SANTA BARBARA, Calif. - Sharon Green is running into a problem she never anticipated during this health crisis. Her business insurance company denied her recent claim for Business Interruption coverage.
It's something that more businesses around the country are facing right now when they really need it. They paid for extra insurance coverage for years just for a moment like this only to receive a denial letter pointing out that they are not covered for damage caused by a pandemic, or anything involving a virus for that matter.
Just as the name implies, Business Interruption Insurance also known as Business Income Insurance, kicks in when a business suffers a loss of revenue from a disaster such as a fire. The insurance money is supposed to help the owners rebuild and get back on their feet. Businesses pay extra for that peace of mind.
Sharon Green was counting on her coverage. She owns Ultimate Sailing, a Santa Barbara based business that focuses on photography and publishing for that sport. All of the events that keep her business going have been cancelled because of COVID-19.
She filed a Business Interruption claim with her insurance company, The Hartford. She said it’s a small claim, but it was denied anyway.
The denial letter explained that her coverage only applied to physical damage to her business. Under exclusions, it doesn’t refer to a pandemic, but it specifically mentions ‘viruses.’
Green's policy does, however, cover ‘civil authority’ actions. In this case the government ordered shutdown.
Green said if her insurance company doesn’t help her, they could be in a lot of trouble.
“We were denied because of the virus clause. Had they paid the policy, we would have been in fabulous shape, we’d be still in business, we’d be doing very, very well and we wouldn’t necessarily have to apply for all of these government assistance loans which are rather tricky for a very small business,” said Green.
The NewsChannel did call The Hartford claim representative who sent Green her denial letter. He referred us to their corporate office which declined to comment for this story. A Hartford spokesperson did refer us to the American Property Casualty Insurance Association.
An APCIA spokesperson sent us a document titled, FACT SHEET: COVID-19 & BUSINESS INTERRUPTION dated April 8,2020. It describes how the insurance industry is in ‘uncharted territory’ with COVID-19.
The fact sheet includes one line that reads: Pandemic outbreaks are uninsured because they are uninsurable.
The Association throws around some pretty big numbers to try and explain that point. One example reads, APCIA now estimates that closure losses just for the small businesses with 100 or fewer employees—regardless of any business interruption coverage—have increased to $255 billion to $431 billion per month.
More local businesses could end up in Green's situation. We spoke with some Santa Barbara restaurant owners who have filed a Business Interruption claim with their insurance company but have not received a response yet.
This topic is attracting more attention in Washington, D.C. Lawmakers are talking about getting involved, President Trump has commented on it and now lawsuits are being filed around the country to force insurance companies to pay on these claims.