Insurance companies facing lawsuits after denied Business Interruption claims

Posted at 6:55 AM, Apr 21, 2020
and last updated 2020-04-21 07:17:08-04

Business Interruption Insurance is a safety net some businesses have spent years paying thousands of dollars for, but now when many need it, they're being denied.

Dr. George Sanchez is one of them.

He operates a dental office and recently filed a business interruption insurance claim.

His wife, Claudia Sanchez, who works in the office with him, says their claim was quickly denied.

The insurance adjuster admitted that the claim and the current environment fall into a gray area.

"Basically said well, we're early in the game with the situation. This is a very unusual situation, so we are denying the claim at this time," Claudia said.

The couple pays more than $5,000 every year for the additional coverage.

The couple hired attorney Gil Sanchez to fight the denied claim.

"This couldn't be a more perfect scenario for business owners to get relief from their insurance, right," Sanchez said.

According to Sanchez, under the business interruption policy, it states there has to be physical damage to the business, but that's where he says the fight comes in.

"The fact that the building can no longer be used for your business, then that's an interruption to your business," Sanchez said. "So, therefore, you should be able to make the claim under your business loss insurance."

There are two other factors he said that insurance companies are using to deny claims.

Sanchez said some policies state that if the government affects businesses closing the insurance companies will deny a claim. For example, mandatory stay at home orders.

He said those are few and far between.

Another reason for denial, he said, is the writing used in a policy.

"Before COVID-19, you're going to find that the majority of the commercial, the business loss coverage will not cover for fungi like mold or bacteria, but they never mention virus," Sanchez said.

In a matter of days, he has taken more than 200 calls relating to business interruption insurance and denials.

He plans to file close to half a dozen lawsuits and expects more to come.

"It isn't fair that they're sitting on billions of dollars worth of surplus for these types of claims and when business owners need it the most, they're not going to pay out the coverages," Sanchez said.

Sanchez recommends business owners dust off their insurance policies, precisely business interruption policies, and read through it.

"If you do have it file the claim immediately. You have a duty under your contract to have to inform your insurance policy that you have a potential loss. If you do not do that, you could lose your claim later on down the line," Sanchez said.

As for Claudia and her husband, she said she understands this is the land of the unknown for insurance companies amid a pandemic, but she also wants them to be held accountable.

"I feel that there needs to be some kind of motivating factor for insurance companies to look into this further," Cynthia said. "So, if that means getting the legal system involved because this is a very unusual situation, then I think it is appropriate to do that at this time."