Small Business Owners: Don’t Give Up On Business Interruption Coverage

Small Business Owners: Don’t Give Up On Business Interruption Coverage

If your business has been crippled by the COVID-19 pandemic, don’t assume you cannot succeed in obtaining business interruption coverage from your insurer. Many insurance companies have denied business interruption claims arising from the pandemic for a variety of reasons that may not hold up under scrutiny.

Since the onset of the pandemic, companies have filed claims for lost business income typically because of either [1] the suspension of business operations due to COVID-19 exposure within the business premises or [2] the halting of operations due to a government shutdown. In response, insurers have repeatedly denied such claims on the basis that their policy’s business interruption coverage requires “physical damage” to the property, and the presence of a virus does not, in their view, physically alter a business’s premises. Although insurance companies have recycled this argument within COVID-related litigation across the country, it is not supported by the law of many jurisdictions.

In the Northern District of Ohio, two federal judges reached different conclusions as to whether COVID-19 shutdowns gave rise to insurance coverage for lost business income. Judge Pamela Barker concluded in Santo’s Italian Café, LLC v. Acuity Ins. Co. (Dec. 20, 2020) that a business was required to demonstrate its premises were physically altered in some fashion before triggering the policy’s business interruption coverage. The court rejected the plaintiff’s arguments that [1] coverage under similar policies have been found valid even in the absence of physical damage to property, and [2] losing the ability to use a business premises due to a virus or government shutdown amounts to physical loss of the property.

A few weeks after Judge Barker’s decision, Judge Polster agreed with the arguments presented by the Santo’splaintiff. In Henderson Road Restaurant Systems, Inc., v. Zurich Am. Ins. Co., (Jan. 19, 2021), the court interpreted a commercial insurance policy that was nearly identical to the one at issue in Santo’s and determined the plaintiff restaurant had adequately demonstrated the condition for business interruption coverage, i.e., “direct physical loss.” After examining the ordinary definition of the words “physical” and “loss,” Judge Polster concluded that the total loss of use of a restaurant, due to a government-mandated shutdown of indoor dining, satisfied the policy’s prerequisite for coverage, stating:

“Plaintiffs argue that they lost their real property when the state governments ordered that the properties could no longer be used for their intended purposes -- as dine-in restaurants. The Policy's language is susceptible to this interpretation.”

The divergent outcomes within Ohio’s federal courts illustrate the viability of COVID-19-related business interruption claims is still in flux. Insurance companies will take every measure to avoid covering losses owed to businesses that have been devastated by the pandemic.

If your business has sustained COVID-19-related losses and you have questions about your insurance coverage, please reach out to the experienced insurance litigators at Bordas & Bordas to investigate your claim.


If your business has been crippled by the COVID-19 pandemic, don’t assume you cannot succeed in obtaining business interruption coverage from your insurer. Luca DiPiero explains.