Impact of COVID-19 on Traditional Business Income Claims

Businesses, in many sectors of our economy, have been financially impacted by the pandemic and much has been written on the topic of insurance coverages of these COVID-19 related losses.

This is Not One of Those Articles!

In the midst of all things COVID-related, life continues and “unexpected events” occur – commercial and residential properties still catch on fire, suffer broken/frozen pipes and the business operations within these properties are interrupted.

So, when businesses experience a non-COVID-19 related loss, it is important to understand that the claim may be impacted by COVID-19 measures in place locally, regionally, and globally.

Since the measures and restrictions can impact everyone differently across a region or state, it is difficult to argue against the tide of impacted revenue. And while some state insurance departments have asked that COVID-19 be taken out of the equation, that request is in contrast with the insurance contract language and there has only been mixed success at honoring such directives in claims resolutions.

A COVID-19 Silver Lining of New or Increased Opportunities

Let’s focus on businesses experiencing a surge in revenue or opportunities during these unprecedented times.

For example, consider a typical grocery store. In the case of the grocery marketplace, the impact of COVID-19 is undeniable and should inarguably be considered when forecasting the “businesses experience.” In contrast to businesses affected by closures and restrictions, grocery stores have generally remained open and have had significantly increased demand. Many have modified their in-store processes, added curbside pick-up, delivery options, and proven themselves uniquely able to fulfill the increased needs of their community (toilet paper and hand sanitizer not included).

The impacts of COVID-19 have created an increased demand in certain situations for other types of properties – like hotels, care facilities, and even some previously unused spaces – to meet the unique demands of other businesses, including hospitals and colleges/universities.

Real Life Scenarios

Long-term Care Facility Claim

Globe Midwest/Adjusters International recently successfully negotiated a claim wherein a long-term care facility had an opportunity to enter a contract to dedicate a portion of their building to handling COVID-19 cases. The water damage loss suffered at the facility rendered them unable to provide their space and resulted in them forfeiting that potential revenue. But the facts and documented support of this opportunity were sufficient to successfully get coverage to include that loss of revenue.

Hotel Loss

We are currently assisting an insured with a hotel loss where the property was contracted with a nearby college to hold a wing of rooms throughout the academic year to accommodate students who were otherwise unable to be housed on campus due to COVID-19 restrictions. We intend to include that lost opportunity in the forecast in addition to the traditional measurement of lost rooms. It is important to include potential revenue items for consideration in a forecast.

Paycheck Protection Program

Another area of coverage specific to COVID-19 considerations is Paycheck Protection Program (PPP) loan funds when the loss precludes a business from obtaining those funds that would have otherwise been available to them. Understanding how these opportunities fit into coverage and potentially impact the business income measurement is key to formulating an accurate claim for the insured.

The claims referenced here highlight just a few of the many different opportunities to argue in favor of considering COVID-19 impacts during the claims process.

Analyzing the impact, a traditional business income claim, let alone in times of a pandemic, requires an array of expertise and skillsets to properly conduct a detailed look into the business and evaluate the facts and circumstances of a business’ experience against the insurance contract’s terms.

While an insured loss is never good news, in the times of COVID-19, there may still be opportunities for capturing revenue losses that did not exist before COVID-19.

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As the Midwest’s largest and oldest public adjusting firm, Globe Midwest Adjusters International’s core focus is exclusively representing property and business owners, during the insurance claim process, to maximize and expedite our clients’ insurance claim settlement. With offices in Southfield and Grand Rapids, Michigan, Chicago, Illinois, and Appleton, Wisconsin we are experienced with the types of natural disasters that strike the Midwest, the companies that insure here, and how local claims are handled.

Author:

Wendy Biety, CPA, SPPA, is the Senior General Adjuster, Forensic Accountant of Globe Midwest/Adjusters International (GM/AI). Prior to joining GM/AI in 1999, Ms. Biety worked for The Greenspan Company/Adjusters International in Los Angeles and The Ritter Group in Chicago, both public insurance adjusting companies. With over 20 years of specializing in business income and extra expense coverage, Ms. Biety has handled claims throughout a wide range of industries and has negotiated settlements on many multi-million dollar losses. She is a CPA in Illinois and a licensed public adjuster in both Illinois and Michigan. Ms. Biety graduated from University of Michigan with a concentration in accounting.

Ms. Biety has been featured as an expert panelist on Adjusters International’s Property Insurance Roundtable podcast in the episode titled, “Business Income Insurance.”