing. However, the financial hit the majority of businesses took since March remains a reality. Although there have been multiple legislative proposals, bills, acts, and grants made available to both individuals and businesses in the United States since the outbreak, there have also been disappointments in what some thought would provide alternative assistance.
Several of the previous acts that students, parents, and business owners depended on over the past few months have expired or are due to expire shortly. The Payroll Protection Program, for instance, is a loan program that aided small businesses by granting loans to them when they first encountered the repercussions of the pandemic. However, the assistance from that program for any new loans expired on August 8, 2020. Some businesses are still in need of financial assistance to get back on their feet and find a way to stay in business after other programs expire. The original CARES Act also aided many people, including renters from evictions. Now, it seems that there are disagreements among the extensions proposed in the Democratic and Republican proposals. It is unclear exactly what the future aid for some will look like.
According to the New York Times, business owners admittedly presumed that the business interruption insurance they had paid for prior to the COVID-19 outbreak would cover some losses when a disaster halted their operations. Business interruption insurance typically covers and replaces part of the company’s lost revenue when this happens. Many businesses had paid thousands of dollars annually for the coverage, but found that the insurers will not pay for the losses.
A New York Times article explained that the economic damage from the 2003 Severe Acute Respiratory Syndrome (SARS) outbreak in Asia inspired many insurance companies to specify exclusions for interruptions resulting from viral epidemics. For example, one business owner’s policy states that they are not responsible for loss that results from any virus, bacterium, illness, or disease. However, it does not appear that most business owners were aware of these exclusions. Various policies specified that the business interruptions have to be “direct physical damage” for the claim to be paid out, and other specific language restricts the compensation.
The lack of protection devastated business owners in what they consider to be the most harmful business interruption they have and may ever experience. Small businesses, high-profile restaurant owners, and even the Houston Rockets of the National Basketball Association have decided to sue the insurance companies in hopes of receiving some of the coverage they had expected to get. They argue that, simply put, the claims should be paid when businesses are interrupted. Now, there is debate about the interpretation of phrases in the insurance policies such as “direct physical damage.”
Over 400 business interruption lawsuits have already been filed, and it seems that there may be more filed as businesses try to recover from the impact of COVID-19. Currently, it does not appear that plaintiffs have had much success in their cases. Several programs and alternatives have been proposed as solutions to these discrepancies – some with federal involvement and some suggesting policies grouped by the size of each business. Litigation is likely to continue in this area.
